background. the renaal (reduction of endpoints in type 2 diabetes with the angiotensin ii antagonist losartan) study demonstrated that treatment with losartan reduced the risk of esrd by 29% among hypertensive patients with type 2 diabetes and diabetic nephropathy. the objective of this study was to project the effect of losartan compared to placebo on the lifetime incidence of esrd and associated costs from a third-party payer perspective in mexico. methods. a competing risks method was used to estimate lifetime incidence of esrd, while accounting for the risk of death without esrd. the cost associated with esrd was estimated by combining the cumulative incidence of esrd with the lifetime cost associated with esrd. total cost was estimated as the sum of the cost associated with esrd from the three main public institutions in mexico, the lifetime cost of losartan therapy, and other costs (non-esrd/non-losartan) expected for patients with type 2 diabetes. survival was estimated by weighting the life expectancies with and without esrd by the cumulative risk of esrd. results. the projected lifetime incidence of esrd for losartan patients was lower (66%) compared with placebo patients (83%). this reduction in esrd resulted in a decrease in esrd-related cost of m$49,737 per patient and a discounted gain of 0.697 life years per patient. after accounting for the cost of losartan and the additional cost associated with greater survival, we projected that treatment with losartan would result in a net savings of m$24,073 per patient. conclusion. treatment with losartan in patients with type 2 diabetes and nephropathy not only reduced the within-trial incidence of esrd but is projected to result in lifetime reductions in esrd, increased survival, and overall cost savings to public institutions in mexico.