The aim of this study was to examine the cost-effectiveness of combination therapy with ribavirin plus interferon alpha-2b compared with interferon monotherapy for hepatitis C-infected Japanese patients who had either temporarily responded or not responded to initial interferon treatment. Data from a recent randomized clinical trial among relapsed or non-responding patients comparing combination therapy to interferon alone were applied to a computer cohort simulation Markov process model to project lifelong clinical and economic outcomes. Combination therapy for 24 weeks should increase life expectancy by 1.6 quality-adjusted life years and should reduce discounted (3% per year) lifetime costs by yen 121,000 when compared to retreatment with interferon alone. For the subgroup of patients with genotype 1b and high viral load, combination therapy should be cost-effective ( yen 187,000 per QALY gained with a 3% annual discount rate) by well-accepted international standards. These results were robust with combination therapy remaining cost-effective or cost saving in sensitivity analysis involving reasonable variation in all parameters. For patients similar to those enrolled in the interferon alpha-2b and ribavirin trials in Japan, combination therapy should be considered cost-effective with the higher drug treatment costs nearly completely offset by future savings through reductions in future liver complications from hepatitis C.