Inventory represents the single largest investment and ongoing expense for most pharmacies, so managing it well has an outsized impact on profitability. Business coach Danny Nelson of AmerisourceBergen recommends that independent community pharmacists pay particular attention to these areas to optimize inventory:
Know what you have: Most community pharmacists know their inventory well, but an annual or semi-annual physical inventory provides the details needed to fine tune orders, keep product fresh, and identify any issues with shrinkage. A trained employee can manage the process and ensure that the computerized inventory system records match what’s actually on the shelves.
Monitor and adjust the perpetual inventory system: The typical pharmacy inventory system automatically places an order for products as they sell to ensure a stable supply. That “perpetual inventory” works well to reduce the amount of time needed for daily management of stock but still requires regular updates and adjustments. Demand for brand-name drugs, for instance, typically declines as generics come online, and certain supplements come in and go out of vogue as consumer interests shift. A quick comparison of the established inventory levels versus the current demand can ensure you have enough of what’s selling now and do not get stuck with product that has waning demand.
Manage risk wisely: For expensive drugs, keep supply to a minimum by using next-day delivery from distributors and coordinating refills with patients. Nelson notes that a single hepatitis C drug could cost $30,000, so just having it on hand would tie up too much money. Instead, coordinate refills with the patient and distributor to keep your costs low. A call to the patient to discuss a high copay can also keep losses to a minimum. If you have opened an expensive medication and labeled it for a specific patient and that patient does not pick it up, you may be stuck with the cost. While costly drugs have the most significant impact on an individual basis, frequent disposal of prescriptions that made it to the “will call” bin but not to the patient can add up, too.
Keep big sellers on hand: In addition to common prescription drugs, make sure that you keep sufficient stock of popular OTC medications. You can’t sell what you don’t have, and patients may be reluctant to purchase the last package of a key item, Nelson says. He recommends keeping at least three or four products on the shelf for key items such as antacids, laxatives, analgesics, and allergy medicines.
Don’t let products expire: On the other hand, capping inventory of most items at one week’s supply will minimize the risk of products expiring. If you can’t sell it and can’t return it, it’s just wasted money, so stay on top of inventory and aware of what items are stagnating. While some manufacturers will provide partial credit for returned expired product, most do not. If you know the distributor’s return policy, you can ship back items before they lose too much value and minimize any associated losses. Make keeping track of items approaching their expiration date a clear part of a designated employee’s job to make sure the task does not get lost in the day-to-day bustle of the store. Remember, some product with short expiration dates will be kept in the refrigerator, not on the shelves.
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