Chapter Four
Efficient Pharmaceutical Physical
Inventory
By: Mrs. Yalem Gadisa ([Link], MSc.)
12/7/2024 1
Pharmaceutical physical inventory
The purpose of an inventory control system
To inform personnel when and how much of a
product to order
To maintain an appropriate stock level
To ensure availability of essential medicines at all
times in adequate quantities.
To monitor losses through expiry, pilferages, or
other reasons.
To avoids over and under stocks.
Pharmaceutical physical inventory..
Physical inventory: is one of the pharmaceutical
inventory management methods and it refers
to counting the actual amount of
pharmaceuticals in a health facility.
All items in pharmaceutical stores, various
dispensaries and other service delivery units
are counted.
Cont’…
For proper physical inventory to take place there
has to be:
An appropriate recording of transactions at the store
and dispensary.
Stock cards and bin cards are used to track the
movement of stock (issues & receipts) at the
pharmacy store.
Cash and credit sales tickets and
Registers for credit/freely dispensed drugs
used to monitor the stock movement and value of
inventory at the dispensary and other service
delivery units.
Cont’…
to conduct physical inventory:
a distinct inventory form is applied for the
pharmacy store and another for dispensing
outlets and service delivery units.
The inventory forms used are slightly different.
(at the pharmacy store and dispensary/service
delivery units).
b/c of the d/t in the type of information available at
the dispensary and pharmacy store.
Stock/bin card balance, discrepancy and cost of
medicines can be easily obtained from the store.
Periods/step of physical inventory
1. Activities before inventory: Preparation for
physical inventory
The stock at the pharmacy store and dispensary
arranged to facilitate physical count.
All products grouped according to expiry dates,
codes, or cost, etc.
medicines at store and dispensary registered in
their respective inventory forms prior to the
actual physical inventory.
Periods/step of physical inventory..
Inventory control tools updated and placed next
to respective bins.
All pharmacy professionals and responsible
persons informed and avail themselves.
The authority of the health facility assign an
internal auditor to verify all the findings of the
physical inventory.
Periods/step of physical inventory..
2. Activities during physical inventory: Taking
physical inventory of medicines
On pharmaceutical stores is carried out every
two months; whereas inventory at the
dispensaries and service delivery units is
conducted every month.
The inventory should better be taken on the last
weekends of the month .
Cont’…
Actual physical count carried out in the presence of
the responsible persons in the respective locations
(e.g. store manager, dispensers, etc.)
Members of the group doing the inventory are assigned
by the head of the health facility.
The assigned professionals grouped into teams of 2
persons and carry out the actual count of allocated
shelves.
Each shelf counted by two teams. The results of the
two counts should be reconciled.
If there are differences between the two counts, the
shelf counted for a third time.
Cont’…
The group make sure that all sections of the
inventory forms that need to be filled before
and during the inventory are properly
completed, signed and submitted to the
concerned authorities of the health facility.
Cont’…
3. Activities after physical inventory: Completing
and reporting the physical inventory
The pharmacy accountant, be part of the group,
has to complete the section to be filled after the
inventory.
The inventory at the pharmacy store is valued
based on the cost of medicines; whereas
the inventory at the dispensary is valued
based on retail prices of medicines.
Reconciliation physical inventory reports with
stock record balance
balance the total transactions, the cost of
medicines at the pharmacy store and dispensing
outlets including service units should be added
up together.
so, the monetary values (total selling price) of
the physical inventory at the dispensing outlets
converted into cost to bring the values at the
store and dispensary into same unit.
Reconciliation physical inventory reports with stock
record balance …
TCsoh=TCe + TCr – TCs
Where:
TCsoh = total cost of stock at hand obtained during
physical inventory
TCe = total cost of the ending balance of the previous
quarter (within the health facility)
TCr = total cost of stock received during the current
quarter
TCs = total cost of sales
Cont’…
The formula is: -Selling price =cost + profit margin;
E.g: If the selling price of the medicines is 120 birr
at dispensary, with a profit margin of 20%, what
is the cost of the medicines?
Formula 120 birr = cost + 20%xcost
120 birr =cost (1+0.2); 120=1.2 cost and 100=cost
To simplify, the formula will be
cost= selling price / (1+ profit margin)
Cost =120/1.2=100
Cont’…
internal auditor verify all the findings of the
physical inventory.
After completing the verification
a report is prepared by the pharmacy head and
communicated to the head of the health facility.
The results of the inventory is further analyzed
and interpreted by methods such as stock status
and consumption methods and ABC analysis.
Cont’…
The results of the analysis used to make
informed decision that contributes to
continuous availability of essential
pharmaceuticals.
The information is also used to ensure
effectiveness of mechanisms put to counteract
wastages and pilferages.
The end