Aimslhypothesis. 'The Cost of Diabetes in EuropeType II (CODE-2) study' provides the first coordinated attempt to assess the total costs of managing people with Type II (non-insulin-dependent) diabetes mellitus in Europe. Type II diabetes is associated with a number of serious long-term complications, which are a major cause of morbidity, hospitalisation and mortality in diabetic patients. Methods. Patients were divided into four broad categories defining their complication status in terms of no complications, one or more microvascular complications, one or more macrovascular complications or one or more of each microvascular and macrovascular complication. The prevalence of complications and associated costs were assessed retrospectively for 6 months.Results. In total, 72% of patients in the CODE-2 study had at least one complication, with 19% having microvascular only, 10% having macrovascular only and 24% of the total having both microvascular and macrovascular complications. Of patients with microvascular complications, 28% had neuropathy, 20% renal damage, 20% retinopathy and 6.5% required treatment far eye complications. Among the patients with macrovascular complications, 18% had periphera1 vascular disease, 17% angina, 12% heart failure and 9% had myocardia1 infarction. Percutaneous trans1uminal coronary angiop1asty, coronary artery bypass graft or stroke occurred in 3%, 4% and 5% of the patients, respective1y. In patients with both microvascu1ar and macrovascular complications, the total cost of management was increased by up to 250% compared to those without complications. Conclusionlinterpretation. Complications have a substantial impact on the costs of managing Type II diabetes. This study has confirmed that the prevention of diabetic complications will not only benefit patients, but potentially reduce overall healthcare expenditure. [Diabetologia (2002) 45:S 13-S 17]