Drug Purchasing and Inventory Control

Drug Purchasing and Inventory Control

While managing specialty pharmacy products is quite important, one cannot overlook the importance of purchasing and inventory control, in general. Purchasing the right amount of drug at the right price can make a substantial difference in a pharmacy’s profitability and financial health. Community pharmacies often operate at very low margins (very low revenue after accounting for the costs of goods sold, or drug inventory). Making shrewd and wise purchases from a reputable vendor offering good prices/discounts on products from reputable manufacturers can mean the difference between a significant profit versus a loss on each prescription filled.

It is also important that a pharmacy’s stock/inventory be sold or ‘turned over’ in an appropriate amount of time to achieve maximum return on equity (ROE) and return on assets (ROA) for the pharmacy, as these will also yield healthy financial ratios when owners, managers, or potential buyers of a pharmacy are scrutinizing the pharmacy’s financial health. Having too much product means wasted space and the potential for expired stock, while not having enough of certain products will result in customers being shorted and potentially fueling their discontent. 

The hospital (versus community) environment has different actors in the supply chain but similar pressures. McConnell et al identified a confluence of clinical and operational strategies to contain drug costs while still fulfilling all of the hospital pharmacy’s business obligations.They describe creation of an interdisciplinary team responsible for systematically reviewing drug cost implications. Operational strategies include various activities that pharmacy staff implement related to contracting, purchasing, and inventory management, including dedicated personnel and technologies, while employing clinical strategies to optimize formulary leverage and being more active stewards in finding the most cost-effective alternatives for patients.  

Additional information about Purchasing and Inventory Control and Financial Ratios can be found in Pharmacy Management: Essentials for All Practice Settings, 4e. If you or your institution subscribes to AccessPharmacy, use or create your MyAccess Profile to sign-in to Pharmacy Management: Essentials for All Practice Settings, 4e. If your institution does not provide access, ask your medical librarian about subscribing.

1McConnell KJ, Guzman OE, Pherwani N, et al. Operational and clinical strategies to address drug cost containment in the acute care setting. Pharmacotherapy. 2017;37:25-35.

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Go to the profile of Shane Desselle
almost 5 years ago

How frequently do you have to tell a customer that you are out of something? How many times have you heard hospital pharmacy directors discuss the need to reduce spend on inventory.