PURPOSE: A state Medicaid program's pharmacy expenditures associated with dispensing one- and three-month supplies of drugs were examined. METHODS: We simulated the effect of a policy change from a maximum of a 100-day supply of prescription medication to one where only a 34-day supply was allowed. All North Carolina prescription claims from Medicaid enrollees who filled a prescription for at least one of six medication categories during fiscal years 1999 and 2000 were included. The six categories were angiotensin-converting-enzyme inhibitors, antiulcers, antipsychotics, nonsteroidal antiinflammatory drugs, selective serotonin-reuptake inhibitors, and sulfonylureas. The dollar value of the medication wasted, the amount of medication wastage diverted after a change to a shorter prescription length, and the total costs incurred by the increases in prescription refills were calculated. RESULTS: For each therapeutic category, 255,000-783,000 prescription drug claims were analyzed. No valid drug claims were excluded for any reason. Although 5-14% of total drug wastage, attributed to switches of drug therapy, could be saved by dispensing a 34-day supply, this saving could not make up for a larger increase in dispensing costs, as consumers would fill prescriptions more often. In addition, reducing the amount of drug dispensed each time may be costly to consumers through increased transportation and other expenses. CONCLUSION: Simulated calculation showed that the cost of drug therapy to North Carolina's Medicaid program would probably increase if 34-day rather than 100-day supplies of medications are dispensed to patients.