This study was carried out to investigate the direct costs for treatment of patients with cancer from 1985 to 1996 in Sweden, and to examine health economic effects of changes in treatment pattern. Material for the study was collected from official statistics and from published health economic evaluations of cancer treatment. Costs for inpatient care decreased during the period, while costs for outpatient care and drugs increased. In total, the direct health care costs for cancer treatment decreased from 1985 to 1996. New drugs registered on the market are often more expensive than the drugs they replace. From a health economic perspective it is not clear, however, that higher drug costs necessarily increase total costs. Further health economic research is needed because many treatment alternatives have not yet been evaluated, and furthermore, because a treatment option can be cost effective in one specific indication but not in another.