Purchasing and

Inventory
Control
GROUP 6
LORENZO, EIZED PATRICE D.
MALIBIRAN, ABEGAIL M.
MENDOZA, LESLIE JANICE M.
MENDOZA, MA. LAURA ISABEL D.
MOLINA, GERNALYN

INTRODUCTION

Purchasing and inventory are important to all

pharmacist because they are essential elements of the
medication use system.

Fundamental to patient safety/because they impact

the ability of the system to provide the right drug, to
the patient, in the amount, by the right route of
administration, and at the right time and frequently.

It applies to all types of pharmacy settings including

decentralized, centralized, home infusion and
ambulatory care pharmacy operations.

The Formulary System

Cornerstone of the purchasing and inventory control

system.

Developed and maintained by a committee of medical

and allied health staff called PHARMACY and
THERAPEUTICS (P&T) committee.

The products on the hospital formulary dictate what the

hospital pharmacy purchase and keep in inventory.

Most retail pharmacies do not rigidly restrict items in

their inventory, because in this setting, inventories are
largely dependent on the dynamic needs of their patient
population and to some degree, their patients
respective insurance plans.

The Formulary System

Available in print or online formats.

Exclusively for all health practitioners involved in

prescribing, dispensing, and monitoring medications

Formatted generally to inform user of product

availability, the appropriate therapeutic uses and
recommended dosing of medications.

Formulary publications should remain current typically

being updated every 12 to 18 months at minimum.

Important information available in the formulary

includes the dosage form, strength, and
concentration; package size(s); common side effects;
and administrations.

Managing the Purchasing and

Inventory Control System

State-of-the-art practice in purchasing and inventory

control uses computer and internet technology to
manage purchasing and receiving of pharmaceuticals
from a drug wholesaler.

This technology includes using bar codes and handheld computer devices for online procurement and
purchase order generation and for electronic receiving
processes.

The benefits of this are up-to-the-minute product

availability information, comprehensive reporting
capabilities, accuracy, tighter inventory control and
efficiency.

Receiving and Storing

Pharmaceuticals
Receiving

medication from suppliers is one

of the most important parts of the
pharmacy operation.

Table 12-1.

DEFINED STORAGE TEMEPATURES AND HUMIDITY

FREEZER

(-)25 to (-)10C

(-)13 to 14 F

COLD

2 to 8C

36 to 46F

COOL

8 to 15C

46 to 59F

ROOM TEMPERATURE

temperature prevailing in working area

CONTROLLED ROOM
TEMPERATURE

20 to 25C

68 to 77F

WARM

30 to 40 C

86 to 104F

EXCESSIVE HEAT

DRY PLACE

any temperature above 40C (104F)

A place that does not exceed 40 percent average relative humidity

at controlled room temperature or the equivalent water vapor
pressure at other temperatures.
Storage in a container validated to protect the article from
moisture vapor, including storage in bulk, is considered a dry place.

The Receiving Process

This process is especially important for controlled substances

because it effectively establishes a check in the system to
minimize potential drug-diversion opportunities.

Receiving personnel play a critical role in protecting the

pharmacy from financial responsibility for products damaged in
shipment, products not ordered, and products not received.

Departments will require that products received have a minimum

shelf life of 6 months remaining before they expire.

Controlled substances require additional processing on receipt.

Regulations specific to schedule II controlled substances require

Drug Enforcement Administration (DEA) form 222 to be
completed on receipt of these products and files separately with
a copy of the invoice and packing slip accompanying each
shipment

The Receiving Process

This is done by listing the product, dosage form,

concentration/strength, packing size, and quantity
on a blank piece of paper or the suppliers
packing slip/invoice and checking off the line item
receive.

The Storing Process

Once the product has been properly received, it MUST be

stored properly

Depending on the size and type of the pharmacy operation,

the product may be placed in a bulk, central storage area or
into the active dispensing areas of the pharmacy.

Products already in stock that have expired should be

REMOVED.

Stock rotation is a practice were products that will expire in

the near future should be highlighted and placed in the front
of the shelf or bin.

It is important inventory management principle that principle

that encourages the use of products before they expire and
helps prevent the use of expired products and waste.

