Hospital Pharmacy

• 8th semester
• Madina college of Pharmacy

Shahnila Mukhtar
2025
Procurement and inventory
control
INTRODUCTION
Purchasing and inventory control is necessary to maintain
adequate stocks of drugs and allied items at reasonable costs in
pharmacy department.
Purchase means to obtain an item by paying money per its
equivalent or to buy for a price.
Inventory is an itemized list of good with their estimated worth,
specifically an annual account of stock taken up by a business.
The word control specifies exercising, directing, guiding or
retraining of power-over.
Thus, purchasing and inventory control specifies the obtaining,
managing and maintaining of drugs and medical supplies in a
pharmacy.
PROCUREMENT PROCEDURE
Under this section, selection of drug items, authority or purchase,
storage and stock control will be dealt.
 Selection of items:
• The selection of pharmaceuticals and other related items is a basic and
extremely important function that must be accomplished by hospital
pharmacist.
• A pharmacist is at a better position for making decisions regarding products,
quantities required, product specifications and sources of supply.
• This responsibility must not be delegated to another individual.
• It is the pharmacists' obligation to establish and maintain standards assuring
the quality, proper storage, control, and safe use of all pharmaceuticals and
related supplies.
• Though purchasing department can perform actual purchasing function, yet
setting of quality standards and specifications requires professional knowledge
and judgment and must be performed by the pharmacist.
• Economic and therapeutic considerations take it necessary for hospitals to
have an efficient, well controlled, and updated formulary system. Under this
system, it is the pharmacist's responsibility to develop and maintain
adequate product specifications to aid in the purchase of drugs and related
supplies. The USP-NF is a good source for drug specifications.
• There should also be criteria to evaluate acceptability of manufacturers
and distributors or items. A hospital pharmacist must have the authority to
reject a particular drug product or supplier when the professional judgement
dictates so. The pharmacy and therapeutic committee recommends the
guidelines for selection of the drug product.
• Economy, quality, and efficacy must be considered for selection of a brand.
• There must be a proper balance between quality and cost when more
acceptable suppliers market a product meeting pharmacist's specifications.
• In selecting a manufacture, vendor or source of supply, the pharmacist
must consider price, terms, shipping times, dependability, quality of service,
returned goods policy, and packaging.
• However, prime importance must always be placed on drug quality and
manufacturer's reputation because the pharmacist is responsible for quality
of all drugs dispensed by the pharmacy.
 PURCHASING
Drugs and allied items can be purchased by any of the following
method
Direct purchase from the manufacturer or wholesaler
The direct purchase from the manufacturer or the wholesaler is the
procurement of the drugs and allied items from their manufacturers
or wholesalers. Usually this purchase is not with any sort of discount
and is not usual.
Bid from either manufacturer or wholesale
Under bid purchase, pharmacist estimates drug usage for a given
period and the reputable manufacturers or wholesalers are invited
to quote their prices for selected items. The manufacturers submit
their bid quotations (offers for prices of drug and other items).
The drug purchase order is forwarded to company with lowest price,
yet with standard quality, usually receives the order for the material,
after which the purchase order is prepared.
With regard to bid purchasing, a word of caution needs to be considered.
If the bids for drugs are released to a selected group of reputable
manufacturers, then the lowest bidder should receive the purchase order
and the hospital may be assured of receiving first quality merchandise.
If on the other hand the bids are released to all vendors requesting them ,
the lowest price doesn’t always mean quality merchandise. Therefore, if
this type of bid release program is to be employed, it is strongly
recommended that some arrangement should be made for analytical and
clinical testing of samples of the product. This testing program may be
carried out by a local laboratory or by the hospital. While estimating for the
required quantities, it can be done even for a multiple years period.
However, the hospital has the option to determine when and how much
will be shipped at any time during the contract period. The use of
competitive bidding considered good practice where a drug is used in large
bulk amounts. An annual purchase the hospital pharmacist eliminates
significant amounts of paperwork and unnecessary frequent bidding.
Purchase from local retail pharmacy
Purchase from the local retail pharmacy is costly and is
performed only in an emergency cases.
