This study was performed to evaluate the potential costs of a hypothetical novel biological agent (BIO) as a therapy for rheumatoid arthritis (RA), compared with oral methotrexate (MTX) and intramuscular gold (IMG). A decision analysis model was used to compare the total costs of treating a cohort of 10,000 RA patients with each agent for 6 months. Total costs included direct costs and indirect costs. Baseline estimates were subjected to sensitivity analysis. Total costs per person were: MTX, $5,430; IMG, $6,725; BIO, $9,411. In sensitivity analysis, the primary cost drivers for MTX and IMG were the indirect costs of RA and monitoring costs. In contrast, total costs of the BIO were driven predominantly by medication costs. Sensitivity analysis showed, even when efficacy and safety were optimized, costs for the BIO still substantially exceeded those of MTX and IMG. Medication costs will be an important consideration in the development of novel BIOs for RA.