Economic evaluations of new and existing pharmaceutical products are an essential input into decision-making in health care. Health care systems around the world face steady increases in the total cost of pharmaceuticals. Increasingly, health care funders have to choose which drugs are subsidised and which are not reimbursed from public funds. In psychiatry, a number of new pharmaceutical products have recently been developed for the treatment of depression and schizophrenia which cost considerably more than traditional pharmacological products. Governments and purchasers, with limited budgets and expanded demands for funding, require pharmaceutical companies to demonstrate the cost-effectiveness of their new therapies. It is no longer sufficient to consider the clinical or therapeutic effects of new drugs: purchasing choices are predicted on studies which identify, measure and value what is given up when a product is used (the cost) and what is gained (improved health outcome).