Prior to the Pennsylvania Department of Public Welfare (DPW) implementing a statewide formulary for its 21 mental health hospitals and mental retardation facilities, each facility had its own drug use policy. In many facilities, drugs were ordered with little or no cost-containment or drug-management consideration. To change drug purchasing and usage policies, a task force was created to develop a state formulary system. The task force appointed a formulary subcommittee to research and make recommendations on issues such as drug selections, formulary substitutions, and nonformulary drug use. The step-by-step process of developing and implementing the Pennsylvania DPW state formulary--including pitfalls and successes--is presented.