Fundamentals of Pharmacy Operations

The Business of Community Pharmacy

Cash Register Management

• Bar-Code Scanning Technology

  • Scanned prescription: prompts offer for pharmacist counseling

  • Scanned Schedule V drugs: prompts questioning for additional patient information

  • Scanned nonprescription drug: adds sales tax

• No sales tax on prescription drugs, diabetic test strips, durable medical equipment

• OTS, other merchandise are taxed, rate varies

• Cash Register Management

  • Cash: Register computes amount of change, technician places large bills under change drawer, technician must be able to identify counterfeit bills

  • Personal Checks: Write in driver’s license information on check, verify amount of check and signature, check reader immediately access bank account and screens for insufficient funds, patient charger for insufficient funds

  • Credit card: Type of loan paid off at the end of the month or finance charge accrues, patient may not need to sign a receipt if less than $50 charge. Newer cards feature EMV chips, which improve security of transactions

  • Flex Cards: Medical credit card for prescription co-pays, and for prescribed OTCs

• Always count change with cash transactions

  • Count out amount on register

  • Count from the purchase price

Accounting, Pricing, and Retail Math

• Profit: business has more income than expenses

• Acquisition cost: amount pharmacy pays for drug from wholesaler

  • Similar to sticker price for car, usually higher than actual acquisition cost, doesn’t include discounts

• PBMs reimburse pharmacies based on the AWP multiplied by some factor, and pay a dispensing fee for each prescription

Inventory Management

• Inventory: entire stock of pharmaceutical products on hand for sale at any given time in a community pharmacy

• Inventory Value: total value of drugs and merchandise in stock on a given day

• Purpose of inventory management

  • Timely purchase and receipt of pharmaceuticals

  • Maintenance of appropriate levels of materials in stock

• Purchasing: ordering products for use or sale by the pharmacy

  • Drug stock is a pharmacy’s biggest expense

• Stock Levels

  • Manual or automated inventory records-based on usage and seasonal patterns

  • All filled prescriptions are deducted from the inventory

  • Computerized inventory control: software that automatically generated purchase orders when inventory drops to a minimum preset level aka PAR level

• Pharmacy Software can automatically generate daily reorder lists and place the orders with wholesalers

• Primary Wholesaler Purchasing: a pharmacy can contract with a wholesaler to be their primary supplier, pharmacy gets daily delivers, automatic online ordering

  • may not be able to get all drugs from that single source

• Prime Vendor Purchasing: a pharmacy that uses 2 or more main suppliers can set up a prime vendor purchasing contract with one vendor to get a discount for high volume purchasing

• Just-in-time Purchasing: keep inventory costs to a minimum by maintaining low stock levels, and purchasing drugs in small quantities as needed frequent reordering

• Processing Order Deliveries:

  • Make sure correct number of plastic containers received

  • Controlled substances delivered in separate totes

  • Check off items on invoice while unpacking

  • Items not in shipment are back ordered

    • Most commonly because of drug shortage

  • Posting: process of reconciling invoice and updating inventory in pharmacy database after delivery

• Rotating Stock: when adding new stock bottles to shelf, put them in the back and the old ones in front

• After delivery received, complete any partial fills orders from previous day

Drug Recalls

• Manufacturer alerts pharmacies to return product based on drug name, DIN, lot number, expiration date,. NMCP may also alert pharmacies to possible recalls

• Either voluntary or Health Canada Mandated

• Ranked Class I-III I being the most severe

• All relevant medications pulled from shelves

• Contact patient, especially if Class I

Controlled Substances and Narcotics Inventory

• Pharmacy must register with Health Canada to purchase and dispense controlled substances

• Persons authorized to order narcotics:

• COMMUNITY

  • Designated Manager: a pharmacist who is responsible for purchasing, receiving, storing, distributing, and disposing of drugs and medications in the pharmacy, including narcotics;

  • Narcotic Signer: a pharmacist designated by the pharmacy to order and sign for narcotics

• HOSPITAL

  • The person authorized by the person in charge of the hospital to order the narcotic

  • The pharmacist in charge of the dispensary of the hospital

• The authority to sign for narcotics is specific to a particular pharmacy and cannot be used in multiple locations

• When ordering narcotics someone must sign and date the receipt to the licensed dealer within 5 days including name and quantity of the drug. If it is not received the narcotic may be withheld

• The purchase of Narcotics must be recorded

• Pharmacists are to record and keep records of their purchases and sales transactions. They must be readily available to personnel

  • They record the name and quantity of drug received, when it was received, and the name and address of the person receiving it

Inventory

• Monthly documentation should be taken of narcotics

• Any thefts should be recorded within 10 days to the College of Pharmacy and Health Canada

• Normal Inventory should be taken yearly to determine turnover rate

define

• Inventory : the stock of medication a pharmacy keeps immediately on hand

• Inventory Management: method used to ensure merchandise assortment is ideal

  • when to buy

  • what to buy

  • how much to buy

• Inventory Control

  • monitor on-hand stock and sales patterns in order to purchase

  • quantities and types of stock to generate profit

  • minimizes cost to increase profit

  • monitors by unit and dollar control method

Inventory Management

Type of Pharmacy

• Is the pharmacy organized to provide self-service of products or will it be stocked items requiring personal selling/service such as cosmetic?

