Dec 21 2018

Using your Pharmacy Technology System to Manage Inventory, and Control Costs

For the past several years, the National Community Pharmacists Association has tracked the rate at which pharmacies are utilizing technology for various workflow functions.  In 2017,  findings showed steady growth in the use of key capabilities including point-of-sale, automated dispensing, mobile commerce/signature capture, and telephone IVR (interactive voice response).

“More and more,” the reported concluded, “independents are taking advantage of emerging technologies to enhance pharmacy efficiency, reduce costs, improve patient care, and facilitate communications with health care and patients.”  The use of technology in the pharmacy has become so common, that almost 90 percent of pharmacy managers’ report having an automated point-of-sale system, and 95 percent are able to receive and process electronic prescriptions.

Is it possible though, that pharmacists are overlooking another critically-important capability in their technology system?  The ability to effectively manage their inventories?

As with all retailers, a pharmacy’s “inventory turn ratio” is a key metric in determining inventory efficiency.  The metric reveals how many times inventory turns over during a specified period, and can be used to determine if an excessive amount of inventory is being carried, compared to sales.  “The average pharmacy turns over its inventory about 10 times a year, according to research by McKesson, and the top 25 percent turn over their inventory 11.6 times per year.

“If your inventory turnover rate is only six times a year,” explained Richard Jackson, professor emeritus and former dean of Mercer University’s Center for Community Pharmacy Practice and Research, “that’s a signal that you have too much money tied up in inventory.  You may have $550,000 worth of merchandise on your shelves when the amount should be only $300,000.”

For some pharmacies, excess inventory can be a matter of not knowing which drugs to stock, or not wanting to risk a stockout when a patient needs a certain drug.  According to reporting in a “typical” pharmacy will stock 1,200 to 2,000 separate NDCs, but roughly 150 drugs will account for as much as 50 percent of sales.  And with space at a premium in most pharmacies, a pharmacy may wish to assess the medications it chooses to keep on hand.

This is especially important since a pharmacy will face a monetary loss for drugs that expire, or become obsolete while sitting on the shelf.  Even worse, slow-turning inventory runs the risk of an expired medication inadvertently being used to fill a patient’s prescription.

A fully-implemented technology system can help today’s busy pharmacies take charge of their inventory systems, and ensure adequate levels are maintained for all drugs.  A fully-integrated system will allow comprehensive services including:

  • Historical sales information for every drug in a pharmacy’s inventory.
  • Real-time inventory levels for each drug.
  • Regular checks of filled prescriptions waiting in pick-up bins.  Patients who do not pick up their prescriptions run the risks associated with medication non-adherence, but also pose a financial cost to the pharmacy.  This is because prescriptions will have to be canceled and returned to stock. In these instances, a patient can be automatically notified when a pick-up has been canceled, and store inventory records updated to reflect the returned medication.
  • Capability to establish recurring delivery orders with a pharmaceutical distributor;
  • Ability to place special orders for drugs not generally held in inventory.
  • Ability to proactively anticipate special medication needs.  This capability addresses instances of patients with chronic conditions that are treated with expensive or obscure medications.  Because the technology system will have a patient’s prescription on file, the pharmacist will be reminded when a refill date is approaching, and given the option to place an order.

Inventory costs are often a pharmacy’s single largest expense, with pharmacists facing an ongoing challenge to stock the right types and quantities of drugs.  No pharmacist wants to disappoint a patient by not having a required medication available.  But the cost of always having every medication available would be prohibitive. 

Taking advantage of a technology system’s inventory management capability offers a tremendous opportunity to better manage a pharmacy’s sales and needs.  At the same time, a fully-implemented system provides yet another touchpoint for pharmacists to interact with patients about the critical need to take their medications on time, as prescribed.