Pharmacy Inventory: Know Thy Shelf

I have managed several different pharmacies early in my career and have worked with many pharmacy managers.  I have noticed an inventory theme in pharmacies: good managers know what is on their shelves, bad managers don’t.  Plain and simple.

Inventory totes-artistic

I didn’t say managing inventory was easy

One of the most basic charges of the Pharmacist-In-Charge from any board of pharmacy is to secure the supply of pharmaceuticals.  You may be the best manager when it comes to customer service or patient care, but if you do not control the supply chain of drugs through your pharmacy then you would get a bad scorecard from me.  Does that mean that the pharmacy manager must directly control the inventory?  No, in fact some of my best pharmacy inventories were led by amazing technicians.  but if the person in charge of inventory is doing a poor job then it falls to the manager to correct it.

Unfortunately, pharmacy schools rarely address inventory management in their curriculum.  Many pharmacy leaders want to prepare pharmacists for a world where dispensing drugs is separate from the practice of pharmacy and I can appreciate that.  However, the current world we live in puts the majority of pharmacists in a pharmacy with drugs.  Understanding cost of goods sold (COGS), first in first out (FIFO), and shrinkage should be a requirement for any pharmacist who has authority to order pharmaceutical products.

Cost

Inventory remains one of the biggest costs for any pharmacy.  Every pill on the shelf represents cash that cannot be invested elsewhere in the business.  While many generic drugs cost pennies, some brand names can be extremely expensive.

FIFO

I talk about “first in first out” accounting as a basic operational function for pharmacists day to day.  When you get a new order of drugs and go to put the bottles on the shelf, where do you put the new bottle in relation to the older bottle of the same product already on your shelf?  If you don’t know that answer then please fly to Baltimore and work with me for a day.  Rotating through your pharmacy inventory is crucial to lower the amount of money lost to expired drugs.

Shrinkage

Shrinkage explains any loss of inventory value and is typically measured during your routine pharmacy inventory audits.  From time to time during operations a pill falls on the floor and is thrown away.  I’ve seen many pharmacies collect all the wasted pills in a jar to dispose of at one time.  Unfortunately, that jar gets pretty full quickly.  Another major reason pharmacists should focus on shrinkage is employee theft.  I have had to personally fire a technician for theft of hydrocodone/APAP.  I also knew a pharmacy manager fired for alleged theft of a diet soda.  Employee theft happens way more often then one would ever imagine.  Do routine counts of controlled drugs as well as high theft products (ie: Viagra, Gabapentin, PSE).  In addition to routine counts, the manager should perform random “secret” counts (yes, this means you need to come into the pharmacy early in the morning or on a day when the pharmacy is closed).

KNOW WHAT IS ON YOUR SHELF

The real takeaway from this post is that pharmacy managers must know what drugs are in their pharmacy.  Not necessarily down to the pill level, but the total dollar amount on hand should be routinely monitored.  In addition, pharmacy managers should routinely walk the pharmacy shelves.  I take many mental notes when I walk through the pharmacy.  I prefer not to write them down in most cases because I don’t want any of the employees to know what I’m doing.  If an employee is stealing they will be more cautious when they think you are watching, so I like to give the impression that I’m not.  I’m a big believer in walking through the aisles and becoming familiar with what the pharmacy is carrying.  While inventory reporting tools can give you more detailed data, you should frequently spot check inventory reports to compare with what is actually on the shelf.  It can be extremely frustrating when discrepancies occur frequently, but if you continue to put inventory control as a high priority your employees will eventually come around and be your best inventory monitors.

 

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Joey
Joey Mattingly, PharmD, MBA is an assistant professor at the University of Maryland School of Pharmacy located in Baltimore, Maryland. Joey has managed retail and long-term care pharmacy operations in Kentucky, Illinois and Indiana. Leading Over The Counter is a blog of Joey's views and opinions on the topics of pharmacy leadership and management and do not represent the University of Maryland, Baltimore. Joey can be followed on Twitter @joeymattingly.

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