Background: Because health care resources are limited, therapeutic regimens should be assessed for their relative costs and effectiveness. Objective: We assessed cost-effectiveness for treating psoriasis using two strategies: one consisted principally of methotrexate and the other was principally a rotational schedule of modified cyclosporine (Neoral) with methotrexate. Methods: We performed a cost-effectiveness analysis using a computerized decision analytic model of simulated patients with moderate to severe psoriasis. Patients were randomly assigned to receive treatment with one of the two strategies. Direct costs included acquisition of medications, laboratory and physician fees, and costs of treating side effects. Because of uncertainty regarding rates of clearing of psoriasis, the relative efficacy of methotrexate and cyclosporine was varied over a wide range in a sensitivity analysis. Results: In the base case over a 10-year treatment period, the methotrexate strategy cost $33,000 and provided approximately 2 years clear of psoriasis compared with $38,000 and approximately 4 years clear of psoriasis for the rotational strategy. When the relative effectiveness of cyclosporine to methotrexate in clearing psoriasis varied from approximately 1 to 20, the rotational strategy cost from $4100 to $2700 per incremental clear year. Conclusion: In selecting therapies for psoriasis patients, both costs and effectiveness should be considered. In this simulation, patients could obtain additional periods clear of psoriasis at an incremental cost by using cyclosporine in rotation with methotrexate. If even a small utility gain accompanies the complete clearing of psoriasis, such a strategy may be a worthwhile investment of resources comparable to other healthcare interventions. (J Am Acad Dermatol 2002;46:242-50.)