Contract purchase
The contract purchase arrangement can be done with
manufacturer, wholesaler, or with a company for a hospital
supply. This system is known as prime-vendor system. Under this
method, institution and a single manufacturer or supplier enter
into a contract for supply of drug products on whenever needed
bases for a specified period of time. Thus, multiple purchase
order are eliminated and ordering may be facilitated further
using a computer and even an order can be emailed on a daily
bases. In this mode of purchase, the vendor provides materials
to hospital for a small percentage fee. This provides for a
minimum inventory at the hospital and provides for an optimum
inventory rate. (optimal stock level without overstocking).
• Many departments seek a turnover of stoke 10 to 20 times annually.( to
maintain efficiency).
• In addition, the prime vendor can provide the hospital with coordinated
purchase data and cost - control reports also.
• The cost on drugs can be reduced by prime vendor contract or cost plus
prime dash vendor contract.
• Under prime-vendor contract, the pharmacy guarantees that it will purchase
a specific rupee amount from the wholesaler. In return for guarantee, the
wholesaler reduces the standard mark-up, which is a practice known as cost
plus.
• Under the cost plus prime-vendor contract, the wholesaler may use a cost
plus formula, charging only the manufacture price plus a significantly lower
handling fee. The prime vendor arrangement increase purchases from the
wholesaler (rather than from the manufacturer), thereby reducing inventory
and increasing inventory turns.
• This system ensures lower costs, better stock management, and improved
financial control for hospitals.
The private hospitals use single or multiple procedures mentioned above during a
year long drug purchases.
The small volume purchase in government institutes is permitted to be done by
adapting bidding purchase. However, the routine purchase, in government institutes is
done through medical store depot (MSD) for this purpose a purchase cell has been
established in secretariat under direction of a section officer of provincial ministry of
health.
This purchase cell advertises for prequalification notice for pharmaceuticals firms
whereby, pharmaceuticals firms showing interest to supply drugs are accepted and listed
with cell for 3 years period.
Obviously, this prequalification is done after asserting that firms comply with standards,
quality of the product, and of course it’s repute and judged by a technical team including
pharmacist and medical staff. After the prequalification, an advertisement is given in
press for bid. The lowest offer of only the prequalified firms is entertained for drug
purchase. Purchased drugs are then sent to the hospitals as per their demands
submitted previously.
It would be necessary to note that few years back a pharmaceutical manufacturing
program was running in Punjab drug testing laboratory under the umbrella of MSD. This
program has ceased now.
PURCHASING AUTHORITY
 Centralized Purchase
Under centralized purchase, an institutional material purchase
department or its purchasing agent is responsible for purchase of
drugs and related supplies.
Purchasing by the purchasing agent involves that the pharmacist,
like all other department heads, requests the items to be
purchased on a special form.
The selection of brands and vendors is thereby left to the
discretion of the purchasing agent.
However, pharmacists furnishes specifications both as to quality
and the sources for purchase, which may or may not restrict the
selection to the product of a particular manufacturer.
• Under another system in centralized purchase while retaining actual purchase
function of purchasing department, utilizes benefits of pharmacist’s technical
knowledge.
• In such a system the pharmacist develops and states necessary specifications
for drugs and allied items to be purchased and has the authority to reject any
article below standard or not complying with specifications.
• The pharmacist may consult with the Pharmacy and Therapeutics Committee
concerning specifications for drugs.
• On the other hand, pharmacist can also guide and assist the purchasing agent in
purchasing function.
• This system has certain control and economic merits and can effectively
function.
• It must, however, depend upon the close cooperation between the pharmacist
and purchasing agent. They should work hand-in-hand, each recognizing the
importance of the function and contribution of the other which can be made to
such a specialized purchase. (for smooth operation).
 Purchase by hospital pharmacist
The other system is purchase of drugs and related items by the
pharmacist.
However, payment can be made from the material purchase
department from the pharmacy account.
The pharmaceuticals and related items constitute specialties that
require the technical skills of a formally trained pharmacist for their
proper selection and purchase.
Hospital pharmacy is the only department in a hospital for which it is
not advisable to have purchasing done by a material department of
a hospital or its purchasing agent. Since pharmacist has
responsibility for compounding dispensing and manufacture of the
drugs used in hospital he should also have the justification to
specify the drugs to be purchased.
