The role of pharmacoeconomics has evolved as a consequence of cost-containment pressures from the pharmaceutical industries’ ‘external environment’. This paper reviews the published literature on the role of pharmacoeconomics in the pharmaceutical industry and gives a historical background and state-of-the-art picture on the function and importance of pharmacoeconomics for the different stakeholders and decision makers in the healthcare area, with a special focus on the pharmaceutical industry in Europe.Pharmacoeconomics is analysed as a part of decision processes at several stages of drug development and drug marketing. The review focuses on the practices of the application of pharmacoeconomics in various countries in Europe, and the drivers for the development of pharmacoeconomics within pharmaceutical companies are described. Investments made by companies with respect to the pharmacoeconomic function in terms of personnel and budget are derived.It is expected that within Europe, the pharmacoeconomic function will continue to grow in importance in the pharmaceutical industry in the coming years and will have at least a moderate commercial impact on pharmaceutical manufacturers through the pricing and reimbursement mechanism.