OBJECTIVES: To assess the cost-effectiveness of lurasidone and olanzapine in the treatment of schizophrenia from a U.S. societal perspective. METHODS: A four state primary Markov model and a four state generic switch model were built. The four states of primary Markov model were- Stable, Discontinuation, Relapse and Death. The patients who discontinued their treatment were transferred to the switch model and remained in this model till the end of model or death. The time horizon was 5 years and cycle length was 3 months. The costs and QALYs were discounted at an annual rate of 3%. The data for transition probabilities were pooled from clinical trials NCT00615433 and NCT00789698. In the absence of head to head trial data, transition probabilities were indirectly estimated from systematic reviews and clinical studies. The drug acquisition costs were derived from the US Veteran Affairs Federal Supply Schedule. The direct costs consisted of drug costs, physician and mental health clinic visits costs, group intervention costs, hospitalization costs, emergency department costs, laboratory costs and costs of managing side-effects. The laboratory costs were based on CMS Fee Schedule 2015. The disease management costs, caregiver’s cost and utility values were obtained from literature. One-way sensitivity analysis was conducted to quantify the impact of uncertainty related to individual model parameter values. RESULTS: The lurasidone-switch strategy yielded an incremental cost of $216,245 per QALY gained relative to olanzapine-switch strategy. The results were most affected by cost of lurasidone, physician/mental health clinic costs and hospitalization costs. The results were not very sensitive to indirect costs, emergency department costs, adverse events costs or administrative costs. For lurasidone to be cost-effective at standard thresholds, the price would have to drop by at least 35%. CONCLUSIONS: Lurasidone was not cost-effective at a willingness-to-pay threshold of $150,000/QALY compared to olanzapine in the management of schizophrenia.