• Is the pharmacy independently owned and operated or part a chain or franchise? This may influence whether the pharmacy stocks national brands in additional to provide label products

• is it located in a strip mall, neighborhood, or major mall? This will influence the merchandise mix because of demographics of the clientele attracted to the practice

• Availability of parking will determine accessibility to the pharmacy

• The degree of specialized that the pharmacist(s) provides will determine the type of products available. For example, an interest in sports medicine, homeopathy, or parenteral nutrition required specialized training

Inventory Management

• The variety and number of units of each size of inventory in a pharmacy should reflect the needs and wants of its clientele

• Individual items of inventory are referred to as stock keeping units (SKUs)

• The goal of inventory management is to ensure that drugs are available when they are needed. This means that all drugs are likely to be needed are both on hand and useable- that is not expired, damaged, contaminated, or otherwise made unfit for use.

Inventory Control

• Larger pharmacies may simply carry larger amounts of inventory and consequently assume larger investments

• Other considerations:

  • larger purchases less frequent or smaller purchases more frequent

  • term and process of purchasing

  • automatic shipments

  • returns

• each pharmacy orders drugs that include formulary drugs and non-formulary drugs. The established level of medications stock kept on hand at any given time is referred to as the periodic automatic replenishment level

• In order to achieve a situation in which sales are maximized with a minimum inventory, the pharmacist owner/manager must meet the clientele demand for products by not over-stocking or under-stocking

• Different systems are available that can keep a running inventory of medications as well as order them. this can be done several ways, such as POS, order cards, or by handheld computers

• This can be accomplished by a mix of unit controls and dollar controls

Unit Control Systems

• visual

• systematic Want-book

• Periodic Inventory

• Perpetual Inventory

Unit Control-Visual

• Shelf stickers min/max (shelves are replenished at predetermined levels)

• simple inexpensive

• least effective

• requires frequent manual checks

• suitable only in low volume situations

• High risk for error

• often used with want book method

Unit Control- Systematic Want-book

• book for each supplier product class'

• min/max quantities are noted for each product

• min is reorder point

• max prevents over-stocking

• sensitive to product fluctuations

Unit Control- Periodic Inventory

• involves physical counts and monitoring sales

• AKA: stock-record card system

  • card includes

    • number of units on hand, sold, and on order

    • Supplier information

    • Product information

• Most accurate of the MANUAL control system

Unit Control- Perpetual

• refinement of periodic system

• Takes into account initial, new, and sold inventory

• Computerized: able to generate data at any time on the units on hand and sales activity of any product that has been entered into the system

• Performs additional functions

  • provides information on the categories of drugs dispensed during specified periods

  • provided data on the categories of drugs not dispensed during specifies periods

  • provide current data on dollars invested in dispensary inventory by selected periods

  • notifies pharmacist of quantities of products on hand to enable them to reorder

  • tracks increases of stock-on-hand when invoices are entered when a new stock of drugs comes onto the dispensary

  • automatically generate orders when stock levels fall to previously established reorder points, and adjust those reorder points automatically in response to fluctuations in sales patterns

Point of Sale System (POS)

• Pharmacies use point of sale system to provide efficient inventory control of merchandise in the front store

• these systems have the ability to track inventory from the time it is received to the time it is sold

• Once the files are built and order levels established, the system can generate purchase orders at the appropriate times. necessary records, and when the order is received, it can add it to the inventory and even generate price stickers and shelf labels

Universal Product Code (UPC)

• Makes it possible to scan products with hand held scanners and thereby register all necessary product information and appropriate sizes

Dollar Control Systems

• Concerned with controlling the money invested in the inventory rather than the actual items in stock, their balance or assortment

  • open to buy method

  • economic order quantity

  • procurement costs

  • carrying costs

• Open to buy method

  • inventory controlled through planned purchase budgets

  • similar to cash flow statement in using intended inventory investment

  • Doesn’t address over or under stocking

• Economic Order Quantity (EOQ): System is based on the following conditions

  • constant ordering costs, rates of demand, and purchase prices

  • fixed lead times

  • complete orders delivered at one time

• Procurement Costs: Cost associated with obtaining Stock

  • purchasing

  • receiving

  • accounting

  • stock inventory

• Carrying Costs: costs associated with holding products

  • loan interest

  • losses due to unsold stock

  • depreciation

  • theft

  • damage or deterioration

  • storage and handling

  • insurance, utilities, rent, tax, etc.

