OBJECTIVES: To quantify the potential impact of PCV7 on rates of acute otitis media-related ambulatory visits and antibiotic prescriptions in children aged <2 years enrolled in private insurance plans. METHODS: We performed a retrospective cohort study of the 1997-2004 MarketScan databases. Analysis included more than 500,000 person-years of observations for children aged <2 years. Trends in rates of ICD-9 coded ambulatory visits and antibiotic prescriptions due to acute otitis media were evaluated and the national direct medical expenditures for these outcomes in young children were estimated. RESULTS: Comparing 2004 to the baseline period 1997-1999, before vaccine introduction, rates of ambulatory visits and antibiotic prescriptions due to acute otitis media declined from 2173 to 1244 per 1000 person-years (42.7%, P<0.001) and from 1237 to 721 per 1000 (41.7% P<0.001), respectively. Total estimated national direct medical expenditures for acute otitis media–related ambulatory visits and antibiotic prescriptions in young children declined from an average of $1.40 billion during 1997 - 1999 to $0.95 billion in 2004 (32.2%). CONCLUSION: Following PCV7 introduction, acute otitis media-related ambulatory visits and associated antibiotic prescriptions in children aged <2 years declined more than expected on the basis of pre-licensure clinical trials. Although other factors such as the rational antibiotic use guidelines may have contributed to the trend, our results suggest that PCV7 may play an important role in reducing the burden of acute otitis media resulting in a major savings in medical care cost.