Senate Bill 196 is aimed at blocking the distribution of medications to people who don't need them.
The bill's sponsor was Senate President Lyda Green, a Wasilla Republican.
Palin says she was willing to allow the bill to become law because prescription drug abuse is a serious problem in Alaska.
But she says she didn't want her name on it because of privacy concerns with the database.
Once the state pharmacy board sets up the program, pharmacists will add to the database the name of the doctor who wrote the prescription, what the prescription is for and who it is for.
The goals are to identify doctors who are prescribing drugs in an unprofessional or illegal way, people who are improperly getting multiple prescriptions for the same drug from different doctors and forged prescriptions.
The law says the database will be confidential and not subject to public disclosure, although individuals may get information on what the database says about them. Individuals may challenge incorrect information, and database records are to be purged after two years.
The Anchorage Daily News contributed to this article.
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