AbstractObjectivesTo estimate the economic impact of misoprostol/diclofenac in a fixed combination tablet compared with diclofenac.DesignCohort study with a prospectively constructed, population‐based, record‐linkage database containing details of exposure to all community dispensed NSAIDs and all admissions to hospital for upper gastrointestinal (GI) diagnoses. Costs associated with each study drug exposure were analysed using generalized linear models.SettingThe population of Tayside, Scotland.SubjectsSubjects aged 20 years and over who received misoprostol/diclofenac or any other NSAID between January 1989 and 31 December 1995.Main outcome measuresTotal costs for the number of days of exposure to diclofenac and misoprostol/diclofenac, plus costs of concomitant ulcer healing drug therapy plus endoscopy procedures plus costs of admissions to hospital for upper GI diagnoses.ResultsThe rate of hospitalization with gastrointestinal events was 30% higher among patients receiving diclofenac than that for patients receiving misoprostol/diclofenac. Among patients who received diclofenac and an ulcer‐healing drug (UHD), the event rate was more than twice that for patients receiving misoprostol/diclofenac. In patients with a prior GI history, switching from diclofenac to misoprostol/diclofenac would reduce the costs of hospitalization. The resulting savings would more than offset the extra prescription costs. In patients without a prior GI history, the greatest potential saving would arise due to reduced use of UHDs and net savings would occur in subjects aged between 60 and 70 years of age or more.ConclusionUse of misoprostol/diclofenac instead of diclofenac can produce cost savings due to reduced hospitalization rates and decreased use of UHDs in subjects with a prior history of GI disease and in older subjects without prior GI disease. These findings have implications for the management of patients who require treatment with NSAIDs. Copyright © 2002 John Wiley & Sons, Ltd.