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Schizophrenia is a ravaging and costly mental illness. Treatment of schizophrenia is long term and involves different kinds of care (drugs, outpatient, hospital, and residential care). Antipsychotic drugs contribute substantially to control patients positive and negative symptoms. In the late 90’s, new “atypical” antipsychotics have been introduced, which are supposed to be more effective, but also are more expensive. However evidence on cost-effectiveness of atypical drugs is yet limited.First, to compare effectiveness and costs of 12 month treatment of schizophrenia, using typical and atypical antipsychotics, associated with psychiatric services. Second, to compare the three most prescribed atypical drugs (olanzapine, clozapine, and risperidone) to the drug of choice, haloperidol.This study originates from a large scale survey carried out in Lombardy (Italy) in the year 2000, where 9,817 psychiatric patients were assessed using the HoNOS scale. Out of 1,537 schizophrenic patients with an initial (January) and final (December) assessment, 365 patients meeting eligibility criteria were elected for the study on cost-effectiveness (NHS perspective). The study is based on the observation of real clinical behaviours; therefore patients are not randomised to different treatments.The group treated with typical antipsychotics (n = 117) reported a light increase in severity index (10.0 vs 10.2; n.s.), whereas in the atypical group (n = 248) there was a significant decrease (11.5 vs 10.0; p = 0.03). Haloperidol (-0.16; n.s.) and risperidone (-0.57; n.s.) subgroups showed no significant reduction of clinical severity, while olanzapine (-2.5; p = 0.05) and clozapine (-1.6; p = 0.02) subgroups proved a significant lowering. Therefore, the average annual total treatment cost per point of reduction on the HoNOS scale was € 6,754 for the atypical drugs and impossible to evaluate for the typical drugs. The same was € 4,554 for olanzapine, € 7,546 for clozapine, € 10,897 for risperidone, and € 22,394 for haloperidol. Assuming that typical neuroleptics are the first choice treatment for schizophrenia, the incremental costs for one point reduction on the severity scale is € 3,136 for atypical drugs; or is € 3,342 for olanzapine vs haloperidol (comparator), € 5,895 for clozapine, and € 6,591 for risperidone.Although the pure cost for the atypical drugs is 16 times higher than for the typical ones (€ 1,563 vs € 96), the total treatment costs prove to be the most cost-effective and, among atypical drugs, olanzapine appears to be the best option.