OBJECTIVES: Rheumatoid arthritis (RA) is a chronic inflammatory condition with significant economic burden. Tofacitinib is an oral Janus kinase inhibitor indicated in the US for the treatment of moderate to severe RA in patients with inadequate response to methotrexate. Given the similarity of indications across available therapies, economic evaluation of alternate treatment strategies could inform US formulary decisions. We estimated incremental cost-effectiveness ratios of tofacitinib after methotrexate failure in a treatment sequence compared with a similar sequence without tofacitinib from a US third-party payer’s perspective. METHODS: The model estimated costs and outcomes of RA treatment with a pre-specified “treatment sequence” (sequential methotrexate, tofacitinib, adalimumab, abatacept, tocilizumab, rituximab) versus a “comparator sequence” (sequential methotrexate, etanercept, adalimumab, abatacept, tocilizumab, rituximab). Alternative sequences were considered. Efficacy was assessed by Health Assessment Questionnaire (HAQ) and compared using mixed treatment comparison and data from long-term extension trials. Adverse event data were from published meta-analyses and trials of tofacitinib and comparators. Patient characteristics were based on tofacitinib clinical trials (NCT00856544; NCT00847613; NCT00853385). RA-related costs were from published data mapping HAQ onto healthcare resource utilization in US patients with RA. Indirect costs were not considered. RESULTS:  From a US third-party payer’s perspective, the predicted lifetime cost of “treatment sequence” including tofacitinib was $509,047 versus $546,860 for “comparator sequence” without tofacitinib, with the difference primarily driven by drug cost. The “treatment sequence” with tofacitinib resulted in an additional 0.11 quality-adjusted life years versus “comparator sequence.” Probabilistic sensitivity analysis suggested the probability that tofacitinib is cost-effective as second-line therapy is 64.0% at a threshold of $100,000. CONCLUSIONS: Our model suggests that including tofacitinib as second-line therapy following methotrexate failure is a cost-effective alternative versus a “comparator sequence” without tofacitinib. Sensitivity analysis reiterated robustness of the findings and cost-effectiveness of including tofacitinib. Results of alternate treatment sequence comparisons were similar.