Under the Medicaid Drug Rebate Program, manufacturers are required to provide rebates on drugs paid for by a State. To receive rebates, States must identify the drugs by their national drug code. Most States, however, use procedure codes to identify physician-administered drugs. The States that match procedure codes to national drug codes do collect rebates on these drugs. We found that in 2001, Medicaid could have saved millions of additional rebate dollars if every State had collected rebates for all single-source physician-administered drugs and 40 multiple-source physician-administered drugs. As of March 2003, 24 States did not collect rebates on any physician-administered drugs. Our study indicates a State’s savings in a single year could exceed the one-time cost of implementing system changes needed to collect rebates for these drugs. We recommend that the Centers for Medicare & Medicaid Services (CMS) continue to encourage all States to collect rebates on physician-administered drugs, especially single-source drugs. As part of this effort, CMS should encourage cooperation and the sharing of information between States that collect rebates for these drugs, and States that do not, in order to facilitate rebate collection. CMS concurred with our recommendation and is currently facilitating information sharing.