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Aims In many countries, governments and third parties find themselves paying for (reimbursing) unproven, inadequate products limiting their ability to invest in therapies with evidence of relevant patient benefit. We examined how three characteristics, level of therapeutic evidence, susceptibility of inappropriate prescribing, and intercountry variation can be used to identify inefficiencies in pharmaceutical reimbursement among four European Union countries, Austria, Belgium, the Netherlands and Sweden. Methods Specific classes of medicines were chosen to provide useful examples of how healthcare resources could be reallocated. A high level of therapeutic evidence was defined as a substantial body of evidence in at least one indication with clear-cut support of relevant patient benefit. The susceptibility of inappropriate prescribing was defined as the likelihood of prescribing a drug outside the scenario for which clear-cut evidence (if any) has been documented to produce relevant benefit for the patient. The intercountry variation represents the variation in utilization of reimbursed drugs across the four countries. Results The combination of these characteristics provides a useful tool for assessing appropriate reimbursement decisions. It would be beneficial to healthcare payers as well as patients to move resources from products that have a low level of therapeutic evidence and a high susceptibility of inappropriate prescribing to products with a high level of therapeutic evidence and low susceptibility of inappropriate prescribing, and to use intercountry variation as a signal of drug classes that should be subject to further scrutiny. Conclusions A method is presented to help policy-makers identify inefficiencies in the spending of limited health care resources, and to reallocate resources to products that have been shown to improve patient care through evidence-based medicine. [ABSTRACT FROM AUTHOR]