OBJECTIVES: Increases in drug cost sharing without regard to value may produce adverse financial and informational incentives which could increase health plan costs and worsen health outcomes in the long term. In an attempt to align utilization with value, Premera Blue Cross, a large not-for-profit health plan in the Pacific Northwest, implemented a value based formulary (VBF) which utilizes cost-effectiveness analysis to determine the evidence-based value of each individual drug. The value of each drug is used to determine the corresponding formulary tier placement for the drug.  The objective of this study is describe the design, implementation and first-year outcomes of Premera’s VBF. METHODS: We compared observed pharmacy cost per member per month (PMPM) in the year following VBF implementation to observed pharmacy costs twelve months prior and to an expected counterfactual estimate if no changes were made to the pharmacy benefits. The counterfactual estimate was generated using autoregressive integrated moving average applied to prior thirty-six months pharmacy costs. We assessed drug use and adherence among individuals with diabetes, hypertension, or dyslipidemia utilizing an interrupted time series design with a comparison group composed of members from three employer groups which had the same pharmacy copay increases but did not implement a VBF. RESULTS: Premera pharmacy costs decreased by 3% or 11% PMPM compared to the twelve months prior or counterfactual estimate respectively. Among individuals with diabetes, hypertension, or dyslipidemia in the VBF cohort, there was no significant decline in adherence or number of users of medications for the treatment of diabetes, hypertension, or dyslipidemia. CONCLUSIONS: Despite an overall higher member cost share structure and potential health plan savings, the VBF was potentially able to maintain medication utilization in key disease states. Subsequent analyses utilizing longer follow-up and greater control for confounding will establish more valid estimates of outcomes and costs.