Objective: To estimate the annual direct cost of managing erectile dysfunction (ED) to the UK National Health Service (NHS) and to examine the impact of the introduction of sildenafil in 1998 and Schedule 11 restrictions in 1999. Design: A prevalence-based cost-of-illness approach was used. The period 1997 to 2000 was covered. The numbers of ED prescriptions, prosthesis implantations and general practitioner (GP) consultations were retrieved retrospectively from UK resource utilisation databases. The number of specialist consultations and psychosexual therapy sessions were estimated from NHS clinic data. National resource unit costs were applied. Main outcomes and results: Between 1997 and 2000 the number of men presenting with ED increased from 79 800 to 257 984. The cost to the NHS increased from 㲹.4 million to 㷳.8 million (2000 estimates). The cost per patient fell from 㳶8 to 㲸6. In 1997, most NHS costs came from psychosexual therapy (30.7%), specialist consultations (20.2%) and intracavernosal injections (26.6%). By 2000, NHS costs came primarily from specialist consultations (32.0%), sildenafil prescriptions (26.2%), psychosexual therapy (13.6%) and GP consultations (12.0%). The annual cost was most sensitive to the number of drug prescriptions and specialist consultations. Conclusions: The increased NHS cost of managing ED was due mainly to a three-fold increase in the number of men presenting to GPs, substantial numbers of whom were then referred for specialist consultations under Schedule 11 restrictions. This naturally resulted in the increased use of all resources including sildenafil. The cost effectiveness of transferring prescribing responsibility in cases of severe distress from specialists to GPs in primary care remains to be determined.