In an attempt to manage scarce health care resources and keep drug expenditure low, health care administrators worldwide have to make careful considerations regarding the choice of drugs to be provided to patients within their systems. One of the key strategies that is being employed to achieve this goal is the use of formularies. A major challenge in the formulary development process is to use pharmacoeconomics and outcomes research effectively to arrive at formularies that simultaneously provide patients with effective pharmacotherapy whilst maintaining financial stability. The extent to which this can be successfully achieved depends to a large extent on the availability of appropriate pharmacoeconomic data. The primary objectives of this study were to describe the availability and quality of literature pertaining to South African based pharmacoeconomic research, and to establish the manner in and extent to which pharmacoeconomic data is used in drug formulary decision-making processes, in both the private and public health care sectors in South Africa. A structured bibliographic search for South African pharmacoeconomic studies was conducted and a qualitative assessment of the identified studies which met the predetermined inclusion criteria was completed, using a pre-validated quality evaluation tool. In order to determine the use of pharmacoeconomic data in the formulary decisionmaking processes, by various stake holders in both the public and private of health care sectors in South Africa, a cross-sectional, descriptive study using a self-administered questionnaire was conducted. The results suggest that there is a limited availability of pharmacoeconomic research data in South Africa. Only 16 full pharmacoeconomic studies could be identified as having been published between 01 January 1995 and 30 June 2007. The quality of 3 of these studies was considered to be ‘dubious’, one study was found to be of high standard whilst the other 12 (74.95%) were of acceptable quality and thus could be considered as suitable to be used in formulary decision-making. The results of the national survey indicated that pharmacoeconomics is considered to be of importance and is used in formulary decision-making processes in both the public and private sectors. The primary source of pharmacoeconomic data used in formulary decisions appears to be international peer-reviewed publications. Of concern however, is the finding that this data, mostly from studies conducted outside of South Africa, is applied directly without sensitivity analysis or modelling. The results of the literature search and the subsequent quality appraisal suggest that pharmacoeconomic research and the use of pharmacoeconomic data in formulary decisions is at its infancy in South Africa. Thus efforts are needed to develop and grow the discipline of pharmacoeconomics in South Africa.