The economic impact of adverse effects is often understated. Increased hospitalisations attributed to adverse drug reactions alone account for billions of dollars each year within the US healthcare system. Although most classes of antibacterials are well tolerated, severe reactions do occur and can add significantly to the cost of care. Among hospitalised patients, antibacterial adverse effects account for nearly 25% of adverse drug reactions. Published pharmacoeconomic data on direct and indirect costs of antibacterial adverse effects are lacking. The importance of determining the most cost-effective treatment regimen is becoming more apparent due to limited resources available within the healthcare system. When considering the cost of new antibacterials, a simple comparison of acquisition costs may not accurately reflect the true costs of treatment. A drug with a lower acquisition cost may be more toxic and/or less effective, resulting in higher complication rates and/or treatment failures, thus leading to a higher overall treatment cost. In addition, nephrotoxic agents such as aminoglycosides and vancomycin often require close monitoring of serum drug concentrations and creatinine levels, which also contributes to the total cost of therapy. Indirect costs as a result of reduced quality of life or loss of productivity are certainly not reflected in the acquisition costs of antimicrobials. Institutions must evaluate a drug's potential for causing and adverse event, among various other factors, when considering drugs for inclusion on their formularies. Drugs with good safety profiles may minimise hospitalisation or facilitate early discharge. Thus, the adverse effect profile of an antimicrobial agent can contribute significantly to its overall direct costs, primarily as a result of higher monitoring costs and additional days of hospitalisation. For example, in the US, the cost associated with adverse effects, such as nephrotoxicity, observed with aminoglycosides and vancomycin, may add approximately $US2500 per patient with nephrotoxicity (1990 values). Indirect costs can also be substantial as a result of reduced productivity. Many adverse effects of antibacterial agents are predictable and may be minimised with appropriate monitoring and care. This article reviews the pharmacoeconomic aspects of adverse effects associated with some of the more important antibacterial classes such as the beta-lactams, aminoglycosides, vancomycin, macrolides and fluoroquinolones.