For patients with chronic hepatitis B, emergence of lamivudine resistance is associated with poor clinical outcomes, more rapid disease progression and poor quality of life. The clinical implications of lamivudune resistance are well described but the health care costs are not. OBJECTIVE: The objective of this study was to evaluate the health care utilization and direct medical cost within the first year of developing a lamivudine refractory infection in chronic hepatitis B (CHB) patients. METHODS: Physician estimates of health care utilization for the care of lamivudine refractory CHB patients were collected in a survey of physicians treating CHB patients in the US. A questionnaire was mailed to 165 physicians of which 51 responded. Data on health care utilization was computed for each health care cost category (Physician visits, hospitalizations, diagnostic tests and radiological examinations). Unit costs were derived based on the Medicare Physician Fee Schedule for procedures, the 2002 Health Care Cost and Utilization Project database for inpatient hospitalization costs, and average wholesale prices for medication costs. RESULTS: The total non-drug, direct medical cost within the first year of developing a lamivudine refractory infection in a CHB patient was estimated at $2925. Among the different cost categories diagnostic tests and specialist visits were the major cost drivers, accounting for an estimated 45% and 41% of the overall cost, respectively. Seventy four percent of the patients were estimated to require a specialist visit. Only 2% of patients were estimated to require a hospitalization accounting for a negligible proportion of the costs. CONCLUSION: The estimated non-drug costs for patients refractory to lamivudine represent a substantial economic burden. In addition, the additional costs of rescue therapy further increase the cost impact and make it considerably higher than the annual direct medical cost for CHB patients who do not develop viral resistance.