This article reviews and describes the formulary decision-making process in an academic medical centre. The pharmacy and therapeutics (P & T) committee is the organisational nucleus of the drug use control process in the institutional environment. Thomas Jefferson University Hospital (TJUH), a 720-bed academic medical centre in an urban locality in the US, is used as a model representative of how most of these committees function. Survey responses collected from 29 peer academic medical centres are presented to compare and contrast the structure and function of the P & T committee at TJUH with corresponding procedures in other university hospitals in the US. TJUH is typical of the institutions which comprise the University Hospital Consortium (UHC). The P & T committee of TJUH is composed of 29 members, meets once per month for 10 months of the year, and has a network of 13 subcommittees. TJUH has an intermediately controlled (mixed) formulary, and uses both restricted drugs and treatment guidelines. Of the 29 UHC member institutions responding to the survey, the average P & T membership is 18, the average meeting frequency is 11 times per year, and 83% of these committees have a network of subcommittees. None describe their formulary system as open, 86% have a closed formulary and 14% have a mixed formulary system. There is a restricted drug programme in 76% of the institutions, 79% utilise treatment guidelines, 76% practice therapeutic interchange and all employ generic substitution. Specific areas addressed in this review include the history of the formulary system, the structure and function of the P & T committee, types of formularies, cost containment and the formulary decision-making process, the impact of organisational culture on physician decision making, the role of the pharmacy department, the role of pharmaceutical sales representatives and their impact on prescribing habits, the impact of the Joint Commission on Accreditation of Healthcare Organisations (JCAHO) Agenda for Change on the formulary process, and future challenges.