Australia and Canada are currently the only Western nations with gover
nment guidelines for analyzing the cost-effectiveness of drugs. We use
d guidelines issued by the Australian Pharmaceutical Benefits Advisory
Committee to construct a model for comparing the cost-effectiveness o
f risperidone and haloperidol over a 2-year period in patients with ch
ronic schizophrenia. Use of clozapine was also included in the analysi
s as an alternative treatment given to patients who proved unresponsiv
e to therapy with haloperidol or risperidone. Results are expressed in
Australian dollars. Cost-effectiveness was determined by using decisi
on-analytic modeling to compare clinical outcomes and costs, The analy
tic model contained a decision tree for each of the compared agents th
at tracked the distribution of patients between treatment outcome path
ways (ie, scenarios), Distributions were based on probabilities derive
d from our meta-analysis results reported elsewhere and from other sou
rces. Each scenario had an associated monetary cost that included all
significant direct costs (ie, hospital costs; outpatient costs; and th
e cost of drugs, the services of health care professionals, and govern
ment-subsidize hostel accommodation). The cost for a given outcome was
the sum of costs for all scenarios leading to that outcome. Cost-effe
ctiveness was expressed as the total cost per favorable outcome. The d
efinition of a favorable outcome was one in which the patient was in a
response phase at the end of the 2-year period. The probability of a
patient experiencing a favorable outcome at the end of 2 years was 78.
9% for risperidone versus 58.9% for haloperidol. The total cost of tre
atment for 2 years was $15,549.00 for risperidone versus $18,332.00 fo
r haloperidol. The expected cost per favorable outcome was $19,709.00
for risperidone and $31,104.00 for haloperidol. Risperidone was more c
ost-effective than haloperidol and therefore was ''dominant'' in pharm
acoeconomic terms because it produced a higher proportion of favorable
outcomes at lower cost. Sensitivity analysis showed that the differen
ce in clinical response rate was a key determinant of cost-effectivene
ss.