The practice of medicine today must balance the optimal use of new pharmaceutical agents with the need for cost containment. Hospital policy regarding therapeutics and its historical perspective are discussed. Various aspects of the operations of Pharmacy and Therapeutics Committees are presented. The potential benefits of a formulary system are therapeutic, economic and educational and it could lead to a uniformity of drug usage throughout a district. The role of Clinical Pharmacology to provide advice to both Institution and physicians in how therapeutic practice may be optimized is also stressed.