OBJECTIVES: Atypical antipsychotic agents such as risperidone and olanzapine have better side effect profiles comparing to typical antipsychotics. The atypical agents also improve the patients' quality of life. The present study was to compare the quality-adjusted life-years (QALYs) gained by risperidone and olanzapine and the corresponding cost in treating patients with chronic schizophrenia who are refractory or intolerant to typical antipsychotics from the perspective of a public health organization. METHODS: Medical records of patients with chronic refractory schizophrenia were reviewed retrospectively over one year. Utilization of healthcare resources and the proportion of outpatient time during treatment with olanzapine or risperidone were retrieved. The utility scores ranging from 0 to 1 of two statuses of schizophrenia, inpatient and outpatient, were rated through a survey conducted on 71 nurses and physicians who have been working at the psychiatric unit for at least 1 year by the method of Standard Gamble. The direct medical cost and QALYs gained by risperidone and olanzapine were estimated. RESULTS: Fifty patients' medical records were reviewed. Olanzapine was administered for 26.2 patient-years and risperidone was administered for 10.0 patient-years. The percentages of outpatient-time were 56% and 51% for patients receiving olanzapine and risperidone, respectively. The utility score of the outpatient status was 0.53 while the inpatient status score was 0.49. It was estimated that it cost HK$324, 283 (1US$=7.8HK$) per QALY gained for olanzapine and HK$ 336,482 per QALY gained for risperidone. CONCLUSION: Olanzapine appeared to dominate risperidone for the treatment of chronic refractory schizophrenia from the perspective of a Hong Kong public health organization.