The Department of Veterans Affairs (VA) Pharmacy Benefits Management Strategic Healthcare Group (VA PBM) oversees the formulary for the entire VA system, which serves more than 4 million veterans and provides more than 108 million prescriptions per year. Since its establishment in 1995, the VA PBM has managed pharmaceuticals and pharmaceutical-related policies, including drug safety and efficacy evaluations, pharmacologic management algorithms, and criteria for drug use. These evidence-based practices promote, optimize, and assist VA providers with the safe and appropriate use of pharmaceuticals while allowing for formulary decisions that can result in substantial cost savings. The VA PBM also has utilized various contracting techniques to standardize generic agents as well as specific drugs and drug classes (eg, antihistamines, angiotensin-converting enzyme inhibitors, alpha-blockers, and 3-hydroxy-3-methylglutaryl coenzyme A reductase inhibitors [statins]). These methods have enabled the VA to save approximately dollar 1.5 billion since 1996 even as drug expenditures continued to rise from roughly dollar 1 billion in fiscal year (FY) 1996 to more than dollar 3 billion in FY 2003. Furthermore, the VA PBM has established an outcomes research section to undertake quality-improvement and safety initiatives that ultimately monitor and determine the clinical impact of formulary decisions on the VA system nationwide. The experiences of this pharmacy benefits program, including clinical and contracting processes/procedures and their impact on the VA healthcare system, are described.