June 14, 2017

Cleveland Clinic saved $90M on drug costs. Here's how.

Daily Briefing

    Editor's note: This popular story from the Daily Briefing's archives was republished on June 14, 2019.

    To combat rising drug costs, Cleveland Clinic launched a cost control initiative that generated $90 million in savings between 2010 and 2016—and nearly half of that savings was on the inpatient side, Maggie Van Dyke reports for Hospitals & Health Networks.

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    Cleveland Clinic's effort entailed inventory control, formulary management, procurement review, and drug utilization review. The strategies "are not new," Van Dyke writes. However, their effectiveness stemmed from a boost in focus on applying them to net saving as well as an increase in new information technologies that yielded specific drug and drug category information.

    Van Dyke outlines four ways in which Cleveland Clinic and other health systems are using traditional methods to achieve savings on drug costs.

    1. Evidence-based formulary decisions

    One strategy for drug-cost savings is making evidence-based formulary modifications. Cedars-Sinai Medical Center in Los Angeles does this by having doctors and pharmacists meet regularly to discuss the safety and efficacy of certain drugs and determine whether they need to make changes to the hospital's formulary or preferred drug list.

    Chief Pharmacy Officer Rita Shane said, "We're not going to interfere with doing the right thing for patients. But when there's a gray area, or questions about whether an expensive drug is indicated or an alternative with equivalent efficacy and safety might be used, we'll work closely with physicians to identify criteria for use."

    Cleveland Clinic uses a similar drug-utilization review process, Van Dyke reports. The health system further reinforces it formulary control efforts by using EHR notifications that tell providers whether the medications they prescribed are restricted to certain patients, according to Meghan Lehmann, coordinator of drug information services.  

    In addition, Cleveland Clinic is able to keep up with unexpected increases by using a data analytics tool developed internally. According to Jeff Rosner, senior director of pharmacy contracting and purchasing at Cleveland Clinic, the tool "can spit out results in 24 to 48 hours" and alert pharmacists to drug price increases who then work with providers to quickly identify lower-cost options. "Before this, it would have taken weeks of manually going through spreadsheets and databases to get this information," Rosner said.

    2. Volume discounts

    Another traditional strategy that Cleveland Clinic has used to curb costs is negotiating volume discounts directly from drug manufacturers. Pharmacists and physicians work together to determine a few drugs in each class that the hospital will use exclusively—a process called therapeutic interchange, and hospital officials use that information to seek discounts on the drugs selected.

    Scott Knoer, chief pharmacy officer at Cleveland Clinic, said the key to the health system's negotiating power is its employed physician model and integrated EHR.

    3. Reducing unused inventory

    Meanwhile, the Ohio State University Wexner Medical Center reduced its drug inventory by $800,000 in a year by getting rid of duplicate and low-use medications in storage areas. According to Hospitals & Health News, the greatest savings came from closer oversight of automated dispensing cabinets on nursing units.

    Wexner's strategy also involved a process known as extended dating. Robert Weber, Wexner's administrator of pharmacy services, explained, "We worked with an analytical laboratory to test the stability of some medications and extend the expiration date." Through that effort, Wexner saves $50,000 a year on clindamycin and remifentanil.

    In addition, Wexner is partnering with a consignment service to have high-cost drugs that aren't used often delivered—rather than keeping them on hand. Through that effort, Wexner saves $140,000 annually.

    4. Point-of-care efforts

    Along with inventory control measures, Wexner is also working to inform point-of-care choices, Van Dyke reports. For instance, Wexner uses a tool in its EHR that depicts the difference in costs of antibiotics with icons—a low-cost drug would have a single cent icon while a high-cost drug could have several dollars signs.

    Point-of-care intervention can also involve assigning a pharmacist to the care team, which Wexner does. Erin Fox, director of drug information services at the University of Utah Health, said having a pharmacist on the care team yields drug savings around two-to-three times that pharmacist's salary (Van Dyke, Hospitals & Health Networks, 6/7).

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