OBJECTIVES: To study the cost-effectiveness if LVD were replaced by ETV in a group of patients with CHB in a public hospital in Hong Kong. METHODS: From a public hospital perspective, a decision analytic model was used to study the cost-effectiveness of 2 years of treatment of ETV in a hypothetical cohort of 1000 CHB patients; cirrhosis and hepatocarcinoma (HCC) events were projected to 10 years. Clinical efficacy data was obtained from a recently published international randomized phase III trial in a group of HBeAg negative CHB patients. The multivariate-adjusted relative risks for events were estimated by Cox proportional hazards model from a recent Taiwan epidemiology study. Local health care costs including drug cost were used. Cost of management of the different disease states were adopted from a recently published local cost of illness study and QALYs were calculated using the utility values obtained from another recent local study. Hong Kong governmental population statistics of life expectancy was used for the estimation. RESULTS: Using a 5% discount rate for all projections, a 2-year of ETV treatment would incur an extra drug cost of HKD 23.5 million (about USD3 million, 1USD=7.8HKD); yet about HKD13.8 million (USD1.7 million) would be avoided in 10 years time due to reduction in compensated and decompensated cirrhosis and HCC. The incremental cost-effectiveness for ETV is about HKD24,000 (about USD3,000) per life year saved and HKD30,000 (about USD 3,800) per QALY saved. CONCLUSION: Using the US standard of USD50,000 per QALY in deciding whether a therapy is cost-effective, the present study suggests ETV to be a more cost-effective treatment relative to LVD for CHB patients in the Hong Kong public sector.