RECEIVING DRUGS
• The drugs must preferably be delivered direct to the pharmacy department
or other pharmacy receiving area, though it should be mandatory for
radiopharmaceuticals or controlled drugs.
• If the drug items received by main storeroom, it should immediately be
forwarded to the pharmacy in the unopened state.
• The delivery of all substances must be checked against the hospital
purchase order forms and any difference between ordered and received
quantities is recorded.
• Expiry dates batch number and manufacturers must be recorded.
• The delivered drugs are to be received by well-trained individuals who
understand their duties, responsibilities and serious nature of drugs.
• All nonprofessional personnel involved in this activity should be selected
and supervised by the pharmacist. The pharmacist involved in this activity
should e selected and supervised by the pharmacist. The pharmacist must
ensure that records and forms provide proper control upon receipt of
drugs. A record can provide a complete accountability from purchase order
initiation of drug administration. All drugs should be placed into stock
promptly upon receipt, and controlled substances must be directly
transferred to safes or other secure areas.
Drug Storage
The storage of drugs and related items is an important aspect of the
total drug control system.
The important considerations for stocking of drugs in pharmacy are as
follows:-
Stability compatible storage:
Proper storage control in terms of temperature, light, humidity,
sanitation and ventilation conditions, compatible with stability of stored
product must always be maintained.
These conditions are needed to ensure the maintenance of stability of
the stored product for their shelf lives.
Secure Storage:
The drug storage areas must be well secured; drug shelves and cabinets
should be designated so that the drug accessibility is limited to
authorized personnel only.
The storage is also financially, physically and chemically secured.
Safe Storage:
Safety is also an important factor , and proper
consideration should be given to the safe storage of
poisons and flammable compounds.
Segregate Storage:
Externals should be stored separately from internal
medications.
Medications stored in a refrigerator containing items
other than drugs should be kept in a separate
compartment.
STOREROOM ARRANGEMENT
Centralized storage is the area where drugs are stored in hospital
pharmacy after they are received.
These storage areas provide a reduction in labour cost along
with record keeping. The chief pharmacist or the delegated
supervisor under his authority are responsible for storage of
drugs in these facilities.
For the ease of control, drugs are usually placed in an area which
is in direct access of the pharmacist in charge.
This ease of access allows for a better control of the stock,
adjustment of inventory and preparing reports about cost and
purchasing.
The arrangement of pharmacy is not defined according to a
strict set of standards; it is usually personalized according to
the pharmacist’s and institute’s needs. There are several
ways of stocking drugs such as arranging alphabetically or
by code number, separating liquid dosage forms from
solids, separating OTC drugs from prescription drugs, etc.
Whatever the method may be chosen, it should adhere to
some basic rules or principles.
Each storage unit e.g., shelf, drawer, cabinet, etc. is either
identified numerically, alphabetically or by any other sign
which facilitates the placement of any item. One of the
major benefits of this identification system is that it allows
for safe dispensing of drugs and eliminates errors
associated with it. There are many ways to achieve
identification.
Shelf-stripping: is a method which constitutes of applying a
strip, containing identification information, in front of the
shelves. Most commonly, the information that is placed on the
strip is name and strength of product, unit size, maximum and
minimum level. The strip may either be made of tape, paper,
plastic, etc.
Floor-marking: is a method of identification of floor; the
necessary information is put on a stencil and painted on the
floor of the storeroom. This technique is best applicable on
wooden or concrete floor. A tape of good quality with strong
adherability may be used on tiled floors.
In hospitals which handle a lot of supplies, storeroom is divided
into different areas such as are for controlled substances,
drugs, biological, narcotic vault, surgical supplies, etc.
Stock control
• Stock control is vital wherever medications are kept, whether in general
storage in main pharmacy, satellite pharmacies, nursing units, patient care
areas, emergency room, operating rooms, recovery rooms, or treatment
rooms. Expiration dates of perishable drugs must be conducted in all these
locations and stock is rotated in these different locations as required. For
those products agreed to be held in stock at all the time, out of stock
situations must be prevented and expiry dates must be recorded and acted
upon.
