Concerns over pharmaceutical costs and appropriateness of medication use have led state Medicaid programs to restrict drug reimbursement. This article critically reviews 20 years of research on cost sharing, drug reimbursement limits, and administrative limitations on access to particular drugs via formularies, category exclusions, or prior authorization requirements; evaluates their methodological rigor; summarizes the state of current knowledge; and proposes future research directions. Drug reimbursement caps and modest cost sharing can reduce the use of both essential and less important drugs in Medicaid populations; severe reimbursement caps may precipitate serious unintended effects. Limitations on access to particular drugs can cause both rational and irrational drug substitution effects; it is unclear whether such limits reduce expenditures either for drugs or for overall health care.