The principles, methods, and applications of pharmacoeconomics and pharmaceutical outcomes evaluations are discussed. Pharmacoeconomics may be defined as balancing the cost with the consequences (outcomes) of pharmaceutical therapies and services. As a type of outcomes evaluation, pharmacoeconomics looks beyond just the direct or acquisition cost of a pharmaceutical by including its impact on total health resource utilization and costs. Outcomes research attempts to answer the question, What difference does the pharmaceutical make in patient outcomes under real-world conditions? The economic, clinical, and humanistic outcomes (ECHO) model for a pharmacoeconomic evaluation views the drug as some combination of its clinical, economic, and humanistic attributes. Safety and effectiveness are no longer the only salient attributes of a drug; the effect on total health resource utilization, cost, and quality of life must also be evaluated. The four types of pharmacoeconomic methods are cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis. As disease state management continues to emerge as a cost-management, quality assurance strategy, formularies per se will wane in importance and pharmacoeconomic and outcomes data will increase in relevance as health professionals endeavor to find the most efficient and effective combinations of medical care. Pharmacoeconomics as a component of outcomes research will help pharmacists decide which clinical circumstances, patient characteristics, and practice settings are most suitable for particular interventions.