Due to rapidly increasing health expenditures, many countries have implemented cost-control strategies in the health care sector by regulating physician treatment discretion. We study how regional variation in preferred drug lists within the German statutory health insurance affects physicians’ prescribing behavior with respect to compliance and efficiency. We use a nationally representative panel of ambulatory care physicians between 2011 and 2014 linked to marketing data to study the effects of variation in preferred statin drug quotas in three German regions. We apply a difference-in-difference econometric framework by comparing physician prescribing behaviour in regions that were and were not subject to policy interventions, respectively. We find that the composition of physician patient base with respect to health insurance (statutory vs. private) significantly influenced the level of compliance with the preferred drug and the market concentration of products prescribed. The effect of abolishing the quota policy did not change physician behaviour on statutory health insurance patients indicating that physicians have internalized the preferred drug regulation after abolishment.