OBJECTIVES: To calculate incremental cost-utility ratios for varenicline as compared to bupropion in smoking cessation in Sweden for a follow-up period of 20 and 50 years, respectively. METHODS: The Benefits of Smoking Cessation on Outcomes (BENESCO) simulation model was employed in order to calculate costs and benefits accruing from smoking cessation. The BENESCO model simulates morbidity and mortality over time for a Swedish population of smokers. Four diseases were considered: chronic obstructive pulmonary disease, coronary heart disease, stroke, and lung cancer. According to available epidemiological evidence, these diseases cover most of the health problems associated with smoking. The advantage of smoking cessation, simulated by the BENESCO model, is the decreased incidence of the diseases considered. The benefits of smoking cessation were simulated for a male and female cohort, respectively. In addition, the BENESCO model was extended in order to include the indirect effects of smoking cessation on production and consumption in the economy. All calculations were performed in 2003 Swedish prices, assuming that 25% of the smokers in each age-group make one attempt to quit smoking at the outset of the simulation. RESULTS: Including indirect effects on production, the incremental costs per QALY gained were € 2,062 for men and € 1,196 for women over 20 years of follow-up and € 14,783 for men and € 14,252 for women over 50 years of follow-up, compared with bupropion. Including only direct effects on health care costs, smoking cessation using varenicline was cost-saving compared to bupropion treatment. Sensitivity analysis indicated that the results are robust. Variation of treatment efficiency and intervention cost, respectively, had a larger effect on cost per QALY gained than other variables. CONCLUSION: Based on this model, the estimated costs per QALY gained demonstrated that smoking cessation intervention using varenicline was among the most cost effective, life-saving medical treatments.