Background Oral semaglutide was approved in 2019 for blood glucose control in patients with type 2 diabetes mellitus (T2DM) and was the first oral glucagon-like peptide 1 receptor agonist (GLP-1 RA). T2DM is associated with substantial healthcare expenditures in the US, so the cost of a new intervention should be weighed against clinical benefits. Objective This study evaluated the budget impact of a treatment pathway with oral semaglutide 14 mg daily versus oral sitagliptin 100 mg daily among patients not achieving target glycated hemoglobin (HbA1c) level despite treatment with metformin. Methods This study used the validated IQVIA™ CORE Diabetes Model to simulate the treatment impact of oral semaglutide 14 mg and sitagliptin 100 mg over a 5-year time horizon from a US healthcare sector (payer) perspective. Trial data (PIONEER 3) informed cohort characteristics and treatment effects, and literature sources informed event costs. Population and market share data were from the literature and data on file. The analysis evaluated the estimated budget impact of oral semaglutide 14 mg use for patients currently using sitagliptin 100 mg considering both direct medical and treatment costs to understand the impact on total cost of care, given underlying treatment performance and impact on avoidable events. Results In a hypothetical plan of 1 million lives, an estimated 1993 patients were treated with sitagliptin 100 mg in the target population. Following these patients over 5 years, the incremental direct medical and treatment costs of a patient using oral semaglutide 14 mg versus sitagliptin 100 mg was $US16,562, a 70.7% increase (year 2019 values). A hypothetical payer would spend an additional $US3,300,143 (7.1%) over 5 years for every 10% of market share that oral semaglutide 14 mg takes away from sitagliptin 100 mg. Univariate and scenario analyses with alternate inputs and assumptions demonstrated consistent results. Conclusions Use of oral semaglutide 14 mg in patients currently receiving sitagliptin 100 mg substantially increases the budget impact for patients with T2DM whose blood glucose level is not controlled with metformin over a 5-year time horizon for US healthcare payers. Plain Language Summary Patients with type 2 diabetes mellitus (T2DM) have many treatment options. Choices depend on factors such as cost, preference, and patient characteristics. Oral semaglutide was recently approved for the treatment of T2DM as the first oral therapy of its class. This study estimated the cost for patients treated with sitagliptin 100 mg, a commonly used T2DM treatment, versus oral semaglutide 14 mg for patients whose disease is not well controlled with metformin. Costs and effects were estimated over 5 years for each treatment strategy using predictive model equations and clinical trial data for the two treatments. These costs were considered for both a hypothetical healthcare plan of 1 million lives and the full US population. A patient treated with oral semaglutide 14 mg would expect to see 70.7% higher costs than a patient treated with sitagliptin 100 mg over 5 years. For every 10% of patients who would switch from sitagliptin 100 mg to oral semaglutide 14 mg, costs would increase by 7.1%. Changing the cost of oral semaglutide 14 mg had the greatest impact on model results. The findings from the analysis were consistent across a range of alternate model inputs. Oral semaglutide 14 mg is more costly than sitagliptin 100 mg over 5 years.