OBJECTIVES: Diffusion of electronic patient record (EPR) systems is almost universal in ambulatory medical services in Israel. The drug prescription module of the most widely-used EPR system has an intervention capacity of electronically notifying physicians about generic or therapeutic drug substitutions. This notification is triggered when the physician's first choice of a prescribed drug does not meet preferences of the health maintenance organization (HMO). The objective of this paper was to study whether and how such an intervention can influence physicians' drug prescription habits and help contain costs. METHODS: We monitored system use for 40 consecutive weeks in the second largest HMO in Israel, covering more than 1.2 million prescriptions, and recorded physicians’ willingness to comply and prescribe a substitute drug in response to the system's notification. RESULTS: Findings show that electronic notifications about substitutes can change physicians' drug prescription habits toward compliance with HMO preferences. Higher physician compliance was found for generic substitutes than for therapeutic substitutes. Moreover, compliance was based on a cognitive decision process triggered upon notification. Examining the notification and deciding whether to comply or not lasted 2 to 5 seconds, hence not time consuming. An increase in compliance over time, until stabilization, was also observed. The direct financial savings on drug expenditures were estimated at 4.7%, mostly for chronic drugs, implying long-term saving. CONCLUSIONS: The results show that embedding notifications about substitute drugs in an EPR's drug prescription module can be effective and impact drug prescription behavior toward compliance, yet this compliance is context-dependent rather than automatic. In addition, long-term cost containment can be achieved without decreasing the quality of care.