Abstract Objective To compare the cost of managing treatment‐limiting cutaneous adverse drug reactions (CADRs) to first‐line anti‐tuberculosis drugs to an alternative strategy of immediate treatment initiation using second‐line drugs in a South African setting. Methods Clinical and cost data were retrospectively collected from patients presenting with a first‐line anti‐tuberculosis therapy‐associated CADR. Costs (2016 US$) were estimated using an ingredient’s approach from a healthcare provider perspective. The per‐patient and total cost of drug rechallenge, the current management strategy for severe CADR, was calculated. Alternative strategies involving second‐line treatment were derived from literature and expert clinical advice. Results Drug rechallenge costs US $5831 (95% CI: 5134–6527) per patient. Hospitalisation accounted for 62% of this cost. Alternative CADR management strategies using regimens containing rifabutin, bedaquiline and/or delamanid cost 44%–55% less than drug rechallenge (US $2651–US $3276/patient). In univariate sensitivity analyses, drug rechallenge and alternative strategies were most sensitive to hospitalisation and tuberculosis drug costs, respectively. Conclusion Cutaneous adverse drug reactions to anti‐tuberculosis treatment represent a significant economic burden. An alternate strategy of outpatient‐initiated second‐line therapy is economically feasible but requires clinical validation to assess effectiveness.