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Objectives: Data from the Intergroup Exemestane Study (IES) suggest that switching to the aromatase inhibitor, exemestane, after 2 to 3 years of tamoxifen therapy prolongs disease-free survival versus continuing on tamoxifen therapy. We sought to evaluate the cost-effectiveness of this management strategy. Methods: A Markov model was developed to predict patients' transitions across various health states based on treatment strategy (continuing tamoxifen vs. switching to exemestane), breast cancer status (no recurrence, local or distant recurrence, contralateral breast cancer), and other related health events (osteoporosis, endometrial cancer, death). Rates of disease-related events (recurrence and contralateral breast cancer) were estimated using data from the IES. Survival and lifetime medical-care costs by type of disease-related event were estimated using SEER-Medicare data. The model was used to estimate direct costs (in 2004 USdollars), life expectancy, quality-adjusted life-years (QALYs), and incremental cost-effectiveness. Results: Switching to exemestane versus continuing tamoxifen therapy was associated with increased disease-free survival (181 vs. 172 months), QALYs (12.21 vs. 11.89), and net discounted lifetime costs of cancer care ($12,124 vs. $7724 per patient). The incremental cost-effectiveness ratio of exemestane was $20,100 per QALY gained (95% confidence interval: $12,100, $59,000). Sensitivity analyses showed that results were robust to plausible variations in recurrence rates, costs, and utilities. Conclusions: Switching postmenopausal early-stage breast cancer patients to exemestane after 2 to 3 years of tamoxifen appears to be a cost-effective treatment strategy versus completing a 5-year course of tamoxifen. [ABSTRACT FROM AUTHOR]