OBJECTIVES: To conduct cost-effectiveness and budget impact analysis (BIA) of OROS hydromorphone versus CR morphine and CR oxycodone for moderate to severe cancer pain from the public payer perspective in Brazil. METHODS: A decision tree followed by a Markov Model with a 12 month time horizon was developed with data from the Phase III trial Hanna 2008. The achievement of mild pain (worst pain scores < 4) was considered as outcome. Only direct medical costs were considered and unit costs were obtained from Brazilian official lists. For the BIA, 10% of currently used CR morphine daily doses was substituted for equivalent OROS hydromorphone doses. The same rational was adopted for CR oxycodone comparison. Univariate deterministic sensitivity analyses showed that the results remained consistent through model parameters variation. RESULTS: OROS hydromorphone showed 1.66 additional months in mild pain per patient per year when compared to both CR morphine and CR oxycodone. Annual treatment costs were 2.401 BRL, 1.256 BRL and 5.114 BRL for OROS hydromorphone, CR morphine and CR oxycodone respectively. The incremental cost-effectiveness ratio was 689 BRL per additional month in mild pain per patient per year, when OROS hydromorphone was compared to CR morphine. Versus CR oxycodone, OROS hydromorphone was more effective with fewer costs, being cost saving (ICER -1,634 BRL). BIA results showed that the substitution of 10% of current utilization of CR morphine for OROS hydromorphone and CR oxycodone would result in a budgetary impact of 118,722 BRL and 347,295 BRL, respectively. CONCLUSIONS: OROS hydromorphone is cost saving when compared to CR oxycodone and is more cost-effective than CR oxycodone when both are compared to the current scenario of chronic cancer pain treatment with CR morphine, with a lower budgetary impact.