Pharmacy Inventory

one of the largest controllable expenses of a business

inventory

factors that influence inventory

shrinkage, waiting bin, product on shelf, returns/out of dates

inventory

product in the pharmacy

inventory is composed of which 4 costs

acquisition, procurement, carrying, & shortage

what influences acquisition and shortage

shrinkage, waiting bin, product on shelf, returns/OOD

what influences procurement

technology and person-power, rebates, discounts, dating

what influences carrying costs

theft/damage, insurance

inventory turnover ratio (ITOR)

COGS/average inventory cost

ITOR is a measurement of _________________

efficiency

how is inventory monitored

ITOR, profit and loss statement, company specific inventory reports

ITOR is typically calculated on ____________ basis

yearly

COGS

cost of goods sold

what does ITOR value mean

numeric value for number of times inventory was turned over in a year

national annual ITOR

10.6

potential reasons for low ITOR

too much inventory sitting on shelf or many high dollar meds

what influences loss of inventory (other than from sales)

theft/diversion, robbery, damage

how is loss of inventory monitored

BOH modification reports, P&L statement, annual inventory, biennial control inventory

biennial control inventory must be completed...

every 2 years or when there is a change in PIC

what influences waiting bin

proper RTS procedures, proper workflow at sales, incorrect filling of prescriptions (duplicates)

how is waiting bin monitored

RTS maintenance reports, waiting bin inventory reports

what is the result if the actual value of waiting bin is less than the expected value

there is shrinkage

par level/threshold

level to keep ready on the shelf

what influences par level of medication

pharmacy setting and patients, formularies, market trends

how is product on shelf monitored

item movement (frequency of drug movement), sales analysis (flow of total inventory)

how is product on shelf managed

visual method, periodic cycle count, perpetual cycle count (automated), on time check in for orders, stock depth (par level)

management of C2 product on shelf is most often done via the ___________ method

periodic (periodically cycle count and order what is needed at the time of cycle count)

what factors influence returns and out-of-dates

changes in market, changes in patient demographics, over ordering of inventory, contractual negotiations between wholesaler

snapshot of company's assets and liabilities/equities

balance sheet

assests

things a business owns to generate income (cash, building, inventory)

liabilities

money owed to others (loans, money borrowed)

equities

your own funds (savings)

assets = ___________________ + ___________________

liabilities + equities

balance sheet limitations

does not tell how much was sold, how much money was received, unit cost, cost of expenses

snapshot of financial picture at a specified point in time

balance sheet

3 sections of balance sheet

assets, liabilities, shareholders equity

profit & loss statement

connects the beginning and ending balance sheets in a given time by providing details of operating expenses

revenue - _________________ = _________________

COGS = gross profit

gross profit - _________________ = net income

operate expenses/incomes

shows revenue and expense of a business

profit & loss statement

used to assess profitability

profit & loss statement

limitations of profit & loss statement

does not how much money is in the bank, does not show debt, does not show equity in the business, does not show how much you had 1 month ago vs. 6 months ago

cash flow statement

connects the beginning and ending balance sheets in a given time by indicating impact on company's investments, financing, and operations of cash flow

shows increases and decreases in cash

cash flow statement

3 sections of cash flow statement

operations, investing, financing

shows net change in cash balance from start to end for a given period

cash flow statement

allows you to make inferences to whether your business is growing or shrinking

financial reports (script comp)

financial reports do NOT give info on...

financial position

shows if you are ahead or behind market projections

financial reports (script comp)

reimbursement rate = ______________________ + ______________________ - ______________________

product cost portion + dispensing fee - DIR

estimated acquisition cost

solely represents the product reimbursement

sticker price

average wholesaler price

AWP - discount = _________

estimated acquisition cost (EAC)

wholesaler acquisition cost (WAC)

cost that the wholesaler pays the pharmaceutical company

WAC + ______________ = EAC

small markup

WAC has evolved to become __________________

alternative list price

cost of dispensing (COD)

fair share of all costs above and beyond the cost of the drug product (COGS)

indirect cost examples

rent, utilities, promotional expenses

fixed costs

costs that do not change as the prescription volume changes (computer and hardware, insurance, licenses, utilities)

variable costs

costs that change directly as the prescription volume changes (prescription vials, office supplies, payroll, delivery costs)

how to calculate COD per prescription

1. identify all costs associated with prescription department (income statement with appropriately allocated indirect costs)

2. sum of all prescription department costs

3. divide sum by total number of prescriptions dispensed

direct and indirect remuneration fees

price concessions determined by CMS; usually occur after point of sale of prescriptions

examples of DIR fees

inclusion into a pharmacy network, pay-for-performance, rebates (applies to manufacturers)

methods of determining DIR fees

percent of medication cost, flat fee

which DIR fee method is preferred for high cost medications

flat fee