Introduction: The advancement of precision medicine into routine clinical practice has been highlighted as an agenda for national and international health care policy. A principle barrier to this advancement is in meeting requirements of the payer or reimbursement agency for health care. This special report aims to explain the economic case for precision medicine, by accounting for the explicit objectives defined by decision-makers responsible for the allocation of limited health care resources. Areas covered: The framework of cost-effectiveness analysis, a method of economic evaluation, is used to describe how precision medicine can, in theory, exploit identifiable patient-level heterogeneity to improve population health outcomes and the relative cost-effectiveness of health care. Four case studies are used to illustrate potential challenges when demonstrating the economic case for a precision medicine in practice. Expert commentary: The economic case for a precision medicine should be considered at an early stage during its research and development phase. Clinical and economic evidence can be generated iteratively and should be in alignment with the objectives and requirements of decision-makers. Programmes of further research, to demonstrate the economic case of a precision medicine, can be prioritized by the extent that they reduce the uncertainty expressed by decision-makers.