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Refers to the number of times per year inventory is sold and replaced at cost.

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Inventory turns

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These costs include but are not limited to the costs of placing an order, receiving goods, and processing payment.

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Procurement costs (ordering costs)

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All costs associated with carrying and maintaining inventories.

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Carrying costs

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Measures the operational costs and profitability of a pharmacy.

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Gross Margin Return on Investment (GMROI)

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The amount of inventory carried to meet an average demand level.

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Basic stock

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The amount of inventory carried to account for fluctuations in demand and in order cycle times.

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Safety stock

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A list of the drugs stocked at the hospital which have been selected based on therapeutic factors as well as cost.

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Formulary

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When the pharmacy carries only formulary medications and physicians must order from the medications selected for the formulary.

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Closed formulary

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Drugs not on the formulary list which a physician can order; A physician may be required to complete a special form stating why that specific medication is required.

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Non-formulary medications

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The amount of time that elapses between the placement of an order and the receipt of the merchandise.

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Order cycle time

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Point of Sale, an automated inventory system to help keep a running count of what is on store shelves.

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POS

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The National Community Pharmacists Association

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NCPA

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efficient inventory management

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EIM

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a just-in-time inventory replenishment system

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JIT

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out-of-stock(s) items

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OOS

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Federal Claims Act

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FCA

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current Good Manufacturing Practices

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cGMPs

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active pharmaceutical ingredient

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API

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Generic Pharmaceutical Association

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GPhA

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Return to Stock items

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RTS

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The Omnibus Budget Reconciliation Act of 1990, this act mandated the pharmacist to provide patient counseling with each prescription dispensed and increased the need for a pharmacy technician to assist in product dispensing.

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OBRA-90

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Return-to-stock (RTS) prescriptions, New product introductions, Brand to generic product transitions, Recalls, and Cycle counts

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What five factors impact inventory management?

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An inventory auditing procedure in which a small subset of inventory is counted on a specific day.

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What is a cycle count?

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They are used to provide an ongoing measure of inventory accuracy and procedure execution and can be tailored to focus on items with higher value, higher movement volume, or those that are critical to the business process.

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What is the purpose of a cycle count?

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A cycle count method (derived from the Pareto principle) which emphasizes inventory value (i.e., cost multiplied by usage for the period). Items with a higher determined value are counted more often; items with a lower determined value are counted less frequently.

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The Pareto method - sometimes called the 80 20 rule

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A cycle counting method in which usage dictates that the more frequently accessed items should be counted more frequently, regardless of value.

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Cycle counting by usage only method

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A cycle counting method that takes into account both a product's movement and a product's dollar value. Utilizing a mixed approach to cycle counting, provides the community pharmacy a method to protect and monitor its inventory across the enterprise without disrupting the daily work flow.

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Hybrid cycle counting methods

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Contributes to accuracy, Maintains transparency, Improves the Gross Margin Return on Investment, Efficiently controls inventories of expensive items, Prevents the overstocking of frequently used items, Identifies slow moving items, Establishes a true JIT inventory count

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Cycle Counting - advantages

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Inconsistency contributes to errors, a standard process should be developed. Lag times between the count and entering the inventory into the data management system contributes to variances in inventory counts. Cycle counts can be disruptive to business operations.

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Cycle Counting - pitfalls

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specific route of administration.

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Organization of Medications: In most hospital pharmacies, medications are organized according to a precise system. First, medications are categorized and organized based on their ___________.

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generic name. Some retail pharmacies organize medications by their brand name, but most hospital pharmacies use an alpha-generic system.

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Organization of Medications: Second, the medications are organized in alphabetic order by their _______ name.

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Medications must be properly stored to retain their stability. The Pharmacy Technician should follow the manufacturer's instructions when storing medications. For example, most vaccines require refrigeration.

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Organization of Medications: Some medications have special storage requirements.

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Narcotics and controlled substances.

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Organization of Medications: ________ are usually stored in a secure area of the pharmacy, separate from other medications.

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Negative events are those events that decrease the dollar value of inventory. Examples include product recalls and the brand-to-generic transitions of products.

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What is a negative inventory event?

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Positive events are those events that increase the dollar value of inventory. Examples include the return-to-stock (RTS) items and the receipt of new products.

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What is a positive inventory event?

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Drug products that have been out of the pharmacy's possession should not be returned to inventory because the product's strength, quality, purity, and identity can no longer be ensured.

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Should items returned to the Pharmacy be restocked?

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Yes, unclaimed prescriptions have not left the control of the pharmacist, it is important to apply a standardized approach for placing these medicines back on the pharmacy shelf.

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Should unclaimed items (prescriptions) be restocked?

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Generally the time frame to restock can run from 7 to 10 days; this will depend on the pharmacy's policies and procedures and the specifications of the signed insurance contracts. What is most important is that the pharmacy adopt a standard procedure for handling such items.

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What is the appropriate time frame to hold a product before returning it to stock?

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With the repackaging of drugs, the FDA will allow a 6-month expiration date to be established as long as the expiration period is 25% of the remaining time between the date of repackaging and the manufacturer's expiration date.