Records: An adequate record keeping system must be devised and maintained
where by the numerous easily retrievable records are to be retained these
records are required for management , inventory control , assessment of
departmental progress and legal protection
Records needs in the drug distribution and control system are:
Purchase and inventory records
 Controlled substances
 Inventory and dispensing records
 Records of medication orders and their processing
 Manufacturing and packing production records
Inventory control
Since pharmacist is accountable for expenditure of pharmacy
funds an adequate inventory management system must be
maintained.
This system enables pharmacist to analyse and interpret
prescribing trends and theirs economic impacts and appropriate
minimise inventory cycles. Adequate stock levels must be held
which will be cope with sudden and sustained demand but
should not be so excessively large that products are held for
longer than is financially cautious.
Purchasing procedure
Usually plan of purchasing procedures is accomplished by a pharmacist and
a hospital purchasing agent collaboratively. The purchasing procedures
initiated with completion of a purchase request form for the products
desired by a pharmacist or a person authorized by him. Drugs coming from
the same vendor may be grouped upon a single form. This form provides the
purchasing department with the data concerning typically description
specification, packaging, price, quantity needed as well as information
concerning the inventory balance and anticipated monthly use. In addition,
this form also is the source document for information for accounting office
concerning cost and discounts etc. The original of this form should be
forwarded to the administrative officer responsible for the department for
approval. Upon his approval, this form is then forwarded to the purchasing
agent. The copy is retained by the pharmacist as a record of the fact that the
merchandise is in the process of being procured. Upon the receipt of the
approved purchase request, the purchasing agent prepares the official
purchase order. This form utilizes the data from the source document, the
purchase request.
The purchase order may take the form of any number of different types
• it may consist of a two-page or a many page snap-out form. The majority of
institutions prefer the multi copy snap-out form since it provides a copy for the
vendor, accounts payable department of the hospital. Purchasing number file,
initiating department, two receiving reports and a history copy. The vendor's cops
is sent to vendor. One copy is retained by the purchasing agent for his number file
to serve as a source of information for purchase department whenever a question
is raised relative to the issuance of the order this is also used in ascertaining rates
of use while:
 One copy is forwarded to the accounting office where it is held until the
invoice is received from the vendor and the completed receiving reports from
the initiating department. Then and only then may the invoice be processed
for payment
 Three copies are returned to the pharmacy department where he matched
with the request for purchase to check for accuracy. The other two will also
serve as receiving reports. If the order is received in full, one copy is to be
completed and forwarded to the accounting office. Should merchandise be
back ordered, the second receiving report is utilized,
Some hospitals prefer to use a purchase order form and a receiving notice
separately, the disadvantage in the use of this system is that the individual
receiving the merchandise must record by hand the name of each item.
This may cause error and, if rushed by the load of work, a delay in receiving the
completed memo in the accounting office, thereby causing a loss of the discount for
prompt payment.
Whenever merchandise that has been received by the hospital is to be returned to
the vendor for any cause, a returned goods memorandum must be prepared for
record purpose.
This form is of the snap-out type and provides copies for the accounting
department, purchasing agent, storeroom, initiating department and the vendor
once the merchandise is received, it is the duty of the pharmacist to record upon a
purchase record the transaction for each item purchased. By so doing, he will have
available a source of reference for determining date of use, cost of drug, source,
etc.
Some pharmacists feel that this card should be maintained by the
purchasing agent and made available to them whenever necessary. The
final decision as to whose responsibility it is rests with the desires of
the administrator. On occasion, merchandise may be ordered from the
pharmacy at a time when it is out of stock. This may happen quite
frequently in pharmacy departments handling surgical and laboratory
supplies as well as drugs. When this happens, an out-of-stock form
should be prepared in duplicate and one copy sent to the initiating
pavilion or laboratory. The other copy is retained in the pharmacy. This
form serves dual purposes. Firstly, it speeds up the delivery of
merchandise to the floor upon its arrival and secondly, it prevents the
pavilion or laboratory from reordering and creating a false sense of
heavy demand, which could result in over ordering by pharmacy.