The Storing Process

It is safe to assume that the first-in, first-out (FIFO) method of

inventory management is applied when it comes to
pharmaceutical products.

All stock should be sorted at temperature and humidity levels

recommended by manufacturers and defined by the United
States Pharmacopeia (USP)

Product Handling Considerations

Pharmacy Technicians usually spend more time handling and

preparing medications than do pharmacies

They the critical responsibility of assessing and evaluating each

product from both a content and a labeling standpoint.

It also provides the technician with an opportunity to confirm that

the receiving process was performed properly

The technicians play a vital role in minimizing dispensing errors

that may occur because of human fallibility

Generally the first in a series of checks involved in an accurate

dispensing process.

Pay close attention to the products expiration date.

Product Handling Considerations

The Role of the Pharmacy Technician

Pharmacy technicians usually spend more time handling and

preparing medications than do pharmacists. This provides the
technician with an opportunity to confirm that the receiving
process was performed properly.

The pharmacy technician should read product packaging

carefully, rather than rely on the general appearance of the
product.

Technicians play a vital role in minimizing dispensing errors that

may occur because of human fallibility.

The technician must pay close attention to the products

expiration date when performing purchasing or inventory
management roles.

Product Handling Considerations

Pharmacy technicians should also discuss their

concerns with coworkers and advocate changes to
products with poor labeling.

Product Handling Considerations

Look-alike/sound-alike (LASA) products Stocking products of

similar color, shape, and size could result in error if someone fails
to read the label carefully.

Misleading labels Sometimes the company name or logo is

emphasized on the label instead of the drug name,
concentration, or strength.

Product storage Storing products that are similar in appearance

adjacent to one another can result in error if someone fails to
read the label.

Maintaining and Managing

Inventory

An inventory management system is an organized approach designed to

maintain just the right amount of pharmaceutical products in the
pharmacy at all times.

Inventory turns products should be used and not remain on the shelf.
Define in accounting terms, are the fractions of year that an average
item remains in inventory.

A simple means of calculating inventory turns in a given period is to

divide the total purchases in that period by the value of physical
inventory taken at one point in time.

Total pharmaceutical purchases for fiscal year (FY) 2010 $10,243,590

Physical inventory value on 12/31/2009

Calculated inventory turns

$521,550
19.6 times

Maintaining and Managing

Inventory

Inventory turnover way of measuring the productivity of a

pharmacys inventory use of invested capital. High inventory
turnover is a sign of efficiency because inventory is constantly
at work and generating revenue. Low inventory turnover is a
sign that product (capital) is sitting unused on the shelf and is a
signal of operational inefficiency.

Inventory management systems include the order book, the

minimum/maximum (par) level, the Pareto (ABC) analysis, the
economic order quantity (EOQ), and just-in-time systems. Each of
these systems attempt to maximize inventory turnover while at
the same time minimize inventory carrying costs (or holding
costs).

Maintaining and Managing

Inventory

Carrying costs all costs associated with inventory investment

plus storage costs, which might include interest, insurance,
taxes, and storage expenses, among others.

Order Book

Also called a want list or want book.

Simplest form of inventory control.

Provides the least amount of organized control of inventory;

highly dependent on the active participation of staff.

Listed drugs are ordered periodically from wholesalers or other

suppliers.

It is common for the individuals to not notice the need for a drug
or forget to note the need on the order book (causing an
inventory shortage that is embarrassing and difficult to manage
in the course of urgent or routine patient care).

Order Book

Even the most diligent and attentive individuals can

make mistakes because the order list approach relies
excessively on peoples memories and individual
discretion.

If too much is ordered, at best, it may reduce inventory

turnover, while at worst, it may remain unused on the
shelf until it expires and must be returned to the
supplier. Therefore, the order book system is usually not
the sole method of inventory management and is often
used in conjunction with one of the other systems
mentioned previously.

