Background: Adverse drug reactions are a common complication of chemotherapy administration. Uridine diphosphate glucuronosyltransferase 1A1 (UGT1A1) genotype can predict which patients will have severe toxicity (diarrhea and neutropenia) from irinotecan-based chemotherapy. Purpose: To analyze the cost-effectiveness of UGT1A1 pharmacogenomic treatment for patients with metastatic colorectal cancer. Methods: We developed a Markov decision model using a hypothetical cohort of patients with metastatic colorectal cancer beginning chemotherapy. In the model, patients received either a pharmacogenomic treatment strategy of testing for UGT1A1 genotype or conventional treatment (no testing). All patients not tested for UGT1A1 genotype received conventional treatment with an irinotecan-based FOLFIRI regimen. Genotype-tested patients determined to be UGT1A1 deficient or heterozygous were treated with FOLFOX, a non-irinotecan based regimen that reduces the risk of diarrhea and neutropenia for these patients but is associated with a greater risk of neuropathy. Probabilities of toxicities, which included neutropenia, diarrhea, and neuropathy, were based on published literature on FOLFIRI and FOLFOX. Costs were estimated using Centers for Medicare & Medicaid Services reimbursement data to calculate costs for physician and hospital services without adjustment for geographic location, and therefore representing a national cost per procedure. Drug costs were estimated using the Federal Supply Schedule. Health outcomes were measured using quality adjusted life years (QALYs). Univariate and probabilistic sensitivity analyses were performed in order to address uncertainty in the model parameters. Results: The pharmacogenomic strategy provided 1.138 QALYs and cost $30,535, whereas conventional treatment provided 1.057 QALYs at a cost of $26,996. The incremental cost-effectiveness ratio for pharmacogenomic treatment was $43,788/QALY. In 10,000 probabilistic Monte Carlo simulations, the pharmacogenomic treatment was cost-effective in 52% of trials using a $50,000/QALY threshold. The most influential variables in the univariate sensitivity analysis were the probabilities of death associated with FOLFIRI and FOLFOX as well as the costs and years of survival associated with FOLFIRI and FOLFOX. Conclusions: UGT1A1 genotype-individualized therapy appears to be a cost-effective approach for managing colorectal cancer when using the $50,000/QALY threshold. Pharmacogenomic treatment strategies can be cost-effective for reducing adverse drug reactions associated with chemotherapy.