PURPOSE: Standard therapy with peginterferon (PEG-IFN) and ribavirin (RBV) for chronic hepatitis C (CHC) infection is costly, and effective in only half of all treated cases. Recent data indicates that addition of novel Specifically Targeted Antiviral Therapy for HCV (STAT-C) to can potentially advance treatment responses for genotype 1 CHC infection. We modeled this new strategy to assess the economic impact of improved viral eradication on costs and outcomes. METHODS: We developed a Markov model comparing standard therapy with 4 treatment strategies, consisting of STAT-C agent (12 weeks) combined with PEG-IFN +/- RBV (12-48 weeks). The model followed individuals with mild CHC infection from initiation of therapy until death (base-case age 40 years, 60% male). Costing for PEG-IFN and RBV was based on average wholesale prices. Base cost of STAT-C therapy was assumed equivalent to 48 weeks of standard therapy. Rates of viral eradication (SVR) and adverse effects were estimated. Natural history of CHC infection, treatment patterns, healthcare costs and utilities for all disease states were obtained from published data. SVR and costs of STAT-C treatment were varied extensively in sensitivity analyses. RESULTS: Compared to standard therapy, treatment regimens including STAT-C were associated with increases in survival of 0.14-0.45 years and 0.31-0.90 QALYs. These additional health benefits however increased lifetime costs by $15,641-$39,757. Under base-case assumptions, a strategy of STAT-C + 24 weeks of PEG-IFN + RBV had an incremental cost-effectiveness ratio of $29,375/QALY (SVR 70%) compared with standard therapy (SVR 46%). Other strategies were either dominated or prohibitively costly. Results were most sensitive to treatment efficacy, cost, and patient age. Assuming a threshold of $50,000/QALY for cost-effectiveness, sensitivity analyses revealed that the STAT-C with a 24 week PEG-IFN + RBV strategy would remain cost-effective if relative cost increased up to 1.44 times or if probability of SVR lowered to 61%. If this new regimen was priced to be cost neutral compared with standard therapy, lifetime costs increased by $4,482 and QALYs improved by 0.78 resulting in an incremental cost-effectiveness ratio of $5738/QALY. CONCLUSIONS: Our model suggests that STAT-C therapies that increase efficacy will provide an opportunity to increase life expectancy and may enhance value of treatment for patients with genotype 1 CHC infection, depending on cost of these agents.