OBJECTIVE: To use the population attributable risk (PAR) to estimate the treatment costs resulting from nonsteroidal anti-inflammatory drug (NSAID)-induced gastrointestinal (GI) morbidity. DESIGN: Two case- control studies with the following outcoms: (i) the start of therapy with gastroprotective agents (GPAs) and (ii) hospitalisations for GI events. SETTING: Community-dwelling inhabitants of defined areas in The Netherlands covering the period 1989 to 1998. All analyses were performed from the perspective of a third-party payer. METHODS: Risk and exposure data were obtained from the Dutch PHARMO system, a population-based register of drug-dispensing records and hospital records. The PAR was estimated based on stratum-specific prevalence estimates of NSAID use and the corresponding odds ratios (ORs) obtained from the case-control studies. Cost data were obtained from Dutch national hospital discharge records and tariffs. Annual treatment costs of NSAID-induced GI events were calculated based onthe PAR in the sample population and extrapolated to the total population using national demographic data. RESULTS: The adjusted ORs for starting GPA use and hospitalisation for GI events were 6.6 [95% confidence interval (CI): 5.5 to 7.8] and 5.0 (95% CI: 4.0 to 6.2), respectively, in NSAID users compared with controls. Variation of OR with age among NSAID users suggested that prevention of GI events is most efficient among the elderly. The total annual cost (1998 values) of GPA use and hospitalisations for GI events attributable to the use of NSAIDs was 59 million euro (EUR) [95% CI: EUR38.5 million to EUR98 million]. More than 65% of these NSAID-induced costs, EUR38 million, can be attributed to long term users of NSAIDs, representing only 9.3% of all users of NSAIDs. CONCLUSIONS: The PAR can be used to estimate the costs of drug- induced morbidity and changes in costs resulting from substitutions with other drugs. For each EUR1.00 spent on NSAIDs, an additional EUR0.68 (excluding costs for prophylactic treatment) can be added for the treatment of GI adverse events.