The first part of this research was undertaken to assess the impact of documented penicillin allergy on the choice of antibiotics and the clinical and financial consequences of changes in prescribing patterns in an Australian teaching hospital. The medical records of all patients aged >/= 18 years admitted with community-acquired pneumonia (CAP) to Sir Charles Gairdner Hospital (SGGH) over a 15-week period were reviewed prospectively. The severity of patients' penicillin allergies was assessed using a structured questionnaire. The antibiotic cost was calculated using acquisition, delivery (labour and equipment) and laboratory monitoring costs. The appropriateness of antibiotic prescribing was assessed using the Therapeutic Guidelines: Antibiotic (TG:A). The antimicrobial selections and costs were then compared for those patients with (Group A) and without (Group B) penicillin allergy. 155 patients were reviewed (males 71, females 84) with an average age of 68 ± 18 years. Of these, 27 (17.4%) had documented penicillin allergies; of which 12 were classified as Severity I (e.g. anaphylaxis, urticaria), 12 as Severity II (e.g. rash, itch) and three as intolerance (e.g. GI upset). The current TG:A recommends cephalothin or cephazolin as the drugs of choice for mild to moderate CAP patients with a history of penicillin allergy. However, combinations of cephalothin intravenously and azithromycin orally were the most commonly prescribed antimicrobials for such patients. The TG:A recommends erythromycin plus cefotaxime or ceftriaxone as the first-line therapy for severe CAP patients with a documented penicillin allergy. Yet, combinations of intravenous cephalothin, erythromycin and gentamicin were the most frequently prescribed antimicrobials for such patients.