Project goals and methods were implemented for the provision of services in the areas of formulary development, inventory management, drug distribution, onsite placement of pharmacy operations, and educational development. The impact of the program was assessed over a 30-month period (1978-80). Development of policies and procedures for drug use in the correctional setting enabled implementation of a strict population-specific drug formulary. Procedural changes resulted in an 83-percent decrease in onsite drug inventories and a 62-percent decrease in quarterly drug expenditures. A one-time saving of more than $26,000 resulted from the decrease in onsite inventory, and an annual saving of $44,000 is projected for decreased drug expenditures. All but 5 controlled substances were removed from the inventory, and only 13 nonprescription items remained in the formulary. An education course on health care in correctional settings provided exposure for pharmacy students to this area of institutional practice. The contractual model proved both cost effective and functional. The program policy and procedure manual is appended. 8 references. (Author abstract modified)