Pharmacy inventory is the total stock of medications a pharmacy has available for sale. This includes both prescription medications and over-the-counter products.

Inventory management is a balancing act:

• You need enough stock on hand to prevent medication shortages.
• You also want to avoid keeping too much stock that may expire before it’s used.

Many pharmacies use computerized inventory systems to help track stock levels and ordering. Demand isn’t always steady, either. Some medications (such as flu shots, antibiotics, and antivirals) have seasonal spikes in demand. Fast-moving medications usually need to be ordered more often than slower-moving ones. Keeping too much or too little inventory can reduce pharmacy profits.

Inventory is made up of base stock and safety stock:

• Base stock is the set of medications that sell regularly and in high volume. These items need consistent reordering and stocking to avoid shortages.
• Safety stock is extra inventory kept to cover unexpected increases in demand. It’s usually kept at a minimal level to control costs.

Controlled substances have stricter inventory requirements. A complete inventory of all controlled substances must be taken every two years, and it must be an exact, accurate count. This helps prevent drug diversion. For other medications, an estimated count is allowed.

Most pharmacies perform a full inventory check once or twice a year (or sooner if needed). Spot checks may also be used for high-demand medications or medications affected by supply chain and logistics problems. Even with computerized systems, physical inventory checks are important for finding discrepancies and identifying possible medication theft.

To reduce waste and prevent dispensing expired medications, pharmacies rotate stock using either:

• First-in, first-out (FIFO): the oldest stock is used first.
• First-expiry, first-out (FEFO): the stock with the earliest expiration date is used first.

Depending on the demands of a pharmacy, the following methods of inventory management may be used:

• JIT or just in time: In JIT, medications and supplies are ordered only when needed. This results in a low safety stock but reduced storage costs. This type of inventory management is susceptible to shortages when the supply chain fails.
• ABC: Inventory is categorized as A, B, and C depending on value and rate of use. Category A includes the most valuable items, which need to be tightly managed. B items are moderately valuable, while C items are the least valuable, have the lowest usage, and need the least control. This is similar to the 80/0 rule, also known as the Pareto Principle, where 20% of the items represent 80% of the value.
• PAR: PAR stands for Periodic Automatic Replenishment, where a minimum and maximum stock level is set for each medication. An automatic reorder is triggered when the stock falls below a minimum threshold called the PAR level. Errors in the stock number can lead to over or under-supply of medications.
• Perpetual inventory: It tracks the inventory in real time. The inventory is updated every time a medication is received, sold, returned, transferred, or discarded.
• Dispensing log: A dispensing log is a record that documents every prescription that was dispensed in a pharmacy. It includes all details of a prescription, including medication details, patient and prescriber details, along with the date the medication was dispensed. Controlled medications have a separate dispensing log than non-controlled medications. Dispensing logs are crucial for inventory management, audits, tracking of controlled medications, and analyzing errors.