We demonstrate a microfluidic system for long-term tumor cell culture and drug testing. Three-dimensional cell culture is critical in characterizing anticancer treatments since it may provide a better model than monolayer culture of tumor cells. Breast tumor cells were encapsulated within alginate which was gelled in situ within the microchannels. Tumor spheroid formation was observed several days after cell seeding, and various concentrations of doxorubicin were applied to the encapsulated cell aggregates. Drug effects on cell viability and proliferation were measured. In future, hydrogel-based microfluidic devices can comprise part of systems which replace labor intensive screening platforms currently implemented in the laboratory, and they address a need for improving preclinical testing of cancer cell sensitivity to anti-cancer drugs.