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What is the recommended best practice for reestablishing an expiration date on a pharmaceutical product returned to stock?

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Unless the manufacturer provides a stocking allowance, it may be best to adopt a wait and see attitude before deciding to purchase large quantities of a new product - especially if it is expensive.

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With regard to inventory control, how should a new product be handled?

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Recalls are initiated to protect the patient from adverse events caused by the use of or exposure to a particular product. Recalls can be initiated either by the manufacturer or by the FDA.

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Recalls

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The FDA classifies recalls according to the severity of the impact to an individual's health

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How are recalls classified?

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A situation in which there is a reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death.

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Class One (I) recall

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A situation in which the use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences, or where the probability of serious adverse health consequences is remote.

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Class II recall

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A situation in which the use of or exposure to a violative product is not likely to cause adverse health consequences.

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Class III recall

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Occurs when a product has a minor violation that would not be subject to FDA legal action. A product removed from the market as the result of tampering, without evidence of manufacturing or distribution problems, would be a market withdrawal.

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Market withdrawal

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Issued in situations where a medical device may present an unreasonable risk of substantial harm. In some cases, these situations are also considered recalls.

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Medical device safety alert

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The average retail price of a generic medication is less than one-third the price of a brand name medication. Also, in instances where a brand name product converts directly to a generic, the branded product often experiences a drastic market share erosion.

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It is important for the pharmacy technician to be aware of pending generic transitions and manage the pharmacy inventory according to a product's life cycle. How can the brand-to-generic transition impact inventory and inventory dollars?

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To maximize a pharmacy's GMROI, it would be a best practice to manage the brand name product inventory down at least 30 to 60 days prior to the introduction of a generic to the market.

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How can a pharmacy avoid a dramatic impact on the pharmacy inventory brought on by a brand to generic transition?

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Either by adopting an authorized generic phase or by converting to a generic medication directly.

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Drug manufacturers typically use one of two strategies when transitioning from a brand to a generic product, what are they?

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In a POS system, products are added electronically to the inventory when scanned upon receipt and then withdrawn from inventory when dispensed, recalled, or expired. POS systems help the pharmacy keep track of inventory and can also help predict future demand.

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How do POS systems contribute to inventory management?

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Cycle counts, a cycle count of selected products ensures the pharmacy's perpetual inventory remains accurate.

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Automated systems are generally reliable and fairly accurate, it is prudent to overlay a manual check to ensure inventory levels are accurate and not excessive. What manual checks are typically used to compliment POS systems?

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The shift from product oriented management to patient oriented management.

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In recent years, pharmacy management and pharmacy practice activities have changed, what prompted this change?

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When the manufacturer's quality control procedures detect an inconsistency with the products active ingredient(s), or with product composition, or product labeling.

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What types of actions might initiate a voluntary withdrawal of a pharmaceutical product by a manufacturer?

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A recall will have a positive impact on inventory if the recalled product can only be substituted with a more expensive product.

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Normally a recall has a negative impact on a pharmacy's inventory; under what circumstances might a recall positively impact inventory?

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By authorizing a generic product, the patent holder can set the price of the generic product before the patent expires and avoid a steep erosion in market price.

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Why would a drug manufacturer authorize a generic manufacturer to sell a bioequivalent generic product before a patent has expired?

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3.7 million dollars - 3.0 percent

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The average community pharmacy fills more than 200 prescriptions per day and handles more than ____ million dollars in sales each year and realizes a pretax net profit margin of just ____%

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slow turning inventory and excessive inventory

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Pharmacy Technicians must understand the dynamics of EIM and how it effects the pharmacy's GMROI. Technicians should carefully monitor inventory, especially ________ and ________.

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Implementing a JIT inventory replenishment system and ensuring that there are no OOS or excessive inventory.

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How can a Pharmacy Technician reduce the pharmacy's inventory carrying costs and improve the GMROI?

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Long Term Care Institutions

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Pharmacy Technicians should be aware that recent legislation has placed limitations on the dispensing of medications in _______

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a 7 to 14 day supply of medication

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The new legislation has limited pharmacies in these insitutions to dispensing no more than ____.

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Short cycle dispensing eliminates waste and mitigates the practice of excessive billing.

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What is the purpose of the new restrictions on the dispensing of medications in Long Term Care Institutions?

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Civil liabilities under the False Claims Act in the form of treble damages and a penalty of $5,500 to $11,000 for each false claim.

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If a pharmacist or a technician fails to reverse an unclaimed prescription within a reasonable time frame, what penalties might be imposed?

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6 months

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Best Practices: Never apply an expiration date to a RTS product that is longer than ______from the date of the first dispensing.

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7 to 10 days

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Best Practices: Return unclaimed prescriptions to stock within_______from when the prescription was first dispensed.

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30 to 60 days

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Best Practices: Manage BRAND product inventory down at least ________prior to generic introduction in a brand to generic conversion.

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periodic manual cycle count

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Best Practices: In addition to an automated perpetual inventory system it is best to employ a _______to ensure inventory accuracy.

The Role of the Pharmacy Technician in Inventory Management – Flashcards

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