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Objectives To examine how the population composition, practice organisation and geographical context of general practice clinics are associated with unwarranted variation in prescribing patterns (variation not explained by patient characteristics), using potentially inappropriate medication (PIM) as an indicator of treatment quality.Design A nationwide register-based cohort study.Setting and population Data on eligible general practice clinics (1703 clinics) in Denmark and their listed patient populations (4 369 915 individuals) were collected from 1 January to 31 December 2021.Main outcome measures Unwarranted variation in PIM was estimated using the clinics’ PIM propensity. PIM propensity in clinics was defined as the ratio between observed and expected PIM incidence among listed patients and was stratified into indicators of underprescribing and overprescribing.Results The results demonstrate a 13% difference in PIM propensity between clinics with the highest propensity (90th percentile) and the lowest propensity (10th percentile). When stratifying by underprescribing and overprescribing, we found a relative difference of 12% for underprescribing and 50% for overprescribing between the two groups. Clinics serving male-dominated populations (>55% men 1.11, 95% CI 1.08 to 1.14) and more socially deprived patient populations (deprivation index >40 10.11, 95% CI 1.08 to 1.14) had a higher propensity for overprescribing. Organisational factors associated with overprescribing included single-handed practices (1.08, 95% CI 1.06 to 1.10), smaller patient lists (<1500 patients: 1.07, 95% CI 1.05 to 1.09) and shorter organisational longevity (<10 years: 1.04, 95% CI 1.02 to 1.06). The propensities for underprescribing and overprescribing varied between the regional administration of clinics and increased with increasing urbanisation (>100 000 citizens: 1.04, 95% CI 1.02 to 1.07). In contrast, disease burden and age distribution in listed patients appeared to have no clinically relevant association with PIM propensity.Conclusions This study indicates unwarranted variation in the medical treatment quality, primarily related to overprescribing. Inferior treatment quality was associated with patient composition, practice organisation and geographical context. This emphasises a need for new strategies to address the inverse care law and enhance patient safety.