1. This study describes stakeholders' opinions on Drug and Therapeutics Committees (DTCs) and measures the composition, activities and perceived effectiveness of DTCs in Australia. 2. Focus groups explored the opinions of clinicians, consumers and administrators on the goals, objectives and strategies of DTCs. 3. A national survey was sent to 306 hospitals to collect data on the composition, committee processes, goals, objectives, educational activities, policies and decision making of DTCs. 4. Stakeholders believed the DTC should optimise therapeutic health outcomes for patients and economic outcomes for the hospital. Important objectives were availability of safe, efficacious and cost-effective medicines, affordability of medicines and quality use of medicines. 5. The national survey of DTCs found that over 92% of respondents had a DTC in their hospital. Composition was generally representational and most commonly included members from the disciplines of internal medicine, pharmacy and nursing. More than half the DTCs had executive authority although only 21% had an appeals mechanism. 6. The most commonly cited issues for DTCs in 1994-95 were quality drug use, drug policies and spending on high cost drugs. 7. While access to clinical pharmacologists and specialist drug utilisation evaluation (DUE) pharmacists was poor, 71% of DTCs had access to DUE data of some sort. Guidelines (61%), prescribing restrictions (60%) and pharmacist monitoring (63%) were the most commonly used strategies to implement DTC policies and decisions. Audit-feedback activities (61%) and drug bulletins (56%) were the most commonly used interventions. 8. Available information for formulary decision making varied with small rural hospitals having access to significantly less information. The most commonly used information was availability of a therapeutic alternative (87%), efficacy (83%), cost (80%) and estimated usage (78%). 9. On average DTCs reported an ability to implement 75% of decisions (range 0-95%) with teaching hospitals perceived to perform better than other hospital types. 10. This study reveals a high level of expectation for DTC activities and achievements. In Australia DTCs were involved in policy, education and management initiatives to promote best practice in therapeutics. Few committees appeared to have adequate resources to extend services to their wider community.