Control on purchases
The control on purchases can be instituted by inventory controlling .Various tools
for inventory management are
ABC concept
A simple tool used for inventory management is the ABC classification of
inventories. Under this concept Drugs are classified as highest-medium and low
value items, regarded as A, B and C respectively. The highest-values items are
few but have cost more, medium-value items amount for comparatively more in
an inventory but costs bit less as compared to the highest-values items while the
low-value items represent highest number in an inventory. The combined value
in rupees of A and B items which are less in number than that of C items but cost
more as compared to C items.
When there are substantial number of items to be controlled, emphasis should
be given to A and B items since they constitute the major portion of total
inventory value (usually about 90% or even more).The inventory levels of C items
should be given little attention and can even be kept at high level since they
contribute only a small per cent of raising or lowering of inventories.
Money limitations on purchase order
Many administrator exercise a power of control over the volume of purchases by the
pharmacist by placing a money limitation on the purchase order. But in this method issuance
of multiple small orders in the long run is more costly for the hospital.
3) Inventory turnover based order
A more modern and reliable means is the computation of inventory turnover. Inventory
turnover is the ratio of the costs of goods sold during the fiscal period by the average of
opening and closing inventories. This gives the number of times the inventory has been
turned during fiscal period. A low turnover indicates
 Duplication of stock ordering of the items already present in surplus quantities.
 Large purchases of slow-moving items purchasing of items having less turnover.
Dead inventory-the items with no or very little turnover.
A high turnover of inventory may b due to small volume purchasing. Large volume
purchasing may take advantage of maximum quantity discounts due to bulk purchase.
A turnover of 6-8 times a year is considered satisfactory for most institutions. However,
institutions with limited budget may wish to increase their turnover rate.
This is a policy decision and should be arrived at by discussion with administrator.
4) Economic order quantity
Economic order quantity (EOQ) is another way to control purchase.
Here the decision of inventory volume is based on the cost keeping
in view that larger the purchase volume, lesser should be the cost.
Determination of how much to order is the EOQ factor. In deciding
the EOQ factor ascertaining the cost ordering and the cost of
carrying inventory are important. The following must be considered
in arriving at the cost of ordering.
 All Labours in purchasing.
 Labour cost in supporting areas such as the stockroom, receiving
and material control.
 Cost applicable to payment of invoices generated by the
purchasing section should apply to ordering cost
 Cost of general operating supplies such as pencils, paper, forms
etc.
 Freight and telephone costs.
After all of the above are applied to total costs, and dividing the resulting figure by
the total number of purchase orders gives the ordering cost in rupees per order. To
determine carrying charges consideration must be given to the following.
 Space charge (rent) for the storage area.
 Labour costs for storage operations.
 Cost of supplies for storage operations.
 Taxes (if applicable).
 Deterioration.
 Pilferage.
Dividing the value of average inventory by the total of above cost results in carrying
or Inventory holding cost for the particular inventor item. Thus, it may be
advantageous to order expensive items on a monthly basis and inexpensive items
annually. In general, carrying charges may range from 18 to 30%.
Thus the formula for determining EOQ is the following
EOQ=2×12× ordering cost/unit cost ×Inventory carrying cost
On the basis of the above equation purchasing agent's have developed monographs
to simplifying figuring the EOQ. The EOQ equation shows that the most economic
lot size is a function square root of the monthly usage if items expressed in rupees.
5) Recorder Quantity Level
The component of recorder point system are safety stock, order point
and order quantity. The safety stocking is to ensure stocking of some
extra units of items necessary to compensate the errors in forecasting
technique since all forecasting techniques have inherent errors.
Obviously, zero stock level must be avoided because it can cause serious
problems and this can be avoided by the system of safety factors.
Ordering point is replenishment ordering of supplying items when the
consumption of items reaches a predetermined number of items. The
remaining number of items is determined depending on the lead time.
Lead time is the time lapse between placement of an order and time it
is received.
