Objective: We examined the effect of three-tiered formulary implementation on drug utilization and expenditures in the Military Health System (MHS) after a leading uroselective alpha-blocker (tamsulosin) was restricted to non-formulary (third-tier) status. Methods: We evaluated 28 months of pharmacy claims data for individuals covered under the TRICARE Pharmacy Program, a federally funded benefit available to all eligible Uniformed Services members, their families, and retirees. The study patients (N=266,380) were men, 45 years of age or older, with at least one prescription for an alpha-blocker (AB) dispensed between October 2004 and February 2007. The new policy limited the availability of tamsulosin at military treatment facilities, increased patient cost-sharing obligations for tamsulosin in the TRICARE Retail Network and Mail Order pharmacy, and designated alfuzosin as the preferred uroselective alpha-blocker in the MHS during 12 months (months 17 through 28) of the study. We used segmented regression models to estimate the effect of the new policy on the use of ABs in the Military Health System with respect to drug utilization and drug expenditures. Results: We observed an abrupt decline (29%) in the use of the third-tier AB following the decision (p<0.001). Concurrently, use of the preferred uroselective product increased three-fold and continued to grow at a faster monthly rate than predicted from pre-implementation data (p<0.001). Overall, the utilization of uroselective ABs decreased slightly (11%) in the month following the decision (p<0.001) but then returned to baseline levels during the post-policy period. The policy reduced drug expenditures for ABs by an estimated $5.6 million during its first 12 months. Conclusion: Implementation of a three-tiered formulary system for alpha-blockers in the Department of Defense led to a reduction in drug expenditures through increased utilization of preferred products and higher cost-sharing obligations for non-formulary drugs.