Medicaid, a government program funded by federal and state taxes, provides healthcare for those who cannot afford it. It is the only way that millions of low-income families can obtain medical care. Federal and state governments split Medicaid costs, typically on a 50-50 basis.

The federal government sets the basic requirements for Medicaid participation, but the specifics are left up to the states. Each state sets criteria for beneficiaries, decides what services may or may not be covered, decides which medical providers can participate, and determines all other requirements for the state Medicaid program. The federal government administers the program through the Centers for Medicare and Medicaid Services ("CMS"), and each state has its own agency.

Each state Medicaid program covers prescription drugs. Prescription drug costs have been a rapidly increasing part of Medicaid costs. According to a 2006 report from the U.S. General Accounting Office, Medicaid’s total spending on prescription drugs rose from $4.6 billion in fiscal year 1990 to $40 billion in fiscal year 2004. This means that the percentage of Medicaid expenditures for drugs doubled, from 7.0 to 14.2 percent during that period.

It is widely recognized that fraud against the Medicaid program costs taxpayers billions of dollars. In recent years, there has been a focus on fraud in charging the states for prescription drugs. Well over $2 billion in taxpayer funds have been recovered through whistleblower's False Claims Act suits against pharmacies, pharmaceutical manufacturers and pharmaceutical benefit managers.

Detecting and preventing fraud in government prescription drug programs have become particularly important since the implementation of Medicare Part D. Unlike Medicaid, Medicare is a program that provides government funded healthcare for seniors. While Medicaid has provided prescription drug benefits for decades, Medicare only began to provide prescription drug benefits in 2006. As the total annual costs of the program exceed $30 billion, the potential for fraud is a serious concern. The government will continue to rely on whistleblowers, particularly pharmacists, and other concerned citizens to help stop those who cheat and steal from the Medicaid and Medicare programs.