Drag-reduction for air and water flowing in a horizontal 0.0127 m pipe was studied experimentally. The fluids had an annular configuration. The injection of polymer solution produced drag-reductions as high as 47 percent with concentration of only 40 wppm in the pipeline. A maximum drag reduction that is accompanied (in most cases) by a change to a stratified pattern for which the concentration of drops in the gas phase is zero or close to zero. The effectiveness of the drag-reducing polymer is sensitive to the gas and liquid flow rates. Description of the phase change by drag reducing polymers is identified.