Cost-containment policies frequently focus on reducing drug expenditures, although prescription drug costs are a relatively small proportion of total health care expenditures. Data show that very few drug cost-containment policies can selectively reduce unneeded care while maintaining essential care. In the early 1980s, the New Hampshire Medicaid program introduced a drug-payment limit (a "cap") that set the number of reimbursable medications a patient could receive per month at 3. Analyses reviewed in this article indicate that New Hampshire's drug cap, while in effect, reduced the use of prescription drugs among the elderly and the mentally ill but increased hospital and nursing home admissions, partial hospitalizations, distribution of psychoactive medications by community mental health centers, and use of emergency mental health services. Vulnerable populations are most likely to experience adverse effects from hastily-applied drug cost-containment policies, and resulting compensatory measures may create more expenses than the policy removes.