Powerful pharmaceuticals are of increasing clinical and economic importance to managed care organizations, which are often responsible for managing and paying for the increasing costs of pharmaceuticals. This creates an incentive for them to go beyond a focus on clinical effectiveness and safety to evaluate the cost-effectiveness of new drugs. This report describes the processes by which managed care organizations evaluate pharmaceutical technologies and suggests pathways for organizing improvement. It reviews current evaluation procedures, provides a framework for future evaluations, introduces evaluation approaches, and annotates resources for further research on each topic covered. The report finds that most managed care organizations have internal procedures for assessing new pharmaceutical technologies, but their medical directors commonly believe these procedures to be less rigorous and less systematic than are desirable. The decisionmaking framework outlined in the report and the techniques it incorporates describe an objective, reproducible process for assessing pharmaceutical technology in the managed care setting. It provides a road map that can help an organization expose hidden biases in current processes, build on its experiences with evaluation, and reduce the risk of illogical or poorly thought-through decisions.