Understanding and appreciating the science of pharmacoeconomics have become even more important for health care providers and insurers during the recent economic downturn. Evaluating the true costs of any disease is complex; both direct costs, such as costs of drug therapy and the provision of care, and indirect costs, such as lost earnings and reduced quality of life, must be taken into account. With chronic liver disease, the most recent data indicate that direct costs were more than $2 billion whereas indirect costs were more than $450 million. Hepatic encephalopathy, a common complication of chronic liver disease, contributes to this economic burden. Although patients' length of stay during hospitalization for hepatic encephalopathy decreased from almost 9 days to 6 days (and has remained stable over the past few years) from 1993 to 2007, hospitalization costs rose from $13,000 to $30,000/hospital stay. In addition, 22% of patients were discharged directly to nursing homes or rehabilitation centers, which increases total costs. When assessing therapy for hepatic encephalopathy, it is important to consider the total costs of the disease, not just treatment costs. Although more expensive on a daily basis than lactulose, rifaximin has been shown to reduce hospitalization rates, has a better adverse‐effect profile, and increases patient compliance. One study found that rifaximin produced a cost savings/patient/year of more than $3000 over lactulose therapy.