OBJECTIVE: Newer antiretroviral drugs provide substantial benefits but are expensive. The cost-effectiveness of using antiretroviral drugs in combination for patients with multidrug-resistant HIV disease was determined. DESIGN: A cohort state-transition model was built representing treatment-experienced patients with low CD4 counts, high viral load levels, and multidrug-resistant virus. The effectiveness of newer drugs (those approved in 2005 or later) was estimated from published randomized trials. Other parameters were estimated from a randomized trial and from the literature. The model had a lifetime time horizon and used the perspective of an ideal insurer in the United States. The interventions were combination antiretroviral therapy, consisting of 2 newer drugs and 1 conventional drug, compared with 3 conventional drugs. Outcome measures were life-years, quality-adjusted life-years (QALYs), costs, and incremental cost-effectiveness. RESULTS: Substituting newer antiretroviral drugs increased expected survival by 3.9 years in advanced HIV disease. The incremental cost-effectiveness ratio of newer, compared with conventional, antiretroviral drugs was $75,556/QALY gained. Sensitivity analyses showed that substituting only one newer antiretroviral drug cost $54,559 to $68,732/QALY, depending on assumptions about efficacy. Substituting 3 newer drugs cost $105,956 to $117,477/QALY. Cost-effectiveness ratios were higher if conventional drugs were not discontinued. CONCLUSIONS: In treatment-experienced patients with advanced HIV disease, use of newer antiretroviral agents can be cost-effective, given a cost-effectiveness threshold in the range of $50,000 to $75,000 per QALY gained. Newer antiretroviral agents should be used in carefully selected patients for whom less expensive options are clearly inferior.