Prophylaxis has been established as the treatment of choice in children with haemophilia and its continuation into the adult years has been shown to decrease morbidity throughout life. The cost of factor therapy has made the option questionable in cost-effectiveness studies. The role of prophylaxis in pharmacokinetic dosage and tolerization against inhibitor formation were used to model the cost utility of prophylaxis vs. on-demand (OD) therapy over a lifetime horizon in severe haemophilia A. The model was applied to a single provider national health system exemplified by the United Kingdom's National Health Service and a third party provider in the United States. The incremental cost-effectiveness ratio (ICER) was estimated and compared to threshold values used by payer agencies to guide reimbursement decisions. A cost per quality-adjusted life year (QALY) was also estimated for Sweden. Prophylaxis was dominant over OD treatment in the UK. The model resulted in an ICER - $68 000 - within the range of treatments reimbursed in the USA. In Sweden, a cost/QALY of SEK 1.1 million was also within the range of reimbursed treatments in that country. Dosage- and treatment-induced inhibitor incidence were the most important variables in the model. Subject to continuing clinical evidence of the effectiveness of pharmacokinetic dosage and the role of prophylaxis in decreasing inhibitor incidence, treatment for life with prophylaxis is a cost-effective therapy, using current criteria for the reimbursement of health care technologies in a number of countries. © 2013 John Wiley & Sons Ltd.