Prologue: Prescription drugs have demonstrated an awesome capacity to ameliorate pain and wage war against infectious diseases. But, unlike most other medical services and products, outpatient drugs are generally not covered either by private health insurance or, until its new catastrophic benefit becomes effective. Medicare. About two-thirds of the population pays for its drugs directly out of pocket Only Medicaid, among the large public health financing programs, has provided outpatient drug coverage to eligible beneficiaries. As Medicaid programs have faced increasing pressure to moderate the growth of expenditures, though, some states have created drug formularies to restrict the products for which they will reimburse pharmacists. In this paper, Henry Grabowski addresses the question of how formularies affect the availability of drugs proven safe and efficacious by the Food and Drug Administration. Grabowski received his doctorate in economics from Princeton University in 1967. Since 1972, he has been a member of the faculty of Duke University. Currently, he is a professor of economics there and director of the Program in Pharmaceuticals and Health Economics, which is a part of the Center for the Study of Business Regulation. In the past fifteen years, Grabowski has studied many dimensions of the pharmaceutical industry. With support from the National Science Foundation (NSF), Grabowski examined how government regulation affects the structure of the pharmaceutical industry, particularly in research and development. He also has studied with NSF support the relationship between regulation, patents, and drug substitutability. Grabowski s expertise has been recognized by the Federal Trade Commission, the Office of Technology Assessment, and the Institute of Medicine. He is the author of two books published by the American Enterprise Institute: The Regulation of Pharmaceuticals: Balancing the Benefits and Risks (1983) with John Vernon, another Duke economics professor, and Drug Regulation and Innovation (1976).