The number of critical medication shortages in the United States has reached an unprecedented level, requiring decisions about allocating limited drug supplies. Ad hoc decisions are susceptible to arbitrary judgments, revealing preformed biases for or against groups of people. Health care institutions lack standardized protocols for rationing scarce drugs. We describe the principles on which an ethically justifiable policy of medication allocation during critical shortages was created at our hospital. Based on supportable scientific evidence and with all clinically similar patients treated as similarly deserving of consideration, drugs were distributed according to a hierarchy of clinical need and predicted efficacy. We explain the ethical rationale for the procedures we adopted, how the policy was implemented at a large academic medical center, and more than 1 year of experience with a number of different medications. Our experience has demonstrated the feasibility and utility of formulating a rational and ethically sound policy for scarce resource allocation in an academic teaching hospital that could be used in a variety of health care settings. The method has proven to be reliable, workable, and acceptable to clinicians, staff, and patients.