INTRODUCTION: People with recurrent epileptic seizures are typically treated with anti-seizure medications (ASMs). Around a third of epilepsy patients fail to achieve an adequate response to ASMs and may be eligible to receive vagus nerve stimulation (VNS) therapy for their drug-resistant epilepsy (DRE) if they are unsuited to surgery. VNS received approval from the United States (US) Food and Drug Administration agency. However, there has to date been no comprehensive cost effectiveness evaluation of VNS within the US setting. This study was designed, using a US Medicare perspective, to estimate costs and quality-adjusted life years (QALYs) associated with VNS as an adjunct to ongoing ASM therapy, compared to ASMs alone. METHODS: We developed a cohort state transition model in Microsoft Excel, with four health states defined by different percentage reductions in seizure frequency, with a 3-month cycle and transition probabilities derived from published clinical trials and registry data. Sensitivity analyses were conducted to understand the impact of parameter uncertainty. Costs included the VNS device, placement, programming, battery changes, and removal; ASM therapy; adverse events associated with VNS (dyspnea, hoarseness, and cough); and costs associated with seizure burden (i.e. hospitalizations, emergency department visits, neurologist visits). RESULTS: Under base case assumptions, treatment with VNS was associated with a 0.385 QALY gain and a $109,678 saving per patient, when compared with ASM therapy alone. The incremental net monetary benefit (iNMB) was $128,903 at a threshold of $50,000 per QALY, with the positive iNMB indicating that VNS is a highly cost effective treatment. This result is explained by the modeled reduction in relative seizure frequency and associated reduction in healthcare resource use that the VNS group experienced. Sensitivity analyses supported this conclusion. CONCLUSIONS: VNS was evaluated as a cost effective addition to the current standard of care in the treatment of DRE in the US Medicare context.