In an incremental cost-effectiveness analysis, combined inhaled beta 2-receptor agonist plus inhaled corticosteroid therapy (BA + CS) was compared with inhaled beta 2-agonist plus placebo (BA + PL) in 116 asthmatic children aged 7 to 16 years. Clinical data have been reported previously. To account for the selective withdrawal rate due to pulmonary problems that occurred in the group receiving BA + PL, costs were calculated using 2 approaches: (1) the cumulative cost approach and (2) the patient-year approach. Besides improvements in forced expiratory volume in 1 second (FEV 1) and airway responsiveness expressed as the provocative dose of histamine required to give a 20% fall in FEV 1 (PD 20), the frequency of asthma symptoms and school absenteeism were significantly reduced in the BA + CS group. Annual drug acquisition costs for the group receiving BA + CS were NLG480 higher than for the BA + PL group ($US1 = NLG2.12, 1989 prices). Based on conservative calculations using the cumulative cost approach, annual savings due to reduced healthcare utilisation, excluding the cost of study drugs, by the group receiving BA + CS compared with BA + PL were estimated to be about NLG273 per patient. The incremental cost effectiveness of BA + CS was estimated to be about NLG175 per 10% increase in FEV 1, or somewhat less than NLG10 per symptom-free day gained. The patient-year approach estimated savings due to corticosteroids of about 43% of the costs of BA + PL (95% confidence intervals, 21 to 58%). Savings were larger when the indirect costs that a family incurred during school absenteeism were considered. Addition of an inhaled corticosteroid to an inhaled beta 2-receptor agonist is a cost-effective treatment option that could even result in net healthcare savings.