OBJECTIVE: Anti-inflammatory medication may interrupt the progression to and severity of asthma for pediatrics who suffer from allergic rhinitis (AR) and/or atopic dermatitis (AD). The objective of this study was to evaluate the impact of: first generation anti-histamines (FGAH), second generation anti-histamines (SGAH), and intra-nasal steroids (INS) on annual asthma treatment costs in a cohort of AD/AR patients who develop asthma. METHODS: Data from GA Medicaid (1995 to 2001) and MarketScan (commercial population - 1998 to 2001) were utilized. Newborn children free of any malignancies and diagnosed with AD/AR who later developed asthma and were eligible for at least 12 months after the first asthma diagnosis were included. All FGAH, SGAH and INS prescriptions from birth until an asthma diagnosis were recorded and total direct health care costs for subjects in the AD/AR cohort after the first asthma diagnosis were examined. Multivariate ordinary least squares regression using Huber-white heteroscedasticity consistent variance–covariance matrix after adjusting for sample selection was used to compare direct medical costs between groups exposed to FGAH, SGAH or INS and groups with no exposure. RESULTS: In total, 4277 in GA Medicaid and 353 asthma patients in the commercial were included, of which 2906 (68%) and 228 (64%) patients had at least one prescription for FGAH, SGAH, and INS. Any exposure to these anti-inflammatory agents were associated with a non-significant lower mean total cost of $66 PMPY (p-value=0.50) and $497 PMPY (p-value=0.45) in the GA Medicaid and commercial populations. Total medical costs (excluding prescriptions) and physician costs were $733(p-value=0.04) and $303 PMPY (p-value=0.05) lower for the exposure groups in the commercial population. CONCLUSION: Exposure to anti-inflammatory agents reduced medical costs excluding prescription drugs in a commercial population; however, medical costs were not significantly lower in the Medicaid population.