Drug coverage is an important facet of the Medicaid program. Although it is an optional benefit, all states cover outpatient prescription drugs in their Medicaid programs. States have significantly more leeway, however, in whether they cover over-the-counter (OTC) drugs. In the last twenty years, more drugs that were once only available through a prescription, including many allergy medications and medication to treat reflux, have become available OTC. Thus it is particularly important for advocates to understand the circumstances in which Medicaid programs cover OTC drugs. This Fact Sheet provides an overview of Medicaid rules for OTC drug coverage and discusses a variety of state examples for Medicaid program coverage of OTC drugs.