The use of insurance claims databases in drug therapy outcomes research holds great promise as a cost-effective alternative to post-marketing clinical trials. Claims databases uniquely capture information about episodes of care across healthcare services and settings. They also facilitate the examination of drug therapy effects on cohorts of patients and specific patient subpopulations. However, there are limitations to the use of insurance claims databases including incomplete diagnostic and provider identification data. The characteristics of the population included in the insurance plan, the plan benefit design, and the variables of the database itself can influence the research results. Given the current concerns regarding the completeness of insurance claims databases, and the validity of their data, outcomes research usually requires original data to validate claims data or to obtain additional information. Improvements to claims databases such as standardisation of claims information reporting, addition of pertinent clinical and economic variables, and inclusion of information relative to patient severity of illness, quality of life, and satisfaction with provided care will enhance the benefit of such databases for outcomes research.