The authors report the results of a literature review to identify research issues relating to physician prescribing practices and evaluate the potential for existing Canadian databases to support initiatives to improve prescribing practices. Methodologies such as small-area variation analysis and drug utilization reviews are discussed, and Canadian data sources relating to drug prescribing are assessed. The authors conclude that small-area variation analysis can be used to identify differences in drug utilization rates. A ranking method to identify drugs with the greatest variability in utilization can then be used to establish priorities for further analysis. After statistically significant factors associated with prescribing patterns are identified, intervention and policy formation will be possible. This will involve a more sophisticated integration of existing provincial information sources and the adoption of uniform guidelines to promote rational prescribing practices.