OBJECTIVES:  Drug expenditures have been increasing much faster than spending on other medical services and have become burdensome for state Medicaid programs. This study was to analyze the trends of Medicaid drug utilization and expenditures across all major therapeutic classes and to identify their similarities and differences. METHODS:   Quarterly Medicaid reimbursed drug prescriptions and dollar amounts for each drug were extracted from the national claims data from the Centers for Medicare & Medicaid Services for 1991 through 2004.  Expenditures were aggregated across all drugs in 64 different therapeutic classes, providing 64 different time series of length 56 quarters each.   Principal components analysis (PCA) was then applied to the data to identify major types of expenditure trends across all the different therapeutic classes. RESULTS:   In total, across all drugs in the 64 therapeutic classes, Medicaid spending increased from $4.6 billion with 231 million prescriptions in 1991 to $22.5 billion with 350 million prescriptions in 2004, representing total Medicaid spending on outpatient drugs during the time period.  PCA revealed three principal components that accounted for 90 percent of total variation in Medicaid drug expenditure patterns.  The first principal component (PC1), explaining 66 percent of the variation, is an exponential-like upward trend; PC2, explaining 17% of the variation, represents an increasing-then-decreasing expenditure pattern; and PC3, explaining 7% of the variation, represents an up-and-down cyclical expenditure pattern.  Therapeutic classes exhibiting high correlation (r>0.9) with PC1 include corticoid steroids, anti-neoplastics, anti-seizure agents, bone density regulators, anti-inflammatory agents, antiretroviral agents, antipsychotics, antidepressants, oral diabetic agents, and gastrointestinal agents.  When PCA was applied to drug utilization trends, the same principal components were discovered and accounted for 92% of total variation in drug utilization patterns.   CONCLUSIONS:   Most drug therapeutic classes exhibited exponential-like upward expenditure trends, clearly contributing to the overall rising expenditure burden for Medicaid.