Disease management (DM) activities are described, and their implementation and monitoring in managed care organizations are discussed. DM programs involve systematic evaluation of the relationships between treatment options and the associated resource use and patient outcomes for the purpose of providing a given standard of health care at the lowest possible resource cost. A DM arrangement covers a specified disease or therapy intervention for a patient group that may be defined by diagnosis, drug use, prior resource use, or patient characteristics. Often, the partners in a DM arrangement are a managed care organization and a pharmaceutical industry representative or division. The development and monitoring of disease management arrangements are dependent on access to several types of data, and these data are available in managed care plans. A DM arrangement includes interventions to change prescribing patterns or patient compliance and assessment of the effects of these interventions against target outcomes specified in the contract. The agreement that is developed specifies guidelines for treatment and requirements for data collection, monitoring, and reporting that are consistent with the target outcomes. In many DM arrangements, the partners share cost savings and risk; other arrangements involve case management on a capitated basis. A pharmaceutical company involved in risk sharing must change its focus from market share to optimal use of drugs within the total cost of treatment. If a risk-sharing contract covers an entire therapeutic class of drugs, a pharmaceutical company may share risk for the use of other manufacturers' products as well as its own. Disease management contracts must consider the full impact of each treatment option on the health system; the goal should be not simply to decrease the drug budget, but to decrease overall costs for treatment that achieves desired outcomes for specific diseases.