PURPOSE: The drug cost avoidance and revenue associated with the provision of investigational drug services (IDSs) at an academic institution were studied. METHODS: The study protocols and dispensing data for the investigational drug studies conducted at the institution over two fiscal years (2000-01 and 2001-02) were reviewed. Revenue generated was calculated for all studies, and drug cost avoidance was calculated for studies in which patients were likely to have been treated with active drug had they not been included in the study. RESULTS: Of 139 studies in which the IDS was involved, 107 (77%) were eligible for the cost avoidance analysis. The total drug cost avoidance plus revenue over the two fiscal years was $5,300,428. The annualized drug cost avoidance plus revenue was $2.6 million. Cost avoidance varied with the type of study and the disease category involved. CONCLUSION: An IDS accounted for substantial drug cost avoidance over two fiscal years.