Aims To estimate the cost effectiveness of continuous subcutaneous insulin infusion (CSII) compared with multiple daily injections (MDI) for patients using insulin pumps. Methods We constructed a Markov model to estimate the costs and outcomes for patients with insulin-dependent diabetes (IDDM) treated with CSII using an insulin pump compared with MDI. Key parameters were obtained from the published scientific literature. The primary outcome was quality-adjusted life years (QALYs). Monte Carlo simulations were undertaken for 10 000 hypothetical patients over 8 years of monthly cycles (the expected life of a pump). Results Over an 8-year period an average patient could expect to gain 0.48 [standard deviation (sd) 0.20] QALYs using CSII compared with MDI. The additiol cost over 8 years for this gain was 㵴62 (sd㸹7). The incremental cost per QALY was 㱱 461 (sd㳶56). CSII was most cost-effective in patients who had more than two severe hypoglycaemic events per year and who required admission to hospital at least once every year. Cases where CSII might be not economically viable are cases where diabetes is well controlled with few severe hypoglycaemic events. Results were most sensitive to the number of hypoglycaemic events per patient and the utility weights used to estimate QALYs. Conclusion CSII is a worthwhile investment when targeted to those who might benefit most.