Ideally, the remaining inventory should be almost depleted before the
arrival the new shipment. Recorder is determined by:
RO=AU/13 ×AVLT +SF
Where AU is the average usage rate of a product per month
in units of issue, 13 are the number of weeks in a year plus
1, AVLT is the average vendor lead time and SF is the safety
factor. The safety factors for vendor lead time have been
cited in literature. In the application of the above formula,
following points must also be considered.
 Unanticipated large increase in usage.
 Shelf life of the items involved.
 Unusual delays in delivery caused by strikes or storms.
 Necessity for rechecking the reorder quantity level
periodically to allow for a change in usage rate.
Role of purchasing agent in drug procurement
Procurement:
Procurement is defined as a process of acquiring supplies through
purchases from the manufacturers, their agents like distributors or
from private or public suppliers.
●It involves the application of special skills and knowledge from both
the professional and legal viewpoints.
Role: The role of purchasing agent in drug procurement may vary and
depends on the size of hospitals.
Small hospitals: In the small hospitals purchasing function may be a
part time one and may be handled the administrator, an
administrative assistant or the store keeper. The lack of time or
pressure from other duties will cause the individual to restrict his
activities in this function to a minimum.
Large hospitals: In large hospitals where the purchasing function is of such
magnitude that it is a full time position for one or more individuals.
The purchasing agent may assume the following duties in relation to drug
purchases:
 Issues purchase orders
 Maintains purchase records
 Follow-ups on delayed orders
 Initiates competitive bidding orders
 Obtains quotations from specified sources
Method of procurement:
Direct purchase from the manufacturer or their regional centres
 Direct purchase from wholesalers and stockists
 Purchase from rack jobbers.
 Purchase through bids
 Purchase through competitive negotiation
 Purchase through a contract
 Local purchase
 In house manufacture of medicine in the hospitals.
Role of pharmacist in procurement
A pharmacist selects a procedure for drug purchase among the
various available choices of direct or contracted purchase as
mentioned before. However, sometimes this choice of one over the
other may be left to the discretion of the purchasing agent. In
addition to the above, the hospital pharmacist should, in
collaboration with the purchasing agent, assume the following duties:
1. Maintain a list of the names, addresses and telephone numbers of
drug manufacturers, wholesalers, and their local representatives.
2. Prepare detailed specifications for drugs, chemicals and
biologicals,
3. Prepare Request for Purchase Forms,
4. Prepare Receiving Memo if drugs are received directly by the
pharmacy
5. Prepare Return Goods Memo, whenever applicable.
A wide variety of manufacturers, vendors and drug suppliers are available
posing a program of selection of quality drugs or allied items. However, some
measures can be adapted for the selection of quality products.
COMPENDIAL SPECIFICATION AS GUIDELINES
The compendia like the United States Pharmacopoeia, British Pharmacopoeia
etc. render a distinct service to pharmacists or pharmaceutical manufactures
by providing specification for procurement of drugs, used in dispensing,
prescription, compounding, manufacturing and supplying formulas and
working directions for the preparation of dosage.
NOT USE NOTATION “ANY RELIABLE BRAND” AS SPECIFICATION
While preparing the specifications, the notation “any reliable brand” (ARB)
should never be used by a hospital pharmacist or a hospital purchasing agent
as a specification for quality merchandise. What one individual considers to be
'reliable' may oftentimes be far from the truth.
ADVICE FROM PHARMACY AND THERAPEUTIC COMMITTEE
• An active pharmacy and therapeutics committee in a hospital serve as advisor to the
pharmacist in regard of drug specifications. It can assist the hospital pharmacist in
the selection of a product for use by the hospital. Certain authority feels that
purchase of drugs from local manufacturers who might not have to support
expensive research and research staffs is not a quality merchandizing.
• This assumption is dangerous and should not be followed unless the hospital is in a
position to establish its small control laboratory for the purpose of analyzing
products purchased from these firms. But the cost of operating such a laboratory
will far exceed the cost of purchasing under tight specifications. Some pharmacists
may utilize a list of qualified suppliers based upon their personal knowledge and
experience with the manufacturer and its products.
• Other pharmacist make use of questionnaire to obtain information about
prospective suppliers. The information requested includes the company’s annual
sales, a list of other accounts, the number of employees, type of operation,
description of quality control procedures and company’s location and facilities. The
use of this form is stated to discourage marginal supplies and serves as a screening
technique for the hospital pharmacist.
