New treatments for Alzheimer's disease highlight the complex clinical and financial issues at stake with new pharmacotherapies. This paper describes cost-effectiveness analysis as a method for assessing these issues. Cost-effectiveness analyses show the relationship between resources used and health benefits achieved for a medical intervention compared with an alternative strategy. In analyses of treatments of Alzheimer's disease, costs include health care resources, such as diagnostic tests, medications and efforts to monitor or treat side effects, acute hospital care, physicians' services, home health care, and nursing home care; non-health-care resources, such as support services provided by paid caregivers; and time spent by family members in unpaid provision of care and by patients in seeking care or undergoing an intervention. Effectiveness of interventions can be assessed by measuring changes in patients' cognitive functioning or by measuring years of life gained and the quality of life during those years. Cost-effectiveness studies often make use of disparate data sources, including data collected as part of randomized controlled clinical trials, and they often use mathematical models to support estimates. Because economic evaluations of new interventions for Alzheimer's disease will likely play an increasingly influential role in clinical and resource allocation in the coming years, physicians and other health system stakeholders should familiarize themselves with the techniques of cost-effectiveness analysis and become critical consumers of the literature describing these analyses.