With increasing concern by consumers, employers, health-care payers, and policy makers, interest has grown in determining the economic efficiency of drugs. Consequently, numerous pharmacoeconomic studies have sought to estimate the marginal cost-effectiveness of initial interferon treatment for chronic hepatitis C. The effects of treating patients with histologically mild chronic hepatitis C for 6 months with interferon was compared with no interferon treatment using a computer simulation model. Data were obtained from five prospective trials, natural history studies from the literature, and actual cost data for hepatitis C patients. After applying the currently recommended annual discount rate (3%), the computer model projects a $400 reduction in lifetime cost of care and a 1.5-year increase in life expectancy associated with interferon treatment. Economic savings derived from preventing future cases of cirrhosis and hepatocellular carcinoma more than offset the initial treatment cost. By preventing future liver complications in responders, interferon treatment should prolong life expectancy and reduce costs. When compared with other well-accepted medical interventions, interferon treatment should be considered "cost-effective." Economic rationales should not restrict the availability of interferon for patients with hepatitis C.