pharmacy inventory management

Expanding Pharmacy Inventory Management beyond The Pharmacy

The Issues Facing Pharmacy Inventory Management

Pharmacy technicians are well aware of the importance of keeping an accurate inventory of drugs. They spend nearly 25 percent of their days maintaining medication inventories in centralized pharmacies. It can be tricky to balance the need to maintain adequate supplies while minimizing overstock. Drug overstock is costly, as drugs that are unused frequently expire, are recalled or lose efficacy over time. According to the National Community Pharmacists Association (NCPA), too much inventory is “a major cause for insufficient cash flow.”

Hospitals can reduce costs by implementing pharmacy inventory management best practices, but there is an opportunity to experience additional benefits. First, it’s important to understand some of the other influencing issues besides cost reductions.

Increasingly rare is to find hospitals, even smaller facilities, with a centralized pharmacy where all drugs are stocked and dispensed. This makes drug inventory a bit simpler but may not provide any cost benefits. A centralized pharmacy is located in a single location inside the hospital, requiring a nurse to walk to and from the pharmacy to retrieve patient medications. The time spent retrieving drugs can quickly consume the nurse’s time and energy, both of which would be better spent directly caring for the patient. This inefficiency can escalate costs.

In order to improve nurse efficiencies and enable them to deliver better patient care, most hospitals have decentralized the pharmacy. This may mean utilizing flexible, tech-enabled solutions, such as automated dispensing cabinets and/or unit-dose dispensing cabinets on each patient floor, or point-of-use dispensing cabinets and pass-through cabinets inside patient rooms. These alternatives to centralized pharmacies free up caregivers’ time and make medication distribution and administration much more efficient. Unfortunately, without the proper technology and oversight, these decentralized solutions introduce risk.

When drugs are no longer centralized in a single pharmacy but dispersed among patient floors and rooms, it can challenge proper pharmacy inventory management, increase the risk for drug diversion, and increase costs. It is critical for pharmacies to be able to track their drug inventory throughout the hospital, despite location, to reduce costs and risks while improving patient care and safety.

Controlling Pharmacy Inventory throughout The Hospital

In order to ensure proper pharmacy inventory management, hospitals must expand their management practices beyond the centralized pharmacy. Because medications are often stored outside of the centralized pharmacy, hospitals, especially the larger ones, may need help keeping proper account of their inventory. Thankfully, technology is enabling the pharmacy to automate many of their processes to ensure all medications are tracked throughout the hospital.

Related: Improving Patient Care through Technology

Automated dispensing cabinets store medications closer to the patient, enabling nursing staff to retrieve those medications much more efficiently. Technology integrated with the cabinets controls user access, tracks medication inventory automatically, and communicates with the pharmacy information system and the patient’s electronic health records. The system automatically creates an audit trail of who accessed the cabinet, when, and what medication was taken. This enables the pharmacy to keep tight control over inventory in those cabinets as they can track the supply of each drug.

For even more efficient nurse workflows and patient care, hospitals often invest in the aforementioned unit-dose dispensing cabinets, point-of-use dispensing cabinets, and pass-through cabinets. These securely store medications specific to patients, not in bulk, and demand little of the nurse’s time because they are located as close to the patient as possible, even inside of the patient’s room. Nurses only have to take a few steps away from the patient, log into the system on the cabinet to gain access, and retrieve the patient’s medications at the exact prescribed dosage.

Related: Pass-Through Medical Cabinets Improve Quality of Care

By making this relatively simple and cost-effective workflow improvement, the hospital can reduce costs, increase nurse efficiency, improve patient care and safety, and provide a better overall patient experience. With the pharmacy maintaining greater control over prescriptions and medications, there is much less risk of a nurse administering the wrong medication or dosage – a good thing for both the patient and the hospital. According to the World Health Organization, “Investments in reducing patient safety incidents can lead to significant financial savings, not to mention better patient outcomes. In the United States alone, focused safety improvements led to an estimated US$28 billion in savings in Medicare hospitals between 2010 and 2015.”


There is a standard for proper pharmacy inventory management, however, there are differing perspectives on what strategies to prioritize. Below are a few recommendations from independent, reputable sources on how to approach this important initiative, each with a differing angle to consider.

The Association of Healthcare Internal Auditors (AHIA) believes pharmacy inventory management has a greater impact beyond cost reductions, saying, “Without adequate pharmacy inventory management practices, hospitals run the risk of not being able to provide patients with the most appropriate medication when it is most needed.”

In order to improve inventory management practices, pharmacies must invest in technology that enables them to more easily track drug quantities and expiration dates in real time. This will not only reduce waste but will also ensure the pharmacy can keep proper stock of effective patient medications. Further, automated notifications can help inform pharmacists of when to order which medications, as well as alert them when excessive quantities have been ordered. The technology may also provide automatic ordering of the most used medications, requiring only an authorized pharmacist to authorize the order before it is placed.

The NCPA says that “inventory ‘eats cash’ in many different ways” and “slow turning inventory (your greatest capital asset) is sitting on your shelves and is not earning anything for your pharmacy.” In order to minimize this risk, the organization recommends pharmacies:

  • Review inventory levels quarterly to adjust for seasonal dispensing trends
  • Assign and incentivize pharmacy technicians to manage a pharmacy bay for slow movers, short or outdated drugs, and return them to manufacturers to free up cash
  • Improved procurement/ordering technology and next day deliveries should limit the size of orders and keep carrying costs down
  • Monitor the order cycle time carefully because big fluctuations in order cycle times often cause pharmacies to stock more inventory than desired

Power-Pak C.E., an organization for continuing education for pharmacists and pharmacy technicians, believes there are multiple factors that impact drug inventory, including newly-approved medications, out-of-stock medications, brand vs. generic medications, inventory spoilage, return-to-stock and recalls, and temperature ranges. They empower pharmacy technicians to take an active role in pharmacy inventory management, saying, “By taking an active role in efficient inventory management, such as taking precautionary steps to limit inventory spoilage and monitoring prescription inventory turn days, technicians will enable pharmacists to shift their focus toward direct patient care while at the same time ensuring that pharmacy operations are cost-effective.”

For hospital pharmacies that are looking to control costs, improve nurse workflow efficiency, and maximize patient safety and outcomes, pharmacy inventory management must include modern technology. Keeping an accurate inventory of medications goes beyond counting bottles. It’s about ensuring medication is available to patients when it is needed while reducing pricey overstock.

As pharmacies expand their operations beyond centralized locations, only technology can establish a foundation for effective inventory management. It is important to assess your current practices and determine whether they are helping you achieve the cost, efficiency, and patient safety goals you desire. If there is any room for improvement, which there inevitably is, it’s time to evaluate modern solutions that will encompass your entire medication inventory. Technology brings automation and accuracy, both of which offer significant, short- and long-term benefits. Pharmacies, hospitals, caregivers, and patients have much to gain when you invest in sound inventory management practices.

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