OBJECTIVES One of the major mandates of the Formulary Management System (FMS) is to evaluate and select drugs using the highest level of evidence available, including cost-effectiveness and budget impact. The purpose of this study is to provide pharmacoeconomic analysis for P&T Committee from the institutional perspective for alvimopan and methylnaltrexone, two peripheral opioid antagonists recently approved by FDA. METHODS A decision analysis model was developed for alvimopan vs. both placebo and chewing gum, using time to hospital discharge as the primary outcome. For methylnaltrexone, the decision analysis compared to placebo determined the probability of laxation as the primary outcome. Institutional acquisition costs were utilized for the analysis. A budget impact analysis of both products was also conducted. RESULTS Alvimopan has incremental cost-effectiveness ratio (ICER) of $51 per hour of reduced LOS vs. placebo, and an ICER of $81 per hour of longer LOS vs. chewing gum. Methylnaltrexone has an ICER of $636 per probable bowel movement, the approved FDA indication, compared with placebo. The estimated annual budget impact of alvimopan and methylnaltrexone on MDACC is $375,000 and $134,400, respectively. CONCLUSIONS In summary, alvimopan is more effective and more costly than placebo for postoperative ileum. However, alvimopan is less effective and most costly than chewing gum for the same indication. The other peripheral opioid antagonist methylnaltrexone is more effective and more costly than placebo for opioid-induced constipation. Though a very basic model, the decision analysis model provided another layer to the final decision process.