We sought to develop a budget impact model that assesses the economic effect of adding tegaserod for the management of irritable bowel syndrome (IBS) with constipation to the formulary of a managed care organization (MCO). The model estimates the per patient economic impact and the per member, per month (PMPM) economic impact of patients 6 months before and 6 months after the initiation of tegaserod. Resource utilization data, taken from medical and pharmacy administrative claims data, were based on a retrospective, longitudinal study of 3365 patients administered tegaserod through a large, geographically diverse MCO. Costs were estimated for 2 patient subgroups, women with IBS and other gastrointestinal (GI) diagnoses. Sensitivity analyses were performed by varying several model input parameters. The base-case model resulted in an incremental PMPM budget impact associated with the use of tegaserod of 0.01 dollars. Total per patient budget impact (for all resources, including tegaserod) for a 6-month period was 274.34 dollars for women with IBS and 301.84 dollars for women with other GI diagnoses. Overall, 25.9% (29.0% for women with IBS group and 21.9% for women with other GI diagnoses group) of the cost of tegaserod was offset by decreases in resource utilization. Key drivers of post-tegaserod reductions in resource costs were hospital stays, outpatient office visits, emergency department visits, endoscopic procedures, and nonendoscopic procedures. Tegaserod therapy can decrease GI-related resource utilization, resulting in a significant cost-offset percentage. When the associated budget impact of adding tegaserod to its formulary is absorbed across an entire MCO population, the PMPM impact of tegaserod is small.