OBJECTIVE: To perform a policy impact analysis of pharmaceutical cost containment strategies implemented by a third party payer (ministry of health (MOH)), in the province of Alberta, Canada, during the 1990s. METHODS: A retrospective, pre-post policy intervention regression-based time trend analysis of seniors’ prescription drug expenditures between July 1992 and September 1999 was used for the evaluation. All seniors (aged 65 and older) in Alberta are eligible for publically subsidized prescription drug coverage. The policies included the introduction of least cost alternative (LCA) pricing for interchangeable drug products, pharmacy reimbursement changes, an increase in the co-payment rate by seniors from 20% to 30%, and the introduction of a maximum co-payment cap of $25 per prescription. Policies were primarily evaluated from the societal perspective, and economic re-distributional consequences were also examined. RESULTS: Total drug expenditures for 1999 were approximately Can$230 million (M) for the 300,000 eligible beneficiaries (seniors) in Alberta. The LCA and pharmacy reimbursement policies reduced overall societal costs by approximately 10%, or Can$21.3M in 1999 (95% CI 7.4M-34.5M); the ministry saved Can$18.1M (95% CI 7.0M-29.2M) and out-of-pocket costs to seniors were reduced Can$3.6M (95% CI 0.2M-7.0M). An increase in the coinsurance rate and introduction of a maximum cap did not significantly decrease total drug expenditures, but the MOH realized significant savings of Can$18.0M (95% CI 4.6M–31.3M) while drug costs to seniors increased by Can$10.2M (95% CI 6.0M-14.3M) in 1999. CONCLUSION: The LCA and pharmacy reimbursement restructuring policies were effective in significantly decreasing overall drug costs to society. The increase in the co-insurance rate and introduction of a cap resulted in significant savings for the ministry but was achieved by shifting costs to seniors, raising issues of access and equity.