BACKGROUND: Previous studies of 3-tier formularies are rare, although the evidence suggests that their cost-sharing structure reduces overall drug spending. However, it is unclear how incentive-based formularies affect the selection of medications with safety advantages, or restrict the access that high-risk populations have to recommended therapies in the higher tiers. This study was designed to determine whether 3-tier formularies influence the use of nonsteroidal anti-inflammatory drugs (NSAIDs) in a population of patients with arthritis. METHODS: This retrospective study used the 2000 MarketScan Research Database, which contains person-level claims data for employer-sponsored health plans. The sample for this study consisted of 20 868 individuals treated for osteoarthritis or rheumatoid arthritis and using NSAIDs while enrolled in tiered drug plans (n = 32). The likelihood of any use of cyclo-oxygenase (COX-2)-selective inhibitors was determined as a function of tiered drug plan coverage, adjusting for other person-level and plan-level covariates. RESULTS: Use of COX-2-selective inhibitors decreased (63.0% vs 53.6% vs 41.6%, respectively) and use of generic NSAIDs increased (37.7% vs 40.7% vs 55.7%, respectively) as formularies incorporated 1, 2, and 3 tiers. Enrollees in 3-tier plans with arthritis and serious gastrointestinal comorbidities (odds ratio, 0.51; 95% confidence interval, 0.40-0.66) were significantly less likely to use COX-2-selective inhibitors compared with patients in 1-tier plans. CONCLUSIONS: Three-tier formularies appear to reduce the use of COX-2-selective inhibitors among all patients with arthritis, even those at risk of experiencing gastrointestinal complications from using nonselective NSAIDs. These findings are among the first to suggest that tiered-copayment drug plans may be influencing the selection of medications beyond generic and branded products.