OBJECTIVES: To conduct a cost-effective analysis of clozapine, olanzapine, quetiapine, and risperidone, for the management of patients with treatment-resistant schizophrenia. METHODS: We used Markov modelling with four health states (remission, stable, relapse, and death) to estimate costs and outcomes of clozapine, olanzapine, quetiapine, and risperidone in patients with treatment resistant schizophrenia and data collected from literature. Using the perspective of the National Health Service in the United Kingdom, incremental cost effectiveness ratios (ICERs) were estimated as cost per quality adjusted life year (QALY) for each of these therapies, over a 5-year time horizon, with a discount rate of 3.5% to both costs and outcomes. One-way, two-way, and probabilistic sensitivity analyses were used to examine uncertainty in the estimates. RESULTS: Clozapine dominated the three therapies it was compared to and had negative ICERs compared to each of these therapies: –£8,773/QALY,  –£20,659/QALY, and –£2,226/QALY, compared to olanzapine, quetiapine, and risperidone respectively. The results from the one-way and two-way sensitivity analyses suggested the findings were insensitive to changes in single model parameters of the top five key drivers and double model parameters of the top two key drivers for all treatment scenarios. The mean ICER values from the probabilistic sensitivity analysis were –£8,737.40/QALY for clozapine versus olanzapine, and –£20,562.56/QALY and –£2,020.44/QALY for quetiapine and risperidone respectively. The probability of clozapine being cost effective compared to olanzapine at a threshold value of £20,000/QALY was 99.98% and 98.44% compared to risperidone. However the probability of clozapine being cost effective compared to quetiapine was 100% at any threshold value. CONCLUSIONS: Clozapine was the dominant treatment for treatment-resistant schizophrenia as it was associated with the lowest costs and highest QALYs. Based on these findings the treatment strategy for treatment-resistant schizophrenia ought to be reviewed and clozapine considered after one unsuccessful trial with any other antipsychotic drug.