Inventory management | Order entry and processing

Pharmacy inventory refers to the total stock of all medications available for sale including prescription medications and over-the-counter products. Pharmacy inventory management is a complex process. The goal is to have enough inventory on hand to prevent any medication shortage while making sure unsold or underused stock is not very close to expiry. Many computerized systems are available for managing inventory. Some medications, such as flu shots, antibiotics, and antivirals, have seasonal increases in demand. Fast-moving drugs have to be ordered more frequently than other drugs. Too much or too little inventory can affect pharmacy profits.

Inventory is composed of base stock and safety stock. Base stock represents the most high-demand and regularly selling medications, and hence, they have to be ordered and stocked regularly to avoid shortages. Safety stock is to tide over unexpected or sudden demand spikes and is typically kept at a minimal level to reduce costs.

Controlled substances have more rigorous inventory requirements, and a new inventory of all controlled substances has to be taken every two years, and an exact and accurate count is needed. This is necessary to prevent drug diversion. For other types of medications, an estimated count is allowed. Most pharmacies perform a full inventory check once or twice a year or earlier. Spot checks may be done for high-demand medications or those that have supply chain and logistics issues. Along with computerized systems, physical inventory checks help to identify any discrepancies or medication theft. Pharmacy stock is rotated in a first-in, first-out (FIFO) or first-expiry, first-out (FEFO) method so that the oldest stock is used first and expired medications are not dispensed.

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.