DISCOUNTS IN PURCHASING
VOLUME CONTRACTS
As mentioned under the section of contract, volume contracts are offered by a
majority of pharmaceutical manufacturers and include contracts to cover total
purchases of pharmaceutical goods. Under this system, the institutions
approximate its annual consumption of particular products and sign an agreement
with a company to purchase this amount on contracted price. The contracted
prices is usually less as compared to the price charged for usual purchase.
Furthermore, a contract price is usually protected from an increase whilst any
reduction in price is passed onto the hospital.
BONUS DEALS
Deals represent a type of transaction involving purchase of a specified volume and
receiving certain quantities of product on bonus at no additional cost. e.g., one free
with the purchase of dozen. There is nothing wrong with this type of purchase if the
“free goods” remain in pharmacy inventory. In order that the inventory not be
understated, the entry into the hospital inventory records should indicate that
thirteen units were received for the price paid.
DISCOUNTS
Discounts can be given to an institution for the prompt payment of its
drug bills. Because of large volume of drug consumption, these
discounts amount to a sizeable sum of money at the end of a year.
Other types of discounts are also available from the manufacturers. A
hospital pharmacist should immediately investigate the discount policy
of every new firm with which he deals.
INVENTORY CONTROL
The control on purchase as well as on inventory goes parallel. The
management consultants all agree that money invested in inventories
should have a turnover of 4-5times a year.
A turnover of less than four indicates overstocking and a turnover of
more than five may indicate under stocking. The required turnover can
be achieved by using methods mentioned in purchase control.
1. Economic Order Quantity (EOQ) – Buy medicines in
the most cost-effective quantities.
2. Inventory Turnover Analysis – Regularly check how
often medicines are used.
3. Reorder Point System – Set minimum stock levels
for reordering to avoid shortages.
4. ABC Analysis – Prioritize high-value drugs (Category
A), medium-value (B), and low-value (C).
CONTROL OF DATED OR PERISHABLE INVENTORY
Dated inventory such as biological or antibiotics requires special control in
order to insure potency at time of dispensing and to be sure that the
pharmacy is not carrying worthless stock in inventory. This can be
accomplished by use of a form such as record of dated pharmaceuticals.
Prod Purc Vend Id. Month expiry Date
uct hase or num
Date suppl ber
ier
1 2 3 4 5 6 7 8 9 10 11 12

Figure 1: Record For Dated Pharmaceuticals

Each dated product is entered on this sheet which provides name of the product, date of
purchase, manufacturer, control number and expiration date. By placing check mark in
the of appropriate month, the pharmacist can tell at a glance that which product is
expiring and should be replaced or returned for credit. This modified sheet eliminates the
need for re-writing the name of the product each time it is purchased. The remaining
information and format remains the same.
ROLE OF COMPUTER
A computer operated with appropriate software could be very helpful for purchasing and
inventory control in a hospital. The computer can automatically subtract each items from
the inventory on its dispensing and entering in it. This subtraction is continued till the
number of units for the product reached to a recorder point and will alert the user about
this.
This system also forewarns well in advance about the expiry of products and can generate
statics for annual consumption and turnover of all products each year automatically. Thus,
use of this artificial intelligence, can make the tasks of pharmacist easy and can save his
valuable time that can be utilized productively.
TAKING OF PHYSICAL INVENTORY
The actual taking of physical inventory is required during an
auditing to check the hospital’s fiscal operation internally by
hospital itself OR externally be an auditing firm. Since the
pharmacy usually is the largest in rupee value; it receives a great
deal of attention. On the other hands; some auditing firms will
require only a spot check type of inventory on 10-20% of the high
cost, fast moving items. The following steps accomplish the
physical inventory taking:
PLANNING
The actual taking of a physical inventory cannot be undertaken
without a great deal of planning and attention to detail. Anything
less than one’s maximum effort will lead to a faulty inventory and
thus to a repeat performance.
STOCK REVIEW
Some period ranging from 1-2 months before placing of an inventory the
pharmacist should review his stock and remove from it all merchandise; which
has not moved since the last inventory.
