OBJECTIVES: To promote rational drug use, governments may apply various instruments to aid health care professionals in clinical decision-making. Guidelines are a common approach, but their impact on clinical practice is often limited. Therefore the Dutch government sometimes applies a stronger instrument: conditional reimbursement enforced by law, applied to drug groups listed on the so called “Annex 2”. We assessed process and outcomes of this instrument. METHODS: We quantitatively explored the effects of conditional reimbursement on drug use and costs for 33 Annex 2-drugs using the national GIP-database that administers funding decisions for people in insurance schemes. The qualitative process evaluation used document analyses, interviews (N=70), and case studies (N=6) to map perceptions of patients, physicians, pharmacists, insurers, manufacturers, and policy makers to attain insights into the performance of Annex 2. In focus groups we triangulated findings and identified improvements. RESULTS: The quantitative analysis showed that effects of conditional reimbursement varied with type of conditions and clinical setting. People responsible for implementation complained about administrative burden and lack of means to monitor if conditions for reimbursement were met (e.g. statins). An additional problem is that Annex 2 conditions lag behind evolving clinical knowledge (e.g. clopidogrel). The way in which conditions were operationalised appeared crucial for their implementation. When stakeholders had been actively involved in their operationalisation (e.g. TNF-α-blockers) implementation was successful, lack of consensus on the conditions was detrimental to effectiveness of Annex 2 policy. CONCLUSIONS: Overall, Annex 2 is considered a necessary instrument, although there are conditions to be met for a more effective functioning in the near future. There is a demand for more dynamic and pro-active communication strategy by the different Annex 2-actors to increase awareness of the existing policy and to narrow the gap between the clinical practice and policy regarding registration and reimbursement of drugs.