OBJECTIVES: Budget Impact Analysis (BIA) addresses the question of whether a new drug is affordable by the health care system in which it is being introduced. In Canada, committees and managers of each public drug plan make reimbursement decisions regarding new drugs. Most drug plan managers now require economic data, including a BIA, as part of the formal decision process on the pricing and reimbursement of drugs. There is currently no standardized method of performing and presenting BIAs for submission. METHODS: A survey of representatives across Canada and a review of 35 previously submitted BIAs were conducted to assess existing needs for BIA guidelines. Based on these findings, previously published guidelines (ISPOR) and input from the project's Steering Committee, BIA guidelines were developed to provide detailed instruction on how BIAs should be performed. An interactive budget impact model template was designed to facilitate BIA model development. RESULTS: Five key problem areas were identified for improvement in BIA models: Lack of transparency, inaccurate or misapplied assumptions, generalized analysis non-specific or inaccurate to jurisdiction and/or plan, inappropriate choice of comparators; and overall quality. The guidelines and accompanying template address these problems and cover model design, analytic perspective, time horizon, target population, costing, scenarios to be compared, uncertainty analysis, discounting and validation methods that should be used when preparing a BIA as well as provide detailed guidance on data inputs and data sources. CONCLUSION: The BIA guidelines and accompanying template address the requirements of each of the participating drug plans in Canada. Both have been endorsed by the National Prescription Drug Utilization Information System (NPDUIS) Steering Committee and the PMPRB for the standardization of BIA submissions. The intended audience includes those who develop, submit or use BIA models, and drug plan managers who evaluate BIA submissions.