The aim of this study was to assess the incremental cost effectiveness of on-demand versus prophylactic haemophilia therapy in Germany, Sweden, the United Kingdom and The Netherlands from the third-party payers' perspective. Using a decision tree model, the cost effectiveness of on-demand versus prophylactic therapy was analysed by extrapolating data from the European Haemophilia Economic Study to a 1-year analytic time horizon. Five hundred and six patients with severe haemophilia A and B, without inhibitors and at least 14 years of age, were enrolled in this study. Patients treated prophylactically had fewer bleeds than patients treated on-demand. With prophylactic treatment, the incremental cost per avoided bleeding ranged from 6,650 Euro dollars for patients 30 years of age or younger in Germany to 14,140 Euro dollars for patients over 30 years old in Sweden. If quality of life was taken into account, patients receiving prophylactic treatment had higher mean utilities than patients on on-demand therapy. The incremental effectiveness ratios in Germany were 1.2 million Euro dollars per quality-adjusted life year gained for patients 30 years or younger and HIV-positive and 2.2 million Euro dollars for patients 30 years or younger and HIV-negative. In the group aged over 30 years and HIV-positive the on-demand treatment strategy was dominant, whereas in the over 30 years/HIV-negative group the incremental cost-utility ratio was 4.7 million Euro dollars per quality-adjusted life year. Based on our decision analysis, the use of prophylactic treatment was overall more effective than on-demand therapy in young haemophiliacs, but at extremely high cost.