You might feel your hospital pharmacy has inventory management down to a science. Or you might admit that it could use a tune-up. Either way, there are a number of ways you can improve your inventory management to better serve the clinical needs of your patients and the fiscal needs of your hospital.

Let me tell you what new skillsets and tactics should be in your pharmacy’s inventory management toolkit. I will also describe the characteristics of a hospital pharmacy that knows how to put that toolkit to good use.

Common drug inventory management challenges

Why do you need to upgrade your pharmacy’s inventory management toolkit in the first place? I can think of several good reasons. Each tests your ability to manage your drug inventory effectively.

  • Value-based reimbursement. As you know, payment models are shifting from volume to value. That places an additional burden on your hospital pharmacy to stock the most effective drugs at the lowest possible cost. Managing your inventory and eliminating waste to help your hospital’s bottom line are more critical than
    ever before.
  • Drug shortages. Shortages of critical drugs are rampant. That adds layers of complexity to the work that you do. Ensuring that you have enough of the medications not to jeopardize patient care, but not so much that it ties up your capital, is a difficult predicament.
  • Specialty drugs. The number of specialty drugs on the market is increasing. Many of these drugs come from a channel other than your wholesaler. Some may require additional information or require that you be registered with the manufacturer before ordering. This creates separate invoices, payments, shipments and delivery times to manage.
  • Drug costs. A lot of these new specialty drugs come with a high price tag. Even the prices for your routine drugs are going up. Overstocking on high-cost drugs or wastage of these drugs can make a significant dent to your bottom line.
  • Ambulatory care. With more hospital pharmacies opening ambulatory clinics, pharmacies are now providing drugs for new locations. Managing the inpatient needs, outpatient needs and additional clinics increases the importance of a solid inventory management strategy.

As you can see, what your hospital pharmacy is dealing with now may be more than what your current inventory management model can handle. You need new skills and tactics to convert all those new challenges into opportunities to improve patient care and to meet your hospital’s financial needs.

Pharmacy inventory management skills you need

When I think of the skills that your hospital pharmacy needs to be successful in this new and challenging environment, a few come to mind.

  1. Advanced analytics. If your pharmacy is like most, you do not lack in data. You have purchasing data, utilization data, automation data and waste data. You need to be able to take all that data from different sources and combine it for a more holistic view. Detecting trends and being able to construct actionable insights to improve how you manage your inventory are essential.
  2. Technical understanding. Technology is generating all this data for you, but you need to know how your technology works. How is it collecting your data? Where is your data coming from? How is it analyzing the data? Is it generating the data you need to make the decisions you need to make? It’s important to understand how your technology works so you can make it work for you.
  3. Strategic planning. You understand how your technology works, and you’re getting the data that tells you how your inventory management systems are working. Now, what do you do with that information? You have to think strategically. It’s not about putting out fires. It’s about preventing them in the first place. It’s thinking about where you want to be tomorrow or next month or next year.
  4. Process improvement. This is about operationalizing your strategic plan. Your data is telling you what to do, and you have a plan to get you where you need to go. How are you going to get there? You need to take a systematic approach to process improvement. You need to fix broken systems, improve others and create new ones to improve and sustain your inventory management performance. It’s about being proactive rather than reactive.

Inventory management tactics to consider

Once your hospital pharmacy has acquired these new skills, how do you put them to work for you and your patients? There are a number of tactics that you can use. For example:

  • Optimize technology. Use your existing technologies to their optimum capabilities. If you’re like most hospital pharmacies, you’re probably only using about half of what your systems can do. Are you maximizing your return on investment for your current technology?
  • Create monthly reports. When you start using your technologies, you should start generating monthly reports on metrics such as drug usage and recommended PAR (periodic automatic replenish) levels. Look at the trends over the last month and adjust your inventory accordingly.
  • Develop action plans. You should review reports on a monthly basis to analyze your inventory, develop an inventory reduction plan and create a regular drug shortage restoration process.
  • Monitor drug supply. Monitoring your drug supply is a dynamic process. Activities could include: ensuring your drug shortage items are rotated back into the regular inventory supply once a shortage has resolved; rotating stock in automated dispensing cabinets; ensuring that obsolete inventory within automated dispensing cabinets is brought back to the central pharmacy to avoid wastage; and guaranteeing that par levels are adjusted once a shortage is resolved.
  • Track non-formulary items. Each month, it is important to review your non-formulary purchases, any non-formulary items still in stock and if any drugs new to the market are being requested. If no one is in charge of monitoring this activity, it is surprising how quickly items can become a part of your regular stock.
  • Add expertise. Consider adding specialists to your hospital pharmacy or re-aligning duties to help you improve your inventory management performance. You may want to add an IT and analytics expert or an inventory management specialist.

Adopting a new hospital pharmacy culture

When I think about the hospital pharmacies that excel at pharmacy inventory management and that use all the mentioned skillsets and tactics to their patients’ advantage, they share some cultural characteristics:

  • Agile and adaptable. They assess a situation and change quickly if needed.
  • Data-driven decisions. They don’t rely on instincts or experiences to do what’s right. They utilize data.
  • Collaborative approach to managing inventory. They stress that inventory management is the responsibility of all pharmacy staff members.
  • Comfortable with technology. They embrace it and want to unleash its full potential.

Do those traits describe your hospital pharmacy? I hope so. There is a fine line between having the right drugs at the right time for your patients and being overstocked, which can lead to wastage, diversion risks and tying up extra capital.

By pursuing the skillsets that I mentioned and the tactics that I listed, your hospital pharmacy will find itself on the right side of that line and be able to provide the best possible care to your patients at the lowest possible cost to your hospital.

Related: Learn more about Studiomaca’s drug inventory management solutions for hospital pharmacies

© 2019 Studiomaca Corporation and/or one of its subsidiaries. All rights reserved. Studiomaca RxO® is a registered trademark of Studiomaca Corporation and/or one of its subsidiaries. All other marks mentioned are trademarks or service marks of their respective owners.

Studiomaca Corporation, U.S. Pharmaceutical, 6555 N. State Hwy 161, Irving, TX 75039

Cindy Jeter

About the author

Cindy Jeter is a supply chain management consultant for Studiomaca Pharmacy Optimization. Her focus includes best practice inventory management processes, wastage reduction, cost containment and pharmacy buyer education. She brings over 20 years of experience to customers. Cindy graduated from West Texas A&M University with a Bachelor of General Studies degree and is a certified pharmacy technician and certified purchasing professional.

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