Treatment cost can have a dramatic effect on treatment availability, and clinicians may find themselves unable to provide expensive treatments they believe their patients should receive. The introduction of new, premium-priced antipsychotic medications has provided visible examples of this problem. Cost considerations must be part of treatment decisions, since resources are often insufficient to provide all potentially helpful treatments. However, the key question regarding expensive drugs is whether other savings can be expected to offset the higher drug price, or if not, whether improved effectiveness justifies the added cost. Pharmacoeconomic research attempts to integrate relevant information on both effectiveness and cost so that clinicians, patients, and other decision-makers can make meaningful treatment choices. This article presents a conceptual framework for cost-effectiveness analysis, illustrates pharmacoeconomic methods with studies of the cost-effectiveness of clozapine treatment, and describes the steps in designing cost-effectiveness research on novel antipsychotic agents.