OBJECTIVES: The purpose of this study was to evaluate the cost effectiveness (cost utility) of insulin glargine in the UK for people with Type 2 diabetes mellitus (T2DM) using observational data in patients continuing on NPH versus those switching from NPH to insulin glargine. METHODS: A discrete event simulation was developed with a time horizon of 40 years. Transition probabilities for macrovascular and microvascular complications were drawn from the UKPDS 68 Outcomes equations. Direct costs and quality of life (EQ5D) were derived from published sources and the HODaR database respectively; costs and benefits were discounted annually at 3.5%. This model was adapted for Type 2 patients switched from NPH to glargine identified from the THIN database, a UK primary care database including 2,335,667 active patients recorded over 15 years from 211 practices. Analysis was conducted on a total of 181 patients with data for the 12 month period prior to and post switch to glargine; the primary outcome measure was Hba1c change. RESULTS: The median age at switch from NPH was 71 with mean duration of T2DM of 9.2 years. Baseline HbA1c was 8.79% and patients switching to glargine showed a significant reduction in HbA1c of 0.67%( p=0.00384) between switch to glargine and 12 months post glargine initiation. Incorporating this into a simulated cohort of 10,000 patients followed over a 40 year time horizon translated into 150 fewer cardiovascular events. Average cost per patient was £4338 and £3370 for glargine and NPH respectively, providing discounted quality adjusted life years (QALYs) of 4.96 and 4.86 respectively; resulting in a discounted incremental cost effectiveness ratio (ICER) of £9200 per QALY. CONCLUSION: Based on UK real life observational data, switching to basal insulin in type 2 DM patients from NPH to glargine is cost-effective; with a corresponding ICER within accepted thresholds for cost-effective treatments.