OBJECTIVE: Antipsychotic therapies are often evaluated on the basis of clinical endpoints (BPRS, PANSS) and measures of direct cost. However, schizophrenia patients pose a substantial burden in terms of indirect costs, much of which is attributable to loss of employment. We present a new approach to assess the cost-effectiveness of Risperidone Vs Haloperidol, using employability as an outcome measure. METHODS: A decision analytic cost effectiveness model was developed to compare the two treatments over a one-year period including all direct medical costs and the number of employable persons as a measure of effectiveness. A measure of executive functioning, the Wisconsin Card Sort Test (WCST), was used as an intermediate endpoint from which employability was modeled. A Monte-Carlo procedure, using WCST sampling distributions from clinical trials, simulated the WCST score distribution for a cohort of 10,000 patients. A clinically stable patient, with a Positive and Negative Syndrome Scale (PANSS) score increase of at least 20% and a WCST-Category score of >=3.5 was assumed to be employable. Sensitivity analysis was performed for key values. RESULTS: The base case per-patient cost of Risperidone and Haloperidol was $5,967 and $4,622 respectively and the number of employable persons was 3,258 (32.58%) and 2,517 (25.17%) respectively. Risperidone remained cost increasing and had higher number of employable persons over all the ranges used in the sensitivity analysis. The base case incremental cost effectiveness ratio for Risperidone was $14,507 for each additional employable person. The incremental CE ratio ranged from a high of $100,000 to a low of $3,000 per employable persons when the rates of clinical stability for Risperidone and Haloperidol therapy were varied. CONCLUSION: Gains from earning rates for employed schizophrenics, savings in informal caregiver costs and other intangible positive effects could justify an incremental cost of $14,507 for each additional employable person prescribed Risperidone.