OBJECTIVE: In Greece, a new pricing system and a positive list for pharmaceuticals were introduced in late 1997 April 1998. This paper attempts to evaluate their effectiveness on total and social insurance expenditures after one implementation year. METHODS: In December 1997, pharmaceutical prices were re-calculated, based on the lowest ex factory price for the same product in EU. Levies on ex factory prices, (earmarked social insurance (SI) taxes) were reduced. All drugs were classified in categories of active substances. Those with individual daily treatment cost higher than category averages were excluded from the positive list. Using data from IMS and the National Agency Pharmetrica we evaluate: total expenditure growth after reforms, formulary exclusion impact on products and therapeutic classes and trends in SI expenditures and income. RESULTS: Price reform led to average unit price reduction of 24%. Volume trends remained initially stable increasing sharply in Q1/1999. Positive list introduction lead to slight volume reduction until 08/1999 followed by increasing value trends. The list had no impact on average unit price. Total market expenditures were reduced by 14% in 1998, albeit surpassing 1997 levels in early 1999. Excluded products showed sales decrease. Effects on therapeutic class value and volume growth varied. SI expenditures were reduced in the short, but not in the long term. SI income lost from tax reduction was replaced by government subsidies. CONCLUSION: Price control and drug list effects were short-lived both on total and SI expenditures. Government finally had to subsidise price reduction for individual products. Cost effectiveness criteria and prescribing habits controls may be more effective in future policy initiatives.