Rationale & Objective Benefits of sodium-glucose co-transporter 2 inhibitors on kidney outcomes have been demonstrated in clinical trials. Among patients with type 2 diabetes and established cardiovascular (CV) disease enrolled in EMPA-REG Outcome Study (NCT01131676), empagliflozin added to standard of care (SoC) reduced the risk of incident or worsening nephropathy compared to SoC alone. This analysis evaluated the cost-effectiveness of empagliflozin versus SoC alone in the subpopulation with diabetic kidney disease (DKD) from the perspective of United States (US) commercial insurers and Medicare. Study Design Discrete event simulation model. Setting & Population Patients with DKD in a US healthcare system. Interventions Empagliflozin 10 or 25 mg with SoC versus SoC alone. SoC included glucose-lowering therapies and medications to treat CV risk factors. Outcomes Incremental cost-effectiveness ratios (ICERs, 2020 US dollars per quality-adjusted life-year [QALY] gained). Costs and QALYs were discounted 3.0%/year. Model, Perspective, & Timeframe: Cost-effectiveness analysis, commercial insurers and Medicare perspective, lifetime horizon. Results The ICER of empagliflozin with SoC versus SoC alone was $25,974/QALY. Empagliflozin added 0.67 QALYs and $17,322/patient over a lifetime horizon. Results were driven by fewer clinical events (including CV death, heart failure [HF] hospitalization, albuminuria progression, and a composite kidney outcome) experienced by patients receiving empagliflozin with SoC versus SoC alone. Results were sensitive to rates of CV death, non-fatal MI, and HF hospitalization, as well as to drug costs, and time horizon. Probabilistic sensitivity analyses indicated 91% of simulations falling below $50,000/QALY. Limitations The EMPA-REG Outcome Study was not powered to assess treatment benefits in a subgroup and excluded patients with estimated glomerular filtration rate Conclusion Based on EMPA-REG Outcome Study, this cost-effectiveness analysis suggests that for commercial insurers and Medicare, adding empagliflozin to SoC may be a cost-effective treatment option for patients with DKD.