BACKGROUND: As more European governments require economic data to support reimbursement applications the potential burden of multiple economic evaluations is being seen as a problem by industry. Placing responsibility for cost-effectiveness assessment at the European level using standardised methods has been proposed as a solution. OBJECTIVE: To review the feasibility of a European level cost-effectiveness test for new drugs, from conceptual, practical and political viewpoints. METHODS: The issues are examined first from the theoretical perspective - does a European level economic evaluation have any inherent logic. Secondly, the practical issues of how such an evaluation might be conducted are examined. Could it be based on a phase III clinical trial? The political issues relate to who would regulate the production of such cost-effectiveness data; who would use the data to assist in what decision(s)? Different regulatory models are assessed using the analogy of drug licensing. DISCUSSION: The position generally taken by economists is that a generalised cost-effectiveness result is neither possible nor useful. Differences in the price structures, treatment patterns and provider incentives between systems make generalisations of cost-effectiveness of questionable relevance. How fast will European integration produce a single health market? Moves towards a single European price for each drug are relevant as in the willingness of European states to allow the EU to play a bigger role in health care financing and organisation. Will countries accept each others' assessments or will an EU agency like EMEA be required? CONCLUSIONS: Long-term political and economic changes may well create a true European market in which cost-effectiveness at the European level will have meaning and relevance. Meanwhile, individual country health care systems seem more concerned with short-term budget impact when making new drugs available. The pharmaceutical industry should not anticipate a reduction in the overall demand for locally targeted economic information.