Case Study

4 minute read

How Mayo Clinic Uses a Unified Formulary to Lower Drug Costs

Learn how Mayo Clinic uses a unified formulary to reduce drug costs and improve care quality.

Overview

The challenge

Drug spending has grown steadily in recent years. The average total drug spending per hospital admission increased 18.5% between fiscal years 2015 and 2017. These costs can be especially difficult to manage when hospitals and physician practices within the same health system have different formularies and prescribing practices, which leads to inefficient purchasing and inconsistent clinical care.

The organization

Mayo Clinic is a nonprofit academic medical center based in Rochester, Minnesota. Mayo Clinic operates in five states and cares for more than one million people a year, with $14 billion in annual revenues and approximately 65,000 employees.

The approach

Mayo Clinic’s unified formulary has been around for more than 15 years, though it was spurred on by many of the same factors that organizations face today. The formulary is developed by a system-wide committee that is overseen by supply chain and finance leaders and is ultimately accountable to the dean of clinical practice and chief pharmacy officer. The committee is composed of 12 task forces that focus on different specialty areas.

The result

Mayo Clinic’s overall annual drug spend is on average over $1 billion. The formulary’s impact is an estimated $50 million saved on medications annually. While the savings are significant, it is insufficient to completely stop the rise in overall drug spend. Still, the formulary has benefits beyond cost savings, including improving care quality and continuity.


Approach

How Mayo Clinic manages their unified formulary

In response to challenges with drug purchasing and care variation, Mayo Clinic’s supply chain department led a multi-stakeholder effort to create a single, systemwide formulary.

The two steps

By implementing the two steps below, Mayo Clinic found that they could generate drug savings and better manage patient care.

Mayo Clinic’s formulary is developed by a system-wide committee. The Mayo Clinic Pharmaceutical Formulary Committee is primarily a policy-making body, composed of all Mayo Clinic chief pharmacy officers and the chairs of all pharmacy and therapeutics (P&T) committees. The group meets approximately three to four times per year and is overseen by supply chain and finance. In addition, the committee is accountable to the dean of clinical practice and the chief pharmacy officer.

The committee makes some formulary decisions for products that are used across many specialties (for example, immune globulin), but most formulary decisions are left to 12 specialized task forces that focus on formulary decisions for different specialty areas.

Leverage specialty expertise

Each of the 12 specialty task forces meet monthly or as needed to make formulary decisions for drugs utilized by their specific clinical specialty. The task force membership is dynamic, which allows leaders to swap out clinical experts based on the expertise needed to evaluate each new set of medications.

For a binding vote, a quorum of three physicians (at least one from a non-Rochester site) and one pharmacist must be met. Any clinician with a conflict of interest, such as direct remuneration and/or research funding, does not count towards quorum. See below for a listing of the specialty task force members.

Specialty task force membership

  • Chair: Physician leader in that specialty, responsible for assembling relevant stakeholders
  • Vice-chair: Clinical pharmacist assigned to that specialty
  • Expert clinicians: Chosen by task force chair based on expertise needed for each drug review
  • Managed care pharmacist: Help create prior authorization processes, provide a different perspective during P&T deliberations (5 FTEs system-wide)
  • Contract portfolio manager: Pharmacists who consult on drug pricing options and liaise with industry contacts. Need five to seven years of experience at the medical center to qualify for this position (2 FTEs serve all 12 task forces)
  • Formulary manager: Clinical pharmacists who provide logistical support for multiple task forces, including coordinating communication around shortages (3 FTEs, plus 1.5 FTE administrative assistant)
  • All formulary and contract portfolio managers are clinical and administrative pharmacists employed by supply chain management, a part of Mayo Clinic Shared Services.

The Pharmaceutical Formulary Committee creates prescribing guidance to ensure that there is one set of rules across the hospitals and clinics. No safe drugs are excluded from the formulary, though guidance is given for appropriate use.

For each drug, the formulary does the following:

Aligns with health plan
Each drug is given a tier that corresponds with its copay and coinsurance levels.

Embeds care pathways
Dynamic prescribing algorithms are used to ensure appropriate and cost-effective care.

Allows flexibility for specialty variation
Guidance for each drug varies by specialty and site of care.


Results

How we know it’s working

Mayo Clinic has seen several cost and quality benefits since implementing their unified formulary and specialty task forces. While the system is still experiencing annual increases in drug spend of around 8% to 12%, the formulary generates an estimated $50 million in savings. Other benefits of the system-wide formulary include:

  • Reduction of potential medication errors
  • Improved care continuity for patients, especially when the formulary is aligned with the pharmacy benefit
  • Support of volume discounts for purchasing
  • Clear guidance for physicians with only one set of rules to follow
  • Establishment of trust with providers who are frustrated by “inappropriate” steps required by many pharmacy benefit managers

By elevating formulary decisions to the system level, Mayo Clinic was able to standardize care, create strong prescribing guidance, and reduce drug spend.


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AFTER YOU READ THIS

1. You'll understand challenges facing health systems with multiple formularies and prescribing practices.

2. You'll know how Mayo generates savings with its unified formulary.

3. You'll learn how to create and manage a unified formulary.

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