BACKGROUND: In May 2003, the government of British Columbia adopted income-based pharmacare, replacing an age-based drug benefits program. Stated policy goals included reducing government spending, maintaining or enhancing access to medicines and improving financial equity. The province's experience on these policy dimensions can inform policy making in other jurisdictions and offers insight into priorities for Canada's National Pharmaceuticals Strategy. METHOD: The research team created an anonymized database with information about drug use, private and public expenditure and household income for all residents of British Columbia from 1996 to 2004. This database was used to evaluate the impact of the policy on trends in drug expenditures, utilization and sources of payment for seniors and non-seniors of different income levels. RESULTS: In the immediate term, Fair PharmaCare appears to have met many of its policy goals. Government spending was reduced. Access to medicines was maintained (though not enhanced). And the distributions of private and public expenditures were brought more closely in line with distribution of income. Long-run impacts depend largely on how a reduced role for government affects trends in costs, access and equity. Early indications suggest that a larger role for government may be needed to maintain performance on desired policy objectives over time. CONCLUSION: In the long run, there is reason for setting a new national standard for pharmacare that increases, not decreases, the share of publicly covered spending in every province. The federal government could play a key role by helping provinces increase public funding for prescription drugs and thereby facilitate cost control, maintain access to medicines and enhance financial equity.