What are the relative impacts of patient copayments, physician financial incentives, and other HMO administrative controls on drug utilization and costs? Using the empirical model developed by the RAND Health Insurance Experiment, the researchers studied the impact of financial incentives to consumers (principally out-of-pocket payments). They also estimated the impact of financial incentives to physicians by building on an empirical model already developed by two of the project's investigators. The findings of this project are intended to assist administrators as they strive to develop effective methods for controlling drug utilization and costs. In addition, since there is an increase in managed care throughout the health care system, these findings should help inform state and national policymakers determine how best to develop incentives for appropriate pharmaceutical use.