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Purpose: Recent clinical trials have evaluated treatment strategies for chronic infection with hepatitis C virus (HCV) in patients co-infected with human immunodeficiency virus (HIV). Our objective was to use these data to examine the cost-effectiveness of treating HCV in an urban cohort of co-infected patients., Methods: A computer-based model, together with available published data, was used to estimate lifetime costs (2004 US dollars), life expectancy, and incremental cost per year of life saved (YLS) associated with 3 treatment strategies: (1) interferon-alfa and ribavirin; (2) pegylated interferon-alfa; and (3) pegylated interferon-alfa and ribavirin. The target population included treatment-eligible patients, based on an actual urban cohort of HIV-HCV co-infected subjects, with a mean age of 44 years, of whom 66% had genotype 1 HCV, 16% had cirrhosis, and 98% had CD4 cell counts >200 cells/mm3., Results: Pegylated interferon-alfa and ribavirin was consistently more effective and cost-effective than other treatment strategies, particularly in patients with non-genotype 1 HCV. For patients with CD4 counts between 200 and 500 cells/mm3, survival benefits ranged from 5 to 11 months, and incremental cost-effectiveness ratios were consistently less than $75,000 per YLS for men and women of both genotypes. Due to better treatment efficacy in non-genotype 1 HCV patients, this group experienced greater life expectancy gains and lower incremental cost-effectiveness ratios., Conclusions: Combination therapy with pegylated interferon-alfa and ribavirin for HCV in eligible co-infected patients with stable HIV disease provides substantial life-expectancy benefits and appears to be cost-effective. Overcoming barriers to HCV treatment eligibility among urban co-infected patients remains a critical priority.