A decision analytic study was conducted using computer simulation to project the outcomes in a simulated cohort of patients whose treatment for back surgery had failed. The objective of this study was to estimate the direct cost of intrathecal morphine therapy (IMT) delivered via an implantable pump relative to alternative therapy (medical management) over a 60-month course of treatment. IMT administered by way of an implantable pump can provide effective pain relief for selected patients whose less invasive treatment modalities have failed. Previous research suggested that a pump implant is less costly than alternative methods providing comparable analgesia for treatment exceeding 12 to 18 months. However, those analyses did not include the cost of complications or pump replacement. Scenarios representing the course of IMT, devised by a panel of experts, were represented as treatment pathways in a Monte Carlo simulation. Adverse event rates were drawn from published data supplemented by expert judgment. Direct costs were based on a health insurer paid claims perspective (direct costs) discounted at a 5% annual rate. The cost-effectiveness of IMT was calculated based on a report of 65% to 81% "good to excellent" pain relief relative to alternative (medical) management. With both adverse event probabilities and costs set at most likely (base case) values, the expected total cost of IMT over 60 months was $82,893 (an average of $1382 per month). In a sensitivity analysis, the best case (low adverse event rate, low cost) estimate was $53,468 ($891/mo), whereas the worst case (high adverse event rate, high cost) estimate was $125,102 ($2085/mo). Cost-effectiveness estimates ranged from $7212 (best case) to $12,276 (worst case) per year of pain relief. Results from a computer simulation designed to collect the costs not included in previous empiric research indicate that IMT appears to be cost-effective when compared with alternative (medical) management for selected patients when the duration of therapy exceeds 12 to 22 months.