OBJECTIVES: The Centers for Medicare and Medicaid Services (CMS) has stipulated regulations requiring coverage of “all or substantially all” drugs in six therapeutic categories deemed “medically necessary:” antineoplastics, HIV/AIDS medications, immunosuppressants, antidepressants, anticonvulsants, and antipsychotics. CMS allows formulary managers to exclude drugs on the basis of safety, for example, drugs with “black box” warnings (BBWs). First, we analyzed compliance with CMS regulations among 36 leading prescription drug plans (PDPs) participating in the Medicare prescription drug benefit. Next, we examined whether plans excluded from coverage or added more formulary restrictions to drugs with black box warnings than to drugs without. METHODS: Utilizing databases at the Tufts Center for the Study of Drug Development, we identified 197 drugs across all six categories, approved by the Food and Drug Administration between 1962 and 2007. Next, we analyzed 36 PDP formularies. Specifically, for all 197 drugs we gathered data on prices, formulary (tier) placement, cost sharing, and formulary restrictions. Our primary source for formulary data was the CMS website and its “Prescription Drug Plan” finder. RESULTS: Plans are not complying with the “all or substantially all” regulations. Across all six therapeutic categories, an average of 15% of drugs is not on plan formularies, with a higher percentage of exclusions among antidepressants and anticonvulsants. In addition, drugs with BBWs tend to be excluded from PDP formularies more frequently than those without BBWs, and to have more formulary restrictions. CONCLUSION: Non-compliance with CMS regulations suggests CMS oversight is lacking. Further, plans appear to use BBWs justify formulary exclusions and restrictions. Research needs to be done to determine whether on balance such exclusions and restrictions are deleterious to beneficiary outcomes.