Par-Level Systems
BASED

ON A PRINCIPLE THAT INDIVIDUAL

INVENTORY DRUG USE FALLS WITH A RANGE OR
PAR-LEVEL
THIS IS WHERE RANGE IS IDENTIFIED AND
MINIMUM AND MAXIMUM QUANTITIES ARE SET

MORE SOPHISTICATED THAN THE ORDER BOOK

RELIES ON A PREDETERMINED ORDER QUANTITY

AND ORDER POINT

ALSO KNOWN AS MINIMUM/MAXIMUM SYSTEMS

Par-Level Systems

Can be managed:
Manually

1.

Shelf Labels/Stickers
- developed for each inventory product
that identifies the par-levels of drug to be
kept on hand
- acts as a general guide for staff to avoid
running short on a product or overstocking

Par-Level Systems
2. Electronically

Perpetual Inventory
- a record of inventory that is constantly
updated when items are added or subtracted
from inventory.
- each dispensing transaction is subtracted from
the perpetual inventory

Par-Level Systems

Just-in-time Inventory Management

- a philosophy of inventory management where
products are ordered and delivered at just the
right time- when they are needed for patient
care- with a goal of minimizing wasted steps,
labor, and cost
- its goal is to neither over- nor under-stock
products

Economic Models
Economic

models of inventory control

attempt to use economic and statistical
methods to predict the need for drugs over
time.
1.

Pareto ABC Analysis

-based on the 80/20 principle that states that approximately 80%
of most problems can be attributed to roughly 20% of their
potential causes.
- highlights that a relatively small number of drugs account for a
disproportionate amount of drug usage
- essentially groups the inventory products by aggregate value and
volume of use into three groups
(A, B and C)

Economic Models
2. Economic Order Quantity (EOQ)
- another method that attempts to minimize inventory
holding costs and ordering costs
- also known as the Minimum Cost Quantity Approach
- relies heavily on the accuracy of various data inputs such
as annual product usage and annual cost per average onhand inventory unit.
- if calculated accurately, it results in the most cost-efficient
order quantity
- relatively difficult in pharmacy practice because of the
wide variability of the individual patients pharmaceutical
needs.

Drug Recalls

manufacturer, on its own or at the direction of

the FDA, will occasionally recall
pharmaceuticals for reasons such as
mislabeling, contamination, lack of potency,
lack of adherence to the acceptable Good
Manufacturing Practices, or other situations
that may present a risk to public health

a pharmacy must have a system for rapid

removal of any recalled products

Role of FDA in Drug/Product

Recalls

The FDA plays an active role in drug-recall process

The FDA also classifies recall actions in accordance

with the level of risk and formulates recall strategies
on the base of the health hazard presented by the
product being recalled

they decide on the need for public warnings and

assists the recalling agency with public notificaton
about the recall as needed

Top Reasons for Drug Recalls

1.

Deviations in good manufacturing processes at the

manufacturer

2.

Subpotency

3.

Stability data does not support expiration date

4.

Generic drug or new drug application discrepancies

5.

Dissolution failure

6.

Label mix-ups

7.

Content uniformity failure

8.

Presence of foreign substances

9.

pH failures

10.

Microbial contamination of non-sterile products

Role of Manufacturer/Distributor
in Recalls

MA. LAURA ISABEL D. MENDOZA

Because of their responsibility to protect the public

consumers, manufacturers/distributors implement
voluntary recalls when a marketed drug product
needs to be removed from the market.
method of recall is more efficient and effective in
ensuring timely consumer protection than an FDAinitiated court action
Recall notices sent in writing to pharmacies by the
manufacturer of the product or by drug wholesalers
indicates:
a) the reason for the recall
b) the name of the recalled product
c) the manufacturer
d) all affected lot numbers of the product
e) instructions on how to return the product
to the manufacturer

On receipt of the recall notice: pharmacy

technician will check all pharmaceutical
inventory stores to determine if any recalled
products are in stock
If none of the recalled products are in stock, a note
indicating none in stock is written of the recall
notice and filed in a recall log to document that the
recall was properly addressed.
If a recalled product is in stock, all products should be
gathered, packaged, and returned to the manufacturer
according to the instructions on the recall notice.
The package should be reviewed by the pharmacist in
charge before returning it to the manufacturer.

If patients have received a recalled product, the pharmacist in

charge take actions recommended by the institutions
policies and procedures
On completion of all activity regarding the product recall, a
summary of actions taken should be documented on the recall
letter and filed for later access.

