OBJECTIVES: The objective of portfolio management is to create the most value from a portfolio of projects. It attempts to ensure that the projects in the portfolio meet the strategic goals of the business by determining which projects are to be funded and at what levels. This study investigates the application of two portfolio management techniques involving Monte- Carlo simulation and the Pearson Index to two diverse situations: pharmaceutical R&D investment prioritisation decisions and health economic evaluations using cost-effectiveness analysis. METHODS: To assist the decision-maker to prioritise pharmaceutical R&D projects in which to invest, we constructed a model involving Monte-Carlo simulation and the Pearson Index. This model was applied to data on cost of development and probability of success for each clinical development phase (I-III), as well as overall return-on-investment (ROI) for each project in the drug portfolio. To assist healthcare policy-makers to select the cost-effective treatment strategy, we constructed a model using Monte-Carlo simulation, to incorporate variability in medical resource use and unit costs, and the bootstrap method to estimate the 95% confidence interval for the incremental cost-effectiveness ratio (ICER). This model was applied to data from a multinational health economic trial. RESULTS: For pharmaceutical R&D investment prioritisation decisions, we derived a probability distribution for the Pearson Index for each project which was then used to prioritise project selection in light of uncertainty in development costs, success probabilities and overall ROI. In addition, we derived an estimate of the ICER and its 95% confidence interval, which was then used to select the cost-effective treatment strategy. CONCLUSIONS: Portfolio management techniques can successfully be used to support the decision-maker in making optimal decisions in pharmaceutical R&D project selection and to select the cost-effective treatment strategy in light of the uncertainty/variability in input parameters ?? ?? QUALITY OF LIFE METHODOLOGY ISSUES