Inventory Management - Complete Study Guide

Inventory Management Deep Dive

Effective inventory management is a core responsibility of pharmacy technicians. It ensures that medications are available when needed, minimizes waste and costs, and maintains regulatory compliance. This topic covers the principles and practices tested on the CPHT exam.

Goals of Inventory Management

• Maintain adequate stock to fill prescriptions promptly.
• Minimize expired and unsalable medications (shrinkage).
• Reduce carrying costs (the cost of holding inventory).
• Ensure compliance with regulations (especially for controlled substances).
• Prevent drug diversion and theft.

Ordering Systems

Automatic Replenishment / PAR Levels

PAR (Periodic Automatic Replenishment) levels define the minimum and maximum quantities of each item to keep in stock. When stock drops to or below the minimum (reorder point), the system generates an order to bring it back to the maximum.

Just-In-Time (JIT)

Inventory is ordered to arrive just as it is needed, minimizing the amount of stock held on-site. This reduces carrying costs but requires reliable supply chains.

Manual Ordering

Staff visually inspect stock levels and place orders as needed. Less efficient than automated systems but may be used for slow-moving items.

Wholesaler Ordering

Most pharmacies order from a primary wholesaler (e.g., McKesson, Cardinal Health, AmerisourceBergen) for regular stock. Orders are typically placed daily and delivered the next business day.

Direct Ordering from Manufacturer

Some items (particularly specialty drugs or controlled substances) may be ordered directly from the manufacturer. This may offer cost savings for high-volume items but often requires larger minimum orders and longer lead times.

Receiving Orders

When a shipment arrives, the technician should:

1. Verify the order against the purchase order or invoice.
2. Check for damaged or missing items.
3. Verify drug names, strengths, NDC numbers, and quantities.
4. Check expiration dates - do not accept short-dated products unless planned for immediate use.
5. Place refrigerated and frozen items in proper storage immediately.
6. Check controlled substance orders carefully:
   • C-II orders received against DEA Form 222 must be verified and the receiving copy signed and dated.
   • C-III through C-V orders should be verified against the invoice.
7. Report any discrepancies to the pharmacist and the wholesaler.

Stock Rotation and Expiration

• FIFO (First In, First Out): Older stock is placed in front and dispensed before newer stock. This is the standard practice to reduce expiration waste.
• FEFO (First Expired, First Out): Similar to FIFO but based specifically on expiration date rather than receipt date. The item with the earliest expiration date is used first.
• Expired medications must never be dispensed.
• Short-dated products (typically those expiring within 3-6 months) should be flagged and used promptly or returned if the wholesaler accepts them.
• Monthly shelf checks should identify and remove expired products.

NDC Numbers

The National Drug Code (NDC) is a unique 10-digit identifier for each drug product:

• First segment (5 digits): Labeler code - identifies the manufacturer or distributor.
• Second segment (4 digits): Product code - identifies the specific drug, strength, and dosage form.
• Third segment (1-2 digits): Package code - identifies the package size and type.

When billing insurance or selecting products, the NDC must match the intended drug product. An incorrect NDC can cause claim rejections.

Returns and Credits

• Medications that are expired, damaged, or recalled may be returned to the wholesaler for credit, subject to the wholesaler's return policy.
• A reverse distributor handles the return and destruction of medications that cannot be returned to the wholesaler.
• Controlled substances require special return procedures (reverse distributor must be DEA-registered).
• Opened or partially used medications generally cannot be returned.
• Keep documentation of all returns for auditing purposes.

Drug Recalls

When a drug recall is issued, the pharmacy must:

1. Identify affected products by lot number and NDC.
2. Remove affected products from stock immediately.
3. Quarantine removed products in a separate area until they can be returned.
4. Notify patients who received the recalled product (if necessary, based on recall class).
5. Follow the recall notice instructions for return or disposal.
6. Document all actions taken.

Controlled Substance Inventory

• Federal law requires a biennial (every 2 years) inventory of all controlled substances.
• Many pharmacies conduct more frequent inventories (monthly, weekly, or perpetual) for C-II drugs.
• A perpetual inventory system tracks each unit received and dispensed in real time, maintaining a running count.
• Discrepancies must be investigated immediately and may need to be reported to the DEA (Form 106 for theft or significant loss).

Cost Management Concepts

Term	Definition
AWP (Average Wholesale Price)	The published average price at which wholesalers sell to pharmacies (used as a benchmark)
WAC (Wholesale Acquisition Cost)	The manufacturer's list price to wholesalers
MAC (Maximum Allowable Cost)	The highest amount an insurance plan will reimburse for a generic drug
U&C (Usual and Customary)	The pharmacy's retail price charged to cash-paying customers
Carrying cost	The cost of holding inventory (storage, insurance, capital tied up in stock)
Turnover rate	How many times inventory is sold and replaced over a period. Higher turnover = more efficient.

Formulary Management

In institutional settings (hospitals), a Pharmacy and Therapeutics (P&T) Committee maintains a formulary - a list of approved drugs. Key points:

• Drugs on the formulary are stocked; non-formulary drugs require special approval.
• Therapeutic interchange policies allow pharmacists to substitute a formulary drug for a non-formulary drug within the same therapeutic class (with prescriber notification).
• The formulary is based on efficacy, safety, and cost considerations.

Exam Tips

• FIFO and FEFO are essential concepts - understand the difference and why they matter.
• Know the three segments of an NDC number and what each represents.
• DEA Form 222 is required for ordering C-II drugs.
• A perpetual inventory provides the tightest control over controlled substance counts.
• Turnover rate is a measure of how efficiently inventory is managed.
• Always check expiration dates when receiving shipments.