Aims/hypothesis. 'The Cost of Diabetes in EuropeType II study' is the first coordinated attempt to measure total healthcare costs of Type II (non-insulindependent) diabetes mellitus in Europe. The study evaluated more than 7000 patients with Type II diabetes in eight countries -Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden and the United Kingdom. Methods. A bottom-up, prevalence-based design was used, which optimised the collection of data at the national level while maintaining maximum international comparability. Effort was made to ensure consistency in terms of data specification, data collection tools and methods, sampling design, and the analysis and reporting of results. Results are reported for individual countries and in aggregate for the total study population. Results. The total direct medical costs of Type II diabetes in the eight European countries was estimated at EUR 29 billion a year (1999 values). The estimated average yearly cost per patient was EUR 2834 a year. Of these costs, hospitalisations accounted for the greatest proportion (55%, range 30-65%) totalling EUR 15.9 billion for the eight countries. During the 6-month evaluation period, 13% of the Type II diabetic patients were hospitalised, with an average of 23 days in hospital projected annually. In contrast, drug costs for managing Type II diabetes were relatively low, with antidiabetic drugs and insulin accounting for only 7% of the total healthcare costs for Type 11 diabetes. Conclusionlinterpretation. Type 11 diabetes mellitus is a common disease and the prevalence is expected to increase considerably in the future, especially in developing countries. Current comprehensive economic data on the costs of diabetes are required for policy decisions to optimise resource allocation and to evaluate different approaches for disease management. [Diabetologia (2002) 45:S5-S 12]