The cost of illness includes not only the funds required to treat illness, but also the effect on the patient's quality of life. Recent concern about rising health costs have focused on the direct expenditures without noting that the cost of illness in terms of mortality and morbidity has declined significantly. Pharmaceuticals have played a major role in reducing the total cost of illness. Several studies of the cost-effectiveness of past introductions of vaccines and pharmaceuticals reveal large cost savings. Although the focus of most studies has been on major advances, the continuing process of less dramatic therapeutic improvements has significantly trimmed the cost of illness. Cost-benefit studies of new drugs or changes in drug use, while more difficult to perform, make it possible to influence the selection of therapy. Since pharmaceuticals represent less than 10% of total treatment costs, reduction in the cost of pharmaceutical products can only have a minor impact on the total cost of illness. Pharmaceuticals can reduce the cost of illness by providing alternative therapies that reduce direct treatment cost or improve the public health.