Background: The evidence for the effectiveness and safety of inhaled corticosteroids (ICS) in chronic obstructive pulmonary disease (COPD) is inconclusive. This study determined the cost effectiveness of withdrawing fluticasone propionate (FP) in outpatients with COPD. Methods: The cost effectiveness analysis was based on a randomised, placebo controlled FP withdrawal study. After a 4 month run in period on FP, patients were randomly assigned to continue FP 500 μg twice daily or to receive placebo for 6 months. A decision analytical model evaluated the 6 month incremental cost effectiveness of the ICS versus ICS withdrawal strategy. One way sensitivity analyses and a Monte Carlo simulation were performed to evaluate the robustness of the findings. Results: The average patient with COPD in the FP group generated €511 in direct medical costs, including €238 for FP. The cost of the placebo strategy was €456. The higher direct drug cost of €212 per patient for the FP strategy during the 6 month follow up period compared with the placebo group was partially offset by a lower exacerbation and hospital admission cost of €157. The 6 month incremental cost effectiveness of the FP strategy compared with placebo was €110 per exacerbation prevented and €1286 per hospital admission prevented. Conclusions: Over a 6 month period, withdrawing FP in a pre-selected trial population of COPD patients led to absolute cost savings but with a higher rate of exacerbations and hospital admissions.