Controlling financial variables--changing prescribing patterns

Techniques of formulary management, pharmacy and therapeutics committee intervention, and the use of clinical pharmacy services to change prescribing patterns and contain costs in hospital pharmacy departments are reviewed. Methods of using the formulary to contain costs include deletion of generic and therapeutic equivalents, inclusion of therapeutic categories and cost codes, and regular reviews and updates of its contents. Drug monographs for formulary evaluation prepared for the P & T committee should include a comparative review of other drugs in the therapeutic category and a cost impact statement. The P & T committee can help contain costs by developing policies for automatic stop orders and restricted drug use. Clinical pharmacy activities that can result in cost savings include physician education (focused on prescribing), target drug programs, target disease programs, pharmacist participation on TPN and i.v. therapy teams, and patient training programs for home care. A matrix for evaluating cost-containment activities is presented. By tailoring the described methods to departmental personnel resources and hospital needs, the pharmacy can be effective in controlling costs.     

Methods of inventory control

Various methods for controlling inventory are described, and the advantages and disadvantages of each are discussed. The open-to-buy (OTB) budget method limits purchases to a specific amount of funds available for purchasing pharmaceuticals during a specified period. The emphasis of the OTB method is financial control of the pharmacy inventory. Although it is useful in monitoring and adjusting the dollar value of the inventory, it should be combined with other methods for a total inventory control system. The primary emphasis of the short-list method is to provide accurate and timely inventory information to the person responsible for order placement. The short list identifies the items that are in short supply. It is the most common feedback and control mechanism in use, but it is best suited for settings where duplicate or reserve stock is maintained and monitored by more rigorous methods. The main objective of the minimum and maximum method is to determine when and how much to order of each item. It also provides limited dollar control. The major disadvantage of this method is the time it requires to establish the minimum and maximum levels and to update them regularly to reflect changes in demand. The stock record card method is used to record information on the movement of goods in and out of the storage area. Stock cards can also be used to monitor inventory levels and facilitate order initiation. It is probably the optimum method to be used alone. The most effective system of inventory control is one employing a combination of these methods tailored to meet the institution's needs and available resources.     

Parenteral packaging waste reduction

The consumption of pharmaceutical products generates waste materials which can cause significant environmental impact when incinerated or landfilled. The purpose of this work is to stimulate discussion among hospital pharmacists and purchasing managers relating to the waste management aspects of their purchasing decisions. As a case study example, a number of commercially available "single use" parenterals are evaluated from a waste reduction perspective, for both the product container and for the packaging of these containers. Glass vials are non-incinerable, and are currently non-recyclable due to the higher melting temperatures required for borosilicate glass. However, plastic vials are potentially both incinