Objective. Tumour necrosis factor (TNF) antagonists have been shown to improve the outcomes in patients with rheumatoid arthritis (RA) and psoriatic arthritis (PsA). We assess the cost-effectiveness of two TNF antagonists and so-called 'palliative care' for the treatment of active PsA from the perspective of the UK National Health Service (NHS). Methods. Bayesian statistical methods were used to synthesize evidence from three Phase III trials, identified through a systematic review, and estimate the relative efficacy of etanercept, infliximab and palliative care. A probabilistic decision analytic model was then used to compare these treatments after the failure of at least two conventional disease-modifying anti-rheumatic drugs (DMARDs), following the British Society for Rheumatology (BSR) guidelines for use. The primary outcome measure, quality-adjusted life years (QALYs), was derived from utility values estimated as a function of disability measured by the Health Assessment Questionnaire (HAQ). The deterioration experienced in HAQ at treatment withdrawal (rebound) was incorporated using alternative scenarios to represent best- and worst-case assumptions. The model was extended beyond the trial duration to a 10-yr and lifetime horizon, using available evidence and expert opinion-based assumptions on disease progression. Resource utilization was based on literature, national databases and expert opinion. Prices were obtained from routine NHS sources and published literature. Results. At a 10-yr time horizon, the incremental cost-effectiveness ratio (ICER) for etanercept compared with palliative care was pound26 361 per QALY gained for the best-case rebound scenario, which increased to pound30 628 for the worst-case. The ICERs for infliximab compared with etanercept were pound165 363 and pound205 345 per QALY, respectively. These findings are mainly explained by the fact that infliximab has higher acquisition and administration costs without substantially superior effectiveness compared with etanercept. Results were sensitive to estimates of rebound assumptions at withdrawal and the time horizon. Conclusions. Only results for etanercept remained within the range of cost-effectiveness estimates considered to represent value for money in the NHS by the National Institute for Health and Clinical Excellence. Further research appears most valuable in relation to the short-term effectiveness, utility parameters and assumptions regarding the effect of rebound.