We evaluated the efficacy and cost savings of the pneumococcal pneumonia vaccine in a retrospective cohort study of 762 vaccinated and 1161 randomly selected unvaccinated age-sex matched persons in Blue Cross/Blue Shield of Minnesota using medical and pharmaceutical claims. The pneumonia incidence and the ratio of incidence in the postvaccination to prevaccination periods (rate ratio) were examined in the vaccine group by sex and risk factors. Vaccination significantly reduced pneumonia incidence, with overall efficacy of 69% and higher efficacy in women (86%) than in men (33%). We assigned persons to risk categories based on disease conditions as recorded in the claims by the ICD-9-CM (International Classification of Diseases, Ninth Revision, Clinical Modification) diagnostic codes. In the risk categories, efficacy varied from 50% to 75% and was confounded by sex. Immunocompromised and immunocompetent women had high efficacy (83% to 88%), while immunocompetent and immunocompromised men had lower efficacy (33%). Persons with a precondition of pneumonia exhibited similar vaccine efficacy to the overall cohort relative to the comparison group. Projected costs of pneumonia cases are 3.6 times the observed costs of vaccination and postvaccination pneumonia costs. We conclude that the pneumococcal pneumonia vaccine is efficacious in persons having had pneumonia, persons "at risk" of developing pneumonia, or persons over 50 years of age, and it corresponds to overall savings of $141 per person.