Available clinical evidence suggests that the newer antipsychotics are similar to conventional antipsychotics for positive symptom control. It has been suggested that they may also be superior for negative symptoms and side effects, but the evidence for this is unclear (Duggan et al, 1999, Kennedy et al, 1999, Srisurapanont et al, 1999, Thornley et al, 1999, Tuunainen and Gilbody, 1999, Wahlbeck et al, 1999). These differences if they exist, may lead to improvements in quality of life and patient satisfaction and subsequent rates of compliance with therapy. If the latter occurs, there may also be improvements in the overall level of symptom control and rate of relapse. Economic evaluations of risperidone suggest that these differences could lead to savings in the use of hospital inpatient care compared to conventional antipsychotics (Guest et al, 1996, Glennie, 1997). The available economic evidence suggests that the use of clozapine has the potential to improve the efficient use of health and social service resources in some patients (Revicki et al, 1990, Davies & Drummond, 1993, Meltzer et al, 1993, Aitchison & Kerwin, 1997, Glennie, 1997, Rosenheck et al, 1997). All of these studies indicate that overall, clozapine is associated with lower rates of hospital inpatient admissions and lower duration of inpatient stay. These are due to earlier discharge from the index inpatient admission and lower rates of relapse. These differences in the use of inpatient care are sufficient to offset the additional costs of purchasing clozapine. However, the designs of all the economic studies raise several issues of concern, such as control for biases, sources of data and methods of data collection, measurement of outcomes, the type and dose regimes of comparator drugs. In addition, the clinical and economic data for these evaluations were collected for a patient population with a long duration of illness and/or who are treatment resistant or intolerant of typical antipsychotic therapy. It is not clear that these are applicable to people with early schizophrenia or those who have not had problems with previous antipsychotics. Patients currently categorised as treatment resistant or treatment intolerant are likely to have a long history of schizophrenia. This is partly due to historical factors, such as the limited number of antipsychotics available, concerns about the safety of clozapine and the restricted use of expensive atypical antipsychotics. These factors may be associated with a relatively poor quality of life and more intensive use of health care services in patients with a longer duration of illness. Any improvements in clinical outcome as a result of a change in antipsychotic may also result in relatively important changes in health status and intensity of ealth service utilisation, compared to those with a recent diagnosis of schizophrenia. In addition, there is some limited evidence that the use of services following entry to a clinical trial is related to the level of resource use prior to entry (Rosenheck et al, 1999). Furthermore, there is a trend to reduce reliance on inpatient or institutional care for people with acute or chronic mental illness. The total number of commissioned hospital bed days for people with mental illness decreased from 14 million to 11.5 million between 1992-3 and 1997-8 and the number of ward attendees fell from 124000 to 93000 (Department of Health, 1998a). Over the same period the number of daily available hospital beds for people with mental illness declined from 47000 to 37000, while the number of outpatient attendances rose from 1.8 million to 2.1 million (HPSS, 1998). Creed et al (1997) suggest that approximately 40% of people with acute episodes of mental illness (including schizophrenia) can be treated by attending psychiatric day hospitals rather then with hospital inpatient admissions. These factors may over estimate the likely value for money of the atypical antipsychotics, in cohorts of people with first episode schizophrenia in the current UK mental health service (Rosenheck et al, 1999). Given the constraints on health and social care budgets, purchasers and providers need to ensure that resources are used efficiently. A variety of guidelines and treatment protocols have been published, or developed for use at a local level to support decisions about the choice of antipsychotic for people with a first episode of schizophrenia. In addition, there are wide variations in the availability and use of the atypical antipsychotics in the UK. Current published literature is not sufficient to address all the economic issues of concern and there is a need for evaluation of the relative efficiency of clozapine and the new antipsychotics. The NHS R&D HTA has funded primary research to assess the relative costs and utility of typical and atypical antipsychotics for people who are resistant to or intolerant of at least two antipsychotics. However, the results of the research will not be available for at least 3 years. In addition, it is also important to assess the value of the new drugs in the context of alternative prescribing guidelines, and for people with a first episode of schizophrenia. This paper presents the results of secondary research to explore the potential economic impact of atypical antipsychotics for people in the context of current clinical guidelines.