The growing burden of prescription drug costs has focused attention on factors which influence physicians' prescribing decisions. We hypothesised that third party coverage of prescription costs would elicit selection of expensive drugs, but that this tendency could be moderated by price reminders. In a mailed survey, primary care physicians throughout Ontario (n = 1072) were provided with the clinical scenario of a patient with an infectious exacerbation of chronic obstructive pulmonary disease, and asked to select diagnostic tests as well as 1 of 6 antibiotics. Two antibiotics were expensive (ciprofloxacin and cefaclor; average price $Can52.23), and 4 inexpensive {amoxicillin, cotrimoxazole (trimethoprim/sulfamethoxazole), erythromycin and tetracycline; average price $Can2.80}. Neither expensive drug is considered first line therapy for the condition described. Questionnaires differed in the presence or absence of drug benefit coverage and price information. The response rate was 71%. With third party cost coverage and prices shown, 18% of respondents selected an expensive antibiotic. This increased to 38% when the prices were omitted {odds ratio 2.72; 95% confidence interval (CI) 1.61, 4.60; p less than 0.001}, and decreased to 8% when the patient was said to have no drug benefits coverage (odds ratio 0.40; 95% CI 0.19, 0.84; p less than 0.01).(ABSTRACT TRUNCATED AT 250 WORDS)