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BACKGROUND: Pharmaceuticals, while central to medical therapy, pose a significant burden to health care budgets. Therefore regulations to control prescribing costs and improve quality of care are implemented increasingly. These include the use of financial incentives for prescribers, namely increased financial accountability using budgets and performance based payments. OBJECTIVES: To determine the effects on drug use, healthcare utilisation, health outcomes and costs (expenditures) of policies, that intend to affect prescribers by means of financial incentives. SEARCH STRATEGY: We searched the following databases and web sites: Effective Practice and Organisation of Care Group Register (August 2003), Cochrane Central Register of Controlled Trials (October 2003), MEDLINE (October 2005), EMBASE (October 2005), and other databases. SELECTION CRITERIA: Policies were defined as laws, rules, financial and administrative orders made by governments, non-government organisations or private insurers. One of the following outcomes had to be reported: drug use, healthcare utilisation, health outcomes, and costs. The study had to be a randomised or non-randomised controlled trial, interrupted time series analysis, repeated measures study or controlled before-after study evaluating financial incentives for prescribers introduced for a jurisdiction or healthcare system. DATA COLLECTION AND ANALYSIS: Two review authors independently extracted data and assessed study limitations. MAIN RESULTS: Thirteen evaluations of budgetary policies and none of performance based payments met our inclusion criteria. Ten studies evaluated general practice fundholding in the UK, one the Irish Indicative Drug Target Savings Scheme (IDTSS) and two evaluated German drug budgets for physicians in private practice. The interrupted time series analyses had some limitations. All the controlled before-after studies (all from the UK) had serious limitations.Drug expenditure (per item and per patient) and prescribed drug volume decreased with budgets in all three countries. Evidence indicated increased use of generic drugs in the UK and Ireland, but was inconclusive on the use of new and expensive drugs. We found no clear evidence of increased health care utilisation and no studies reporting effects on health. Administration costs were not reported. No studies on the effects of performance-based payments or other policies met our inclusion criteria. AUTHORS' CONCLUSIONS: Based on the evidence (AU)(hide)