In a cost-analysis model, the effect on the costs of Alzheimer disease of tacrine (tetrahydroaminoacridine) treatment was studied. A model of the survival of the Swedish Alzheimer disease population was constructed in which the placement of patients with Alzheimer disease in care organization was assumed to be influenced by the use of tacrine. Based on this model, the cost analysis was performed. Fifty-two percent of the Alzheimer disease population with an initial Mini-Mental State Examination (MMSE) score of 10 to 24 points are in the main alternative of the model treated with 160 mg tacrine with an initial improvement in MMSE of 2.6 points. The benefit of tacrine was a cost reduction of 1.3% when the results were calculated for the entire Alzheimer disease population. This corresponds to a benefit of 1.3 billion Swedish kronor (SEK) (with 3% discount rate) for the entire estimated survival period. The annual benefit per patient was estimated as 2,900 SEK [approximately U.S. $320 (1993)]. In the sensitivity analysis, the range was between -0.6% and 5.2%. Beginning treatment in the early stages of Alzheimer disease results in lower costs than a later start. The main conclusion is that tacrine, according to the model, has beneficial but modest effects on the costs of Alzheimer disease in Sweden.