In addition, any merchandise should be removed which has been
purchased during this year but has not moved appreciably during the preceding 3
months. These items should be returned to vendor for credit whenever possible.
If such a move is not feasible they should be written off the inventory via an
adjustment in the books of account in business office.
Once this has been accomplished the inventory should be recorded on
the inventory sheets. This recording should consist of only the name of item or
other identification. The sheets upon which the recording is to take place should
be in duplicate, and should have proper spaces to show the date, location,
recorder and caller.
RECEIVING INVENTORY
The actual taking of the inventory may start at the close of a business day
or at a time when there is no movement of merchandise.
At this time the pharmacy staff and its helpers may arrange themselves into
teams of two - one to record and the other to call out the name of the item,
price, and count.
As each sheet is completed, it is handed to the auditor supervising the
inventory.
It is the right of the supervising auditor as to how many entries he wishes to
check out. The usual procedure is to check all high priced items and to
random check the less valuable entries.
Any merchandise ordered prior to the date of inventory and received on the
day of inventory or shortly thereafter need not be counted. The invoices
pertaining to the purchases should be clearly marked with the fact that they
were received post inventory." The accounting office will make the
appropriate adjustment in the fine inventory figure to account for this
merchandise.
PERPETUAL INVENTORY
Perpetual inventory maintain records of all items on it, their balances in
quantity and in value. The maintaining of perpetual inventory is, of
course, an ideal situation if the record-keeping can be kept up to date.
In many small hospital pharmacies, the pharmacist, at the end of each day,
summarizes all drug charge slips and makes the proper posting in the
perpetual inventory file. The process of tabulation may be accomplished
either by pegboard method, by use punched cards or by use of a
computer.
PEGBOARD METHOD
This method requires a pegboard and requisition form with holes evenly
spaced and punched along the top. The forms are then aligned on the
board so that the first sheet is entirely visible and subsequent sheets
covering all but the section showing the quantities ordered. The forms are
then summarized in one master requisition form that is used for posting
the inventory records.
AUTOMATED METHOD
By using automated system it is possible to have purchase orders, receiving
reports and disbursement requisitions forwarded to the tabulation department
daily, where transaction cards are punched which issue a comprehensive stock
status report. This report may be produced on daily, weekly or monthly basis.
COMPUTER METHOD
The latest and most sophisticated system for electronic data processing is the
computer. With one of these systems, a hospital can readily obtained a record
all of inventory items, and their balance in quantity and rupees value is
maintained. The installation of either of theses mechanized system is highly
technical as well as costly.
ADVANTAGES
There is no need to close facilities regularly to perform physical inventories.
 Data from scanned barcodes help you forecast stock
 You can account for all transition providing complete accountability of your
product
 Real time update
 Managing multiple location easily
 More informed forecasting
DISADVANTAGES
You must still perform an annual inventory to synchronise your data.
You must input every transaction with required more consistent record
keeping and monitoring.
 Perpetual Inventory system have higher set-up cost than other methods
since they require software and training.
 Expensive technique
 Breakage and spoilage not accounted
MATERIALS MANAGEMENT
Materials management encompasses the movement of material from point of
origin to point of use and then to their final breakdown back into the
environment. In terms of pharmacy it is control over the drugs and related
items for procurement, storage, use, inventory control and disposition.
Materials management include
Inventory forecast
Availability of supplies at the right time at right quantity
At right inventory investments(economical cost)
This will leads to the best patient service with lowest inventory investment. To
this effectively a pharmacist control over purchasing, receiving, distribution
and dispensing.
Material management can be accomplished by a careful inventory control
based on statistical and mathematical approaches.
An inventory is needed to satisfy future demands
However a pharmacist has not complete control over drug from
purchase to disposition. It is possible that director of material
management has the responsibility over purchasing, receiving,
inventories, central sterile supply, laundry and distribution,
messenger service, traffic and material disposal activities.
In those hospitals utilizing material management concept, it is
not uncommon to find that hospital pharmacist plays an
important role in developing the program associated with
acquisition, storage, distribution and disposition of biological,
radio-isotopes, drugs and chemicals.
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