OBJECTIVE: Only hip protectors, calcium and vitamin D therapy and bisphosphonates have been shown to reduce hip fractures with the latter having the more robust evidence. Three bisphosphonate are currently widely available but at differing costs, we compared the cost effectiveness of the two least expensive compounds (etidronate & residronate). METHODS: We used a Markov model to compare costs and health states of 1000 women aged 75 years with a prevalent vertebral fracture, and treated with either etidronate or residronate for 3 years and then followed through until aged 100 years. We assumed treatment was only effective for the 3 years. Drug costs were taken from MIMs, fracture costs were taken from published estimates and uprated to 1999 prices, with hip fracture incurring a cost of £13,000 in the first year and £7,000 in the second year. Hip fractures were assumed to be reduced by 58% as evidenced in the most recent trial and 33% for non hip and non vertebral fractures for the residronate treated group. For etidronate observational data suggests that it reduces hip fractures by 34% and non hip and non vertebral fractures by 20%. We also assumed a loss of 0.32 QALYs in the year of fracture. RESULTS: Residronate was revealed as the dominant therapy for treating women of 75 years with a previous vertebral fracture. Estimates of total cost savings per patient with a moderate vertebral deformity were £10,627 and £10,857 for residronate and etidronate respectively. Similarly, QALYs per patient gained were 7.58 and 7.56 for residronate and etidronate, respectively. Sensitivity analysis confirmed the robustness of residronate’s dominancy. CONCLUSION: In the baseline analysis both treatments are cost saving. Residronate even seems to be cost saving when compared with etidronate. Thus, residronate therapy dominates etidronate, that is it saves more costs and produces more QALYs.