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Aims: To evaluate the short‐term cost‐effectiveness of insulin degludec (degludec) vs insulin glargine 100 units/mL (glargine U100) from a Canadian public healthcare payer perspective in patients with type 2 diabetes (T2D) who are at high risk of cardiovascular events and hypoglycaemia. Materials and methods: A decision analytic model was developed to estimate costs (2017 Canadian dollars [CAD]) and clinical outcomes (quality‐adjusted life years [QALYs]) with degludec vs glargine U100 over a 2‐year time horizon. The model captured first major adverse cardiovascular event, death, severe hypoglycaemia and insulin dosing. Clinical outcomes were informed by a post hoc subgroup analysis of the DEVOTE trial (NCT01959529), which compared the cardiovascular safety of degludec and glargine U100 in patients with T2D who are at high cardiovascular risk. High hypoglycaemia risk was defined as the top quartile of patients (n = 1887) based on an index of baseline hypoglycaemia risk factors. Results: In patients at high hypoglycaemia risk, degludec was associated with mean cost savings (CAD 129 per patient) relative to glargine U100, driven by a lower incidence of non‐fatal myocardial infarction, non‐fatal stroke and severe hypoglycaemia, which offset the slightly higher cost of treatment with degludec. A reduced risk of cardiovascular death and severe hypoglycaemia resulted in improved effectiveness (+0.0132 QALYs) with degludec relative to glargine U100. In sensitivity analyses, changes to the vast majority of model parameters did not materially affect model outcomes. Conclusion: Over a 2‐year period, degludec improved clinical outcomes at a lower cost as compared to glargine U100 in patients with T2D at high risk of cardiovascular events and hypoglycaemia. [ABSTRACT FROM AUTHOR]