 The FDA has been known the request documentation

of all recall activities to ensure compliance and,
ultimately, patient safety.
The pharmacist in charge should be notified because
he/she will need to decide which, if any, alternative
products may need to be placed into inventory as
therapeutic alternatives to the out-of-stock items.

DRUG SHORTAGES
Manufacturers will be unable to supply a pharmaceutical
because of various supply and demand situations.
involve the inability of the manufacturer to obtain raw
materials, manufacturing difficulties related to equipment
failure, or simply the inability to produce sufficient quantities
to stay ahead of the market demand for the pharmaceutical.
Drug shortages are a reality that must be dealt with to avoid
compromising patient care.
As with drug recalls, the pharmacist in charge should be notified
so he/she can communicate drug shortages and recommend
alternative therapies effectively to prescribers.

ORDERING AND BORROWING

PHARMACEUTICALS

Pharmaceutical Purchasing Groups

Group Purchasing Organization (GPO) -- Most are health system pharmacists
Health systems, hospitals, and ambulatory practices can join together in a purchasing
group to leverage collective buying power and take advantage of any lower prices
manufacturers offer to large groups that can guarantee a significant volume of orders
over long periods of time (typically 1 to 2 years).
Contracts may involve sole-source or multisource products.:

Sole-source products typically brand-name drugs

are available from only one manufacturer
Multisource products often generics or substitute products
available from numerous manufacturers
GPOs negotiate purchasing contracts that are mutually favorable to members of the
group and to manufacturers. Members benefit from lower drug prices and reduced
need for staff to spend time establishing and managing purchasing contracts with
product vendors. Manufacturers benefit from a steady demand for products from the
purchasing organization.

A GPO guarantees the price for pharmaceuticals over the established contract period.
With the purchase price predetermined, the pharmacy can order the product directly from
the manufacturer or from a wholesale supplier.
Occasionally, manufacturers are unable to supply a given product that the pharmacy is
buying on contract, which may require the pharmacy to buy or substitute a competing
product not on contract at a higher cost.
Most purchasing contracts will include language to protect the pharmacy from incurring
additional expenses in the event this occurs.
Generally, the manufacturer will be liable to rebate the difference in cost back to the
pharmacy when this occurs. Therefore, it is important that the pharmacy technician

documents any resulting off-contract purchases and shares these with the
pharmacist in charge for reconciliation with the contracted product vendor.

DIRECT PURCHASING

Involves the execution of a purchase order from the

pharmacy to the manufacturer of the drug instead of
indirectly through a wholesaler

Advantage

1)

not having to pay handling fees to a

third-party wholesaler

2)

ability to order on an infrequent basis,

and

3)

a less demanding system for monitoring

inventory

Disadvantages :
1)need to order larger quantities
to take advantage of
manufacture discounts
2) need for more capacity to
store the additional inventory,
more cash tied up in
inventory, more complicated
drug return and crediting
3)need to spend more time to
prepare, process and pay
purchase orders to many
different companies, and
4)the likelihood that the
manufacturer may be distant

Purchasing through a prime vendor

allows for drugs to be received shortly before use

Purchasing from a wholesaler is a highly

efficient and cost-effective approach
toward pharmaceutical purchasing and
inventory management.

Drug Wholesaler Purchasing/ Prime

Vendor Purchasing
When a health-system pharmacy agrees to purchase most(90% to 95%) of its
pharmaceuticals from a single wholesale company, a prime vendor contract
arrangement is established, and, customarily, a contract between the pharmacy
and the drug wholesaler is developed.
Usually wholesaler agree to deliver 95% to 98% of the items on acceptable
schedule and offer a 24hr/7day per week emergency service. They also provide
the pharmacy with electronic order entry/receiving devices, a computer system
for ordering, bar-coded shelf stickers, and a printer for order confirmation
printouts. They may also offer highly competitive discounts including those for
prepayment.
These wholesaler services make the prime vendor contracts appealing and
result in more timely ordering and delivery, less time spent creating purchase
orders, fewer inventory carrying costs, less documentation, computer-generated
lists of pharmaceuticals purchased, and overall simplification of the credit and
return process.

