How Cleveland Clinic Saved $90 Million in Drug Costs

Article describes four key cost-saving strategies

A recent survey from the American Hospital Association indicated that inpatient drug expenses increased an average of 23.4% per year between fiscal 2013 and 2015. Despite the challenges, Cleveland Clinic has been able to rein in drug spending without harming quality, saving $90 million between 2010 and 2016, according to an article posted on the Hospitals & Health Networks website.

The clinic achieved approximately 45% of the $90 million savings on the inpatient side by reinforcing traditional pharmacy-management approaches, such as inventory control, formulary management, procurement, and drug-utilization review. Four basic strategies were involved:

  • Base formulary decisions on evidence.

At Cedars–Sinai Medical Center in Los Angeles, physicians and pharmacists meet each month to discuss what Chief Pharmacy Officer Rita Shane calls the “grey indications” in drug use, according to the article. At these meetings, pharmacists weigh the safety, efficacy, and cost of specific drugs to determine whether changes should be made to the hospital’s formulary. Pharmacists also conduct extensive literature searches on the drugs under review and share this information with medical staff for their input, all of which is then brought to the Pharmacy and Therapeutics Committee for review.

The Cleveland Clinic follows a drug-utilization review process that is similar to the one at Cedars–Sinai. “We drive a lot of our formulary restrictions by adding them to our [electronic health record] system,” said Meghan Lehmann, coordinator of drug information services. “We have screens that pop up as providers are entering orders to ensure that they are aware that a medication they’re prescribing is, for example, restricted to certain patients. We also have alerts that pop up for pharmacists reminding them to verify any restricted drug orders with the prescribing physician.”

Another challenge for hospital pharmacies is staying on top of drug price increases, the article observes. The Cleveland Clinic built a data analytics tool that alerts pharmacy staff to significant price spikes so they can work with physicians to rapidly identify lower-cost options.

The tool sorts through drug catalogs obtained electronically from wholesalers to identify drugs that have gone up in price. It also calculates the financial impact of a price increase based on the clinic’s annual usage for a particular drug. For instance, the tool recently informed staff that a price increase on generic lidocaine 4% mucosal solution would cost the clinic an additional $250,000 a year if no formulary changes were made.

  • Purchase directly from manufacturers.

Negotiating volume discounts on drugs is another key cost-saving strategy, according to the article. First, pharmacists work with physicians to identify a few drugs in each drug class that will be used exclusively by the hospital––a process known as therapeutic interchange. Then, hospitals seek discounts on these first-line drugs, typically through group purchasing organizations that negotiate with drug manufacturers on behalf of their members.

The Cleveland Clinic has taken this process one step further by going directly to manufacturers.

Key to the clinic’s negotiating power is its employed-physician model and integrated electronic health records (EHR) system. “We have a lot of credibility with manufacturers because our employed physicians are part of drug decisions, and we build those decisions into our EHR,” said Scott Knoer, chief pharmacy officer.

  • Reduce unused inventory.

After weeding out unused, duplicate, and low-use drugs from all medication storage areas, the Ohio State University Wexner Medical Center (OSU Wexner) in Columbus cut its drug inventory by $800,000 in one year, the article points out. The biggest savings came from maintaining tighter control over automated dispensing cabinets on nursing units.

Tight inventory control reduces investments in unneeded drugs and reduces the number of unused drugs that expire and have to be tossed.

Another strategy––called extended dating––also can help. “We worked with an analytical laboratory to test the stability of some medications and extend the expiration date,” said Robert Weber, administrator of pharmacy services. The facility is saving $50,000 a year on two medications—clindamycin and remifentanil—because of extended dating.

To help staff stay on top of drug supplies, OSU Wexner will be rolling out an inventory-management module in its EHR system this fall.

  • Inform point-of-care choices.

“The point of prescribing is where you can most effectively change physician behavior,” Webber said. Toward this end, OSU Wexner has also added a cost-transparency tool to its EHR system, which visually illustrates the cost of different antibiotics. For instance, an antibiotic that costs less than $1 a day has a single cent sign next to it, whereas antibiotics that cost more than $400 per day have seven dollar signs.

In addition, at OSU Wexner, pharmacists are key members of medical teams, making patient rounds with physicians and nurses. Having pharmacists directly involved in decision-making and drug selection prevents adverse drug events and reduces costs, Weber said.

Source: Hospitals & Health Networks; June 7, 2017.