Prophylactic use of misoprostol has been found to cause a 15-fold reduction in the rate of gastric ulcer among symptomatic nonsteroidal anti-inflammatory drug users with osteoarthritis. Using data from a variety of sources, we performed a decision analytic-based evaluation of direct medical costs in these patients to determine whether routine prophylactic use of this medication is a preferred strategy over no prophylaxis. The base-case analysis revealed that misoprostol is cost-reducing for the initial 3 months of prophylaxis when the compliance rate is 60%, the silent ulcer rate is 40%, and the medication is priced below $1.74/d (expected costs per patient of approximately $300). The model is highly sensitive to changes in these parameters. Changing the rates of hospitalization and operation have less effect. Reliable estimates of misoprostol's economic impact after the initial 3 months of treatment are impossible to develop with current data. Nonmedical direct costs, patients' out-of-pocket costs, and indirect economic effects, such as work loss, were not considered in the model. All would enhance the economic benefit of the medication. Health care policy makers and payers must consider trade-offs between the clinical and economic implications of preventive medical interventions, such as misoprostol, especially as the call intensifies for more efficient allocation of health care resources.