Borrowing Pharmaceuticals
There will be times when the pharmacy MUST BORROW
DRUGS FROM OTHER PHARMACIES!

Most institutional pharmacies have policies and procedures

addressing this situation

Borrowing or loaning drugs between pharmacies is usually

restricted to emergency situations and limited to authorized staff.

limited to commercially available products

Most pharmacies have developed forms to document and track

borrowed or loaned merchandise. These forms also help staff
document the details imperative to error-free transactions.

CONTROLLED SUBSTANCES

Have specific ordering, receiving, storage, dispensing, inventory,

record-keeping, return, waste and disposal requirements established
under the law.

The Pharmacists Manual: An Informational Outline od the Controlled

Substances Act of 1970

ASHP Technical Assistance Bulletin on Institutional Use of Controlled

Substances

In some pharmacies, pharmacy technicians work with pharmacists to

manage inventory and order, dispense, store, and control narcotics and
other controlled substances.

Two principles: 1.) Ordering and receiving Schedule II controlled

substances requires special order forms and additional time (1-3 days)

2.) these substances are inventoried and tracked continuously via a

perpetual inventory process, whereby each dose or packaged unit is
accounted for at all times.

INVESTIGATIONAL DRUGS

Also require special ordering, inventorying, and handling procedures

Generally, the use of investigational drugs is categorized into two distinct

areas:

1.) in a formal protocol approved by the institution

2.) for a single patient on a one-time basis that has been authorized by the
manufacturer and the FDA

In both cases: Physician ordering

Pharmacy Staff inventory management

Some pharmacies associated with academic affiliations or institutions

conducting clinical research are managed by

Investigational drug service pharmacist responsible for ordering,

dispensing, and inventory management of investigational drugs according to
the research protocol

COMPOUNDED DRUGS

Extemporaneously prepared in the pharmacy as indicated by

scientific compounding formulas and processes

May include oral liquids, topical preparations, solid dosage

forms or sterile products

Requires that prescribing patterns and expiration dates be

monitored closely because many compounded products have
short shelf lives

Pharmacy technicians monitor patient use of compounded

drug, product expiration dates and identifying additional stock
needs

Specific pharmacy technicians may initiate compounding

activities, but this may vary according to departmental
procedures

REPACKAGED PHARMACEUTICALS

Unit-dose tablets and capsules, unit-dose oral liquids, and some bulk
packages of oral solids and liquids

Each pharmacy establishes stocking mechanisms for these products and

relies on pharmacy technicians to identify and respond to production and
stock needs.

Generally, designated technicians coordinate repackaging activities, but

some pharmacies may integrate repackaging with other pharmacy
technician responsibilities.

Knowledge of the departments procedures for repackaging is required to

prevent disruptions in dispensing activities

MEDICATION SAMPLES

Storage and use of medication samples in institutions is

controversial and requires special handling procedures

Traditional inventory management and handling practices do

not work well with medication samples for 2 reasons:

1. Medication samples are not ordered by the pharmacist; they

are usually provided to physicians on request by the drug
manufacturer free of charge. This often occurs without the
pharmacys knowledge.
2. Samples are not usually dispensed by the pharmacy

These factors make it difficult to know whom to contact if a

medication sample is recalled and to ensure that medication
samples are not sold

MEDICATION SAMPLES

If an organization allows samples, they will probably be stored

outside the pharmacy, and pharmacy personnel will be required
to register and inspect the stock of medication samples

Pharmacy technicians often responsible for determining if a

sample is registered with the pharmacy, stored in acceptable
quantities, labeled with an expiration date that has not been
exceeded, and generally stored under acceptable conditions

PROPER DISPOSAL AND RETURN OF

PHARMACEUTICALS
EXPIRED PHARMACEUTICALS
Each

year, approximately 2% of all drugs shipped to

pharmacies are returned to the manufacturer

Generally,

wholesalers will not give full credit on returns of

products that will expire with 6 months

To

return products, pharmacy personnel must complete the

documentation required by the products' manufacturer or
wholesaler and package the product so it can be shipped

