What is the impact of supply restrictions for pharmacy benefits in the Medicaid program in North Carolina on medication adherence, health services use, and the cost impact of the change on the Medicaid program? (North Carolina Medicaid introduced a 34 days supply limit in July 2001.) Experience in North Carolina was compared with the experience in Georgia, where there was no change in the days supply requirements. The study focused on individuals who use medications for chronic conditions in the following categories: anti-hypertensives, anti-diabetic medications, lipid-lowering drugs, anti-psychotics, anti-depressants, and seizure-disorder medications. The objective of this study was to inform state-based and private sector initiatives to constrain pharmaceutical costs, and suggest directions for future research to advance the understanding of how prescription drug policies may affect patient behavior, care processes, and costs in Medicaid beneficiaries and other insured populations.