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To determine the incidence and preventability of medication errors and potential/actual adverse drug events. To evaluate system failures leading to error occurrence.Prospective, direct observation study.Tertiary care academic medical center.Patients in a medical/surgical intensive care unit.Observers would intervene only in the event that the medication error would cause substantial patient harm or discomfort.The observers identified 185 incidents during a pilot period and four phases totaling 16.5 days (33 12-hr shifts). Two independent evaluators concluded that 13 of 35 (37%) actual adverse drug events were nonpreventable (i.e., not medication errors). An additional 40 of the remaining 172 medication errors were judged not to be clinically important. Of the 132 medication errors classified as clinically important, 110 (83%) led to potential adverse drug events and 22 (17%) led to actual, preventable adverse drug events. There was one error (i.e., resulting in a potential or actual, preventable adverse drug event) for every five doses of medication administered. The potential adverse drug events mostly occurred in the administration and dispensing stages of the medication use process (34% in each); all of the actual, preventable adverse drug events occurred in the prescribing (77%) and administration (23%) stages. Errors of omission accounted for the majority of potential and actual, preventable adverse drug events (23%), followed by errors due to wrong dose (20%), wrong drug (16%), wrong administration technique (15%), and drug-drug interaction (10%).Using a direct observation approach, we found a higher incidence of potential and actual, preventable adverse drug events and an increased ratio of potential to actual, preventable adverse drug events compared with studies that used chart reviews and solicited incident reporting. All of the potential adverse drug events and approximately two thirds of the actual adverse drug events were judged to be preventable. There was one preventable error for every five doses of medication administered; most errors were due to dose omission, wrong dose, wrong drug, wrong technique, or interactions.