The use of economic analysis is increasingly advocated by funding agencies to acheive efficient cost containment strategy. OBJECTIVES: To inform the use of antibacterials in chosen hospitals and to propose inclusion of economic evaluation of drug therapy in policy formulation and decision-making. METHODS: Cost Minimisation Analysis; the most applicable tool for generic equivalent drugs was used. This was compared in three health institutions. These include a tertiary, Lagos University Teaching Hospital (LUTH); a secondary, General Hospital Lagos (GHL); and a primary, Health Centre Harvey Road, Yaba (HCHR), as well as a community pharmacy outlet for prescriptions of GHL. Relevant information such as diagnosis, cost of drugs, dosage, duration of therapy among others were obtained from patient case notes for which antibacterials are the mainstay of therapy and dispensed prescriptions. The mean cost per defined daily dosage (DDD) of generic and branded for each antibacterial was computed for the various hospitals. These were compared using student 't' test. The outcome measure was erradication of bacterial in question by the respective antibacterials. RESULTS: The use of more expensive branded drugs is very rampant even when the generic equivalence is available. The difference in thier cost/DDD is very significant (P<0.05; n=1576 in LUTH, n=1200 in GHL, n=900 in HCHR, n=750 in the community pharmacy). For example, in LUTH, the cost/DDD of ciprofloxacin was N310 for branded product and N160 for generic. Also observed were some irrational combinations especially in the primary health centre. CONCLUSION: A form of economic evaluation of drug therapy is necessary for health policy and decision makers to be more informed on cost implication of their choices and trade-offs. Systematic appraisal of available options needs to be well understood in view of limited resources. Appropriate and timely intervention for sustainable improvement is mandatory for costs to be greatly minimised.