OBJECTIVES: To examine incidence of and the health outcomes associated with potential drug-drug interactions (DDIs) between ACE/ARBs and potassium sparing diuretics among Medicaid patients.  METHODS: A retrospective matched cohort study was conducted of beneficiaries in the Mississippi Medicaid program from January 2002 to December 2004.  Potential DDIs were defined as medication possession data indicating an object drug (ACE/ARB) and a precipitant drug (potassium sparing diuretic) were taken with overlapping dates.  The first day of overlap was designated as the DDI index date.  A 6-month washout period was used for exposures.  Exposed patients were matched 1-1 to controls taking ACE/ARBs and assigned the same index date.  Exact matching was done  on sex, race,  CHF comorbidity, and cerobrovascular disease comorbidity and close matching was done for age (± 10) and first use date for ACE/ARB (± 45).  Outcomes included hospitalizations and ER visits within 30 days of the index date and payments associated with these services.  RESULTS: A total of 68,299 patients were identified as taking ACE/ARBs during the observation period with 5572 (8.4%) exposed to a potential DDI.  A total of 5599 exposed patients were matched.  The effect of DDI exposure on hospitalization and ER visit rates was tested using SAS fixed effects logistical regression while controlling for sex, age, race and overall Charlson comorbidity index.   The point-specific odds ratio for DDI exposure was 1.41 (95% CI = 1.29 – 1.54) for hospitalization and 1.21 (95% CI = 1.11 – 1.31) for ER visits.   A paired t-test was used to examine differences in Medicaid payments during the 30-days after the index date.  Total payments were significantly higher (p <0.001) for the exposed patients ($2289) than for the control patients ($1,614). CONCLUSIONS: Potential ACE/ARB DDIs were a significant problem among the Mississippi Medicaid patients and during the study period; potentially contributing more than $3.7M in additional health care costs.