The economic impact of the drug cimetidine on the direct and indirect costs of ulcer disease was studied. Cimetidine appeared on the Swedish market in 1978. Unlike other innovations, whose spread is normally slow during the initial period, cimetidine was introduced very swiftly and its use quickly expanded. It was expected that it would reduce the number of elective ulcer operations, with resulting savings in medical care resources exceeding the cost of the new drug. The use of cimetidine was also expected to reduce the indirect costs related to short- and long-term illness. The aims of the study were: (1) to describe and calculate the economic impact of the introduction of cimetidine; (2) to compare the retrospective calculations with the prospective calculations; and (3) to investigate how routinely collected data could serve as a complement to studies of efficacy, effectiveness, and cost-effectiveness. Retrospective calculation of the economic effects shows that cimetidine has in fact increased the direct costs of medical care. On the other hand, the drop in indirect costs due to reduced long-term absence (disability) from work, and reduced short-term absence from work, exceeded the increase in the cost of medical care. Thus, the total economic cost of peptic ulcer disease was reduced.