Objective: Patients might be reluctant to accept generic substitution, due to differences in colorants, shape, package design, etc. This may result in poorer compliance, especially amongst patients suffering from schizophrenia. Generic substitution for schizophrenic patients decreases drug costs, possibly counteracted by more hospitalizations resulting from poorer compliance. This study quantifies the health-economic impact of generic substitution of oral risperidone in Germany. Methods: An existing five-year discrete event simulation (DES) model was adapted to compare patients staying on branded risperidone (BR) with patients switching to generic risperidone (GR). Differences between treatment arms include compliance and medication costs. The compliance loss for patients subject to generic substitution was varied between 0 and 10%. The generic price was assumed to be 40% of the branded price (=€7.41). Incremental costs and effects were recorded and analyzed. Results: With 2.5%, 5.0%, 7.5% and 10% difference in compliance, incremental effects of BR over GR are 0.003, 0.006, 0.009 and 0.011 QALYs respectively. Incremental costs are €871, €551, €231 and -€195. Health benefits are realized through improved symptom reduction resulting from better compliance. Improved symptom reduction also decreases the number of hospitalizations, counteracting the higher drug costs for BR. On average, each 2.5%-point compliance difference causes a 0.003 QALY gain, while incremental costs decrease with ~€355. Thus, for compliance differences =6.5%, the model predicts BR to be cost-effective compared to GR (using NICE threshold of £30,000 (~€42,000)). For compliance differences =8.5%, the model predicts BR to dominate GR. Conclusion: The DES model predicts staying on BR may be cost-effective compared to generic substitution if the latter causes a compliance loss =6.5%. For a compliance loss =8.5%, BR is predicted to dominate GR. Better compliance involves improved symptom reduction resulting in health benefits and fewer hospitalizations. The latter counteracts the higher medication costs associated with BR.