Free energies of solvation (ΔG) in water and n-octanol have been computed for common drug molecules by molecular dynamics simulations with an additive fixed-charge force field. The impact of the electrostatic interactions was investigated by computing the partial atomic charges with four methods that all fit the charges from the quantum mechanically determined electrostatic potential (ESP). Due to the redistribution of electron density that occurs when molecules are transferred from gas phase to condensed phase, the polarization impact was also investigated. By computing the partial atomic charges with the solutes placed in a conductor-like continuum, the charges were effectively polarized to take the polarization effects into account. No polarization correction term or similar was considered, only the partial atomic charges. Results show that free energies are very sensitive to the choice of atomic charges and that ΔG can differ by several kBT depending on the charge computing method. Inclusion of polarization effects makes the solutes too hydrophilic with most methods and in vacuo charges make the solutes too hydrophobic. The restrained-ESP methods together with effectively polarized charges perform well in our test set and also when applied to a larger set of molecules. The effect of water models is also highlighted and shows that the conclusions drawn are valid for different three-point models. Partitioning between an aqueous and a hydrophobic phase is also described better if the two environment's polarization is taken into account, but again the results are sensitive to the charge calculation method. Overall, the results presented here show that effectively polarized charges can improve the description of solvating a drug-like molecule in a solvent and that the choice of partial atomic charges is crucial to ensure that molecular simulations produce reliable results. © 2012 Wiley Periodicals, Inc.