BACKGROUND: Shortened courses of treatment with pegylated interferon alfa and ribavirin for patients with hepatitis C virus infection who experience rapid virologic response can be effective in appropriately selected patients. The cost-effectiveness of truncated therapy is not known. OBJECTIVE: To assess the cost-effectiveness of response-guided therapy versus standard-duration therapy on the basis of best available evidence. METHODS: We developed a decision model for chronic hepatitis C virus infection representing two treatment strategies: 1) standard-duration therapy with pegylated interferon alfa and ribavirin for 48 weeks in patients with genotype 1 or 4 and for 24 weeks in patients with genotype 2 or 3 and 2) truncated therapy (i.e., 50 decrease in treatment duration) in patients with rapid virologic response. Patients for whom truncated therapy failed began standard-duration therapy guided by genotype. We used a Markov model to estimate lifetime costs and quality-adjusted life-years. RESULTS: In the base-case analysis, mean lifetime costs were 46,623 +/- 2,483 with standard-duration therapy and 42,354 +/- 2,489 with truncated therapy. Mean lifetime quality-adjusted life-years were similar between the groups (17.1 +/- 0.7 with standard therapy; 17.2 +/- 0.7 with truncated therapy). Across model simulations, the probability of truncated therapy being economically dominant (i.e., both cost saving and more effective) was 78.6 . The results were consistent when we stratified the data by genotype. In one-way sensitivity analyses, the results were sensitive only to changes in treatment efficacy. CONCLUSION: Truncated therapy based on rapid virologic response is likely to be cost saving for treatment-naive patients with chronic hepatitis C virus infection. Cost-effectiveness varied with small changes in relative treatment efficacy.