BACKGROUND: Chemotherapy is vital for breast cancer treatment, but early-onset toxicities like neutropenia hinder its administration. Neutropenia also increases costs due to hospitalizations and aggressive systemic antibiotic administration. Primary prophylactic (PP) use of granulocyte colony-stimulating factor (G-CSF) helps prevent neutropenia. However, evidence supporting the cost-effectiveness of PPG-CSF is inconclusive, and American Society of Clinical Oncology guidelines state the need for performing cost analyses in high-risk groups like the elderly. OBJECTIVES: To examine the effect of PPG-CSF administration on neutropenia hospitalization costs and overall Medicare costs during the year following chemotherapy initiation. METHODS: A retrospective observational study of patients newly diagnosed with breast cancer between 1994 and 2002 was performed using the linked SEER-Medicare database. To account for the nonrandom nature of observational data, a covariate matching technique was used to preprocess the data before performing parametric analysis estimating the effect of PPG-CSF on costs. RESULTS: Administration of PPG-CSF during the first course of chemotherapy was associated with a 57% increase in overall Medicare costs during the study period, despite a drop in neutropenia hospitalization costs. Forty-two percent of the increase in costs was due to increase in chemotherapy costs during the year after chemotherapy initiation. CONCLUSIONS: A significant part of the increase in immediate medical costs in breast cancer patients receiving PPG-CSF is due to improved chemotherapy administration. It is important to determine whether these short-term cost increases lead to long-term health benefits and savings. Cost analyses with longer follow-ups are crucial for chronic diseases like breast cancer.