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Development of inhibitors (alloantibodies to exogenous factor VIII) is the most significant treatment complication in patients with haemophilia A. The only proven way to eradicate inhibitors is through immune tolerance induction (ITI), while bypassing agents are typically employed to treat or prevent bleeds in patients with high titre inhibitors. Costs of these approaches have not been well studied. The aim of this study was to compare lifetime costs of treating patients with severe haemophilia A with inhibitors using on-demand or prophylaxis treatment with bypassing agents and ITI. A decision-analytic model was developed to compare the treatment costs and outcomes. Quantitation of the reduction in bleeding events for patients on prophylaxis and after eradication of inhibitors when on ITI and relapse of inhibitors was derived from published studies. Costs were obtained from standard US costing sources and are reported in 2014 US dollars. Costs and outcomes were discounted 3% per annum. Lifetime costs of treating patients with inhibitors are lower for ITI vs. on-demand or prophylaxis. Patients are also projected to live longer, have greater quality-adjusted life-years, and have fewer bleeding events than patients treated on-demand. Treating patients via ITI to eradicate inhibitors may result in lower lifetime costs and greater life-years and quality-adjusted life-years than treating with bypassing agents., (© 2015 The Authors. Haemophilia Published by John Wiley & Sons Ltd.)