BackgroundIrrational use of drugs is often observed in health-care systems throughout the world, particularly in developing countries. The World Health Organization estimates that more than half of all medicines are prescribed, dispensed, or sold inappropriately and that half of all patients fail to take them correctly. Therefore, the study was aimed at investigating the practice of rational drug use in a referral and teaching hospital in Northeast Ethiopia.MethodsA hospital-based cross-sectional design was employed to conduct the study from February 2019 to May 2019. Systematic random sampling was used to select prescriptions dispensed in outpatient pharmacies. Convenient sampling was employed to select patient attendants and their prescriptions in outpatient departments during the study period. Data were collected using a structured and technical observational checklist for prescribing, patient care, and health-facility indicators. Face-to-face interviews were also employed to assess patient knowledge of correct dosage among patient-care indicators. Data were analyzed using SPSS version 20. Descriptive statistics are given using frequency, proportions, and summary measures.ResultsAn average of 2.5 drugs per encounter were prescribed, with 34.64% and 13.80% of prescriptions being antibiotics and injections, respectively. Generics were used in 90.53% of prescription, and nearly 83% of drugs were prescribed from an essential-drug list. Average consultation and dispensing times were 1.57 minutes and 47 seconds, respectively. A total of 362 drugs were prescribed, with 82.6% actually dispensed and only 22.7% adequately labeled. The hospital had its own drug formulary and essential drug list, but no standard treatment guidelines. Moreover, except propyl thiouracil, all key essential drugs included in the study were available.ConclusionThe majority of World Health Organization–stated core drug-use indicators were not met by the referral hospital in this study, which is especially problematic regarding patient-care indicators.