OBJECTIVES: Health-policy observers increasingly view budget impact as an important factor in drug reimbursement decisions. In a number of instances budget impact seems to have been a more decisive factor than cost-effectiveness in determining a drug's formulary placement. Nevertheless, budget impact usually is an implicit factor in the decision-making process, while cost-effectiveness is an explicitly defined criterion. The objective of our research is to summarize possible arguments supporting the use of budget impact as a criterion in drug reimbursement decisions, and to inform the debate on whether budget impact can be legitimately (and explicitly) used in reimbursement decision-making. METHODS: Based on a literature review spanning 1990 to 2006, we traced a variety of definitions of budget impact as well as rationales supporting its use. Furthermore, we conducted supplementing interviews with 15 key stakeholders involved in drug reimbursement decisions in the Netherlands. RESULTS: We found that policymakers employ several definitions of budget impact that differ mainly in terms of their scope. However, policymakers did not reveal rationales that would support the use of budget impact in drug reimbursement decisions. Nonetheless, in health economics and policy literature, we identified five types of supporting rationales: “losing out” (opportunity cost), uncertainty regarding return on investment, equal access, equal opportunity and “loss outweighing gain.” CONCLUSION: Budget impact is a legitimate rationing criterion, though its precise use, explicit or implicit, in policy practice remains unclear. We recommend that policymakers not conflate budget impact and cost-effectiveness arguments. Further, we recommend that health economists and policymakers be aware that incremental cost-effectiveness ratios (ICERs) are of limited value in resolving the problem of maximizing subject to health gain, as ICERs fail to account for opportunity cost and ignore the important question of how many resources need to be set aside to fund adoption of newly approved cost-effective biopharmaceuticals.