Technicians

often perform these duties under the

supervision of pharmacist. Some pharmacies contract with
an outside vendor who completes the documentation and
coordinates the return of these products for a fee

Expired repackaged pharmaceuticals

Disposal of expired compounded or repackaged pharmaceuticals by the

pharmacy technician should be completed under the supervision of the
pharmacist

Pharmaceuticals compounded or repackaged by the pharmacy

department cannot be returned and must be disposed of after they have
expired

Proper disposal prevents the use of sub-potent products or products

without guaranteed sterility

Expired repackaged solids can be disposed of using the general trash

removal system

Expired compounded cytotoxic products must be disposed of according

to hazardous waste removal procedures

Expired repackaged
pharmaceuticals

Other products requiring disposal rather than return are

chemicals used in the pharmacy laboratory

Examples:

sodium benzoate or sodium citrate (preservatives)

lactose or talc (excipients)
Buffers and active ingredients such as hydrocortisone,
triamcinolone, neomycin or lidocaine powders

They should be disposed of in accordance with the pharmacys

hazardous waste procedures

Expired controlled substances

Expired controlled substances are disposed of uniquely

May not be returned to the manufacturer or wholesaler for

credit

They must be destroyed and the destruction must be

documented to the satisfaction of the DEA

DEA- provides a specific form Registrants Inventory of

Drugs Surrendered for recording the disposal of expired
controlled substances

Ideally, the actual disposal of expired controlled substances

should be completed by a company sanctioned by the DEA
or by representative of the state board of pharmacy

Expired investigational drugs

Should be returned to the manufacturer or sponsor of an

investigational drug study according to the instructions they
provide

Investigational drugs that expire because of product stability

or sterility issues should never be discarded. These doses
should be retained with the investigational drug stick and be
clearly marked as expired drug products because the
investigational study sponsor will need to review and account for
all expired investigational drug products

Expired investigational drugs

Pharmaceuticals that need to be returned because of a ordering error

require authorization from the original supplier and the appropriate
forms

The Prescription Drug Marketing Act mandates that pharmacies

authorize and retain records of returned pharmaceuticals to prevent
potential diversion of pharmaceuticals

A pharmacy will have a process for returning mis-ordered medications

to the prime drug wholesaler on a routine basis, which prevents the
need for storage in the pharmacy of overstocked or mis-ordered
products

Pharmacy technician is responsible for relevant documentation, filling

paperwork, and packaging returned products under the supervision of
the pharmacist

QUIZ :
1) The ________________ is developed and
maintained by the P & T committee and
the cornerstone of the purchasing and
inventory control system.
a)

Inventory turns

b)

Prime vendor contracts

c)

Order Book

d)

Formulary

QUIZ
2) The process of placing newly acquired
products behind currently stocked
medications of the shelf is called
____________.
a)
b)

Formulary System
Electronic Medical Record System

c)

Stock Rotation

d)

Inventory Turns

QUIZ:
3) Which of the following systems of inventory
control system is known as the
maximum/minimum method of inventory control?
a)
b)

Par-level
EOQ approach

c)

Pareto ABC analysis

d)

Order book

QUIZ:
4) Which of the following inventory control
systems is the least sophisticated and most
prone to poor inventory control?
a)

Par-level

b)

EOQ approach

c)

Pareto ABC analysis

d)

Order book

QUIZ:
5) Which of the following drugs can be
returned to suppliers after expiration?
a)
b)

Prepackaged drugs
Chemical grade products

c)

Investigational drugs

d)

Controlled substances

TRUE or FALSE
6) Purchasing drugs direct from the
manufacturers saves the pharmacies money
in comparison to ordering from wholesalers.
7) Voluntary recalls of products initiated by
the FDA are more efficient and effective in
ensuring timely consumer protection than
FDA recalls or seizures initiated through
court action.

TRUE or FALSE
8) A group purchasing organization (GPO)
guarantees the price for
pharmaceuticals over the established
contract period.
9) A key goal of inventory management is
to minimize inventory turns, meaning
simply that products shouldnt be used
and must remain on the shelf.

QUIZ: TRUE or FALSE

10) Compounded products are
extemporaneously prepared in the
pharmacy as indicated by scientific
compounding formulas and
processes.