Pharmacy Settings

Pharmacy Today

• It is important to understand the environment of pharmacy and be able to identify factors, both political and economic that drive the business.

• No other health professional “sells” a product as well as a “service” so pharmacy is unique as a business.

Types of Business Ownership

• Sole Proprietorship: Legally the owner and the proprietor are the same

  • the owner has complete control and responsibility for ordering marketing, store image, store layout, etc

  • all decisions rest on one person

• Partnership: formed by groups of two or more people who enter into a legal agreement

• Corporations: legal entity that exists with legal rights and privileges of an individual

  • ownership is represented by stock or share in the business

Types of Pharmacy Practice Areas

• Independent Pharmacies

  • not affiliated with any corporate run banner, franchise or chain program

  • unique store name

  • owner has complete control over ordering, marketing, staffing, store image, and store layout

• Independent Banner store

  • independently owned community pharmacy

  • affiliated with central office and pay fees to use a recognized name

    • IDA, guardian, Uniprix, Pharmasave

  • Each banner assumes a required “look” and “feel”

• Franchises

  • largest being Jean Coutu and Shopper Drug Mart

  • may not physically own the store

  • may have the independence to chose local marketing, buying and instore services as well being able to access programs from head office

  • freedom with HR issues, standards are set

  • head office also mandates sales, layouts, department office must be met

  • Shoppers is Canada’s largest pharmacy Chain with over 1200 stores across Canada

  • Jean Coutu has over 360 in NB, Qc, On

• Banner vs Franchise

  • banner remains independently owned, the owners has autonomy with marketing, merchandising and professional services

  • franchised do not typically own the store or fixtures; there is typically an agreement relating to revenue-sharing with head office- head office will provide many services; marketing, training. Franchisees have some autonomy, but not as much as banner store owner

• Chain Stores

  • Pharm Plus/ Rexall and Lawton’s

  • Employ pharmacy managers who are salaried employees of head office

  • head office directs all marketing, buying, professional programs, etc

  • in order to be considered a chain, an individual must own at least 5 or more stores

• Grocery & Mass Merchandisers

  • Sobeys, Superstore, Walmart, Costco

  • Pharmacies are located within a supermarket or mass merchandise outlet

  • Employ pharmacy managers

• Remote Dispensing Pharmacy

  • Patients bring prescriptions to a remote kiosk where they speak with a pharmacist using a telephone receiver and webcam

  • Limited only to the drugs stocked in the machine

  • Pharmacist is able to see the medications as they are packaged to verify

    accuracy

• Internet/Mail Order Pharmacies

  • Canada is home to dozens of licensed internet pharmacies

  • Many Americans use a Canadian Internet pharmacies in search of cheaper drugs

  • CIPA logo should appear on a truly legitimate Canadian Internet pharmacy. CIPA- Canadian Internet Pharmacy Association

  • M/O drugs are filled in a warehouse setting and mailed or delivered to patients home

• Long Term Care: Care that is provided in facilities offering accommodation for people who require on-site delivery of supervised care, 24 hours a day, 7 days a week, including professional health services and high levels of personal care and services (e.g., in nursing homes and residential continuing care facilities).

  • the acuity of people receiving long-term care is generally less than that of patients in acute care or complex continuing care settings

  • medications for residents in long-term care are usually provided by community pharmacies

  • Services

    • ordering home health care supplied

    • blister packages 7-35 days

    • delivery of medication

    • supply nutritional products and other supplies

• Compliance Packaging

  • Labelling and documentation are very important

  • Patient/caregiver must be able to differentiate tablets

  • Dispensing software can print special labels to attach to the package indicating the tablet, description and what time of day it should be taken - often with a grid to indicate the number of tablets in each slot

  • Labels must meet all federal/provincial requirements

  • Stability of all drugs should be considered when using a heat-sealer

  • Heat-sensitive drugs should be done using cold-seal packaging

  • Some medications should not be removed from the original packaging (i.e. nitroglycerin, rapid dissolve tablets etc.)

• Checking Weekly Compliance Packaging

  • it is important that each prescription is checked using normal procedure

  • then each tablet must be identified in the correct slot

  • a final count of each administration time slot should be done to ensure that no additional medications have been added, no medications have transferred to the wrong slot or have been missed

• Hospital Pharmacies

  • Differ greatly from community pharmacies

  • Pharmacists deal with clinical issues and medication management

  • Hospitals can have pharmacists who specialize in certain areas like oncology. pain management, anticoagulant clinics, diabetic clinics.

  • Pharmacists work in teams physicians, nurses, other healthcare personnel in medical areas on patient rounds and in drug product selection.

  • Most setting use unit dose medication systems with pharmacy technicians/assistants who are trained in repackaging unit dose medications.

  • As well pharmacy technicians/assistants may also prepare dosses for patients and complex IV sterile products.

  • Pharmacy technicians/assistants may also manage narcotics in the hospital

• Ambulance Care Pharmacies

  • out-patient within hospital

  • provides drugs and advice to patients in a pharmacy setting

  • pharmacists in this setting often manage chronic Disease States

• Compounding Pharmacies

  • customized to the patient

  • can be anything from creams, ointments, antibiotics, oral liquids for children to hormonal replacement therapy

• Military Pharmacies: some canadian bases employ civilian pharmacists and staff

• Central Fill Pharmacies

  • A central fill pharmacy processes a request from an originating pharmacy to prepare a drug order most often times in a blister pack or pill pack Medications packaged by the central fill pharmacy are dispensed to the originating pharmacy pursuant to a prescription for a patient/customer

• Methadone Pharmacies

  • Dispense methadone to patients who are on the Methadone Maintenance Program

  • Dispense the regular medications that the methadone patient may be prescribed

Retail Pharmacy Dispensing

The Dispensing Process

• Accept the prescription and establish the pharmacy-patient relationship

• Review the prescription and patient information

• review the patient medication profile

• review the cost coverage

• alert the pharmacist to any issues or discrepancies

• Retrieve the drug or ingredients from storage

• prepare or compound the medication

• Label the product

• check and dispense the medications and label

• counsel the patients about their medication

Drug Distribution Changes

• technology has created a paradigm shift from product-focused care to patient-centered care

• expanded role of pharmacist means an expanded role on many aspects of drug distribution for the new regulated pharmacy technician

Types of Community Pharmacies

• are unique in style, size, layout, and approaches to merchandising

• geographic location will determine the type of pharmacy that’s appropriate for the community and will influence the business objectives

Independent Pharmacies

• Owners and operated independently

• extent of ownership by pharmacist is regulated 51%

Pharmacy Security 03/09

• There is ample evidence to suggest that every pharmacy can expect to be victimized in one way or another; ranging from armed robber to shop theft, from burglary to employee theft, and from prescription forgery to credit-card fraud

• The reality is that pharmacies are particularly vulnerable to criminal attack because of their attractive mix of desirable items: cash and drugs. An additional feature is that they are open later; losses, however, can be suffered at any time of day or night

• While taking steps to prevent these crimes may seem at first glance an expensive proposition, the ongoing benefit to a store’s profitability will justify the expense many times over. The fact is that security should be an essential part of doing business in today’s world

• Many common crime-prevention techniques can be used to protect pharmacies, staff members, customers, and property. Exterior security measures, interior security devices, and internal procedures help minimize security risks and are essential aspects of effective policies and systems

• It cannot be stated strongly enough that a security program against internal and external theft must be considered as an all-inclusive package. Internal theft refers to theft by an employee, While external theft is done by customers. Allowing another ears to be weak will compromise a strong area of security.

• Exterior Security

  • security hardware

  • signage

    • on both front and receiving door indicates hours of operation and address

  • Exterior lighting

    • window lightings on a timer

    • parking lot lighting

  • landscaping

    • no concealment and climbing opportunities for a burglar

  • Doors, Windows, and roof opening

    • hinges

    • locks

    • sliding doors

• Interior security measures

  • safes

    • office or cash safe

    • narcotic safe

  • alarm system

    • contact devices for all door, windows, etc

    • motion detection

    • exterior/interior camera surveillance

    • safe protection

    • emergency signalling features

• Internal Procedures

  • External theft

    • break-in and robberies

    • prescription forgeries

    • shop theft and fraud

• Internal theft

  • hiring practices

  • loss prevention procedures

    • surprise register audits

    • front store supervision

    • staff-purchase procedures

    • safe controls

    • secure store openings and closings

    • receiving controls

    • pharmacy controls

    • mystery shopping

• Prescription Of forgeries: constant vigilance in detection and intercepting prescription forgeries has a hidden payoff: The ‘street’ intelligence network will spread the word that a certain pharmacy should be avoided when it comes to this type of fraud

• Forged prescriptions go to the college of pharmacists who put a note out to all pharmacies

• Shop-theft or fraud: the criminal code of canada has no section on shoplifting. The criminal charge is either theft or fraud. Pharmacies are a favorite target for such offences because of the wide variety of products available

• Simplest way to possible prevent stealing is making eye contact and asking “may I help you”

• store layout means there should be no blind spots

• larger places have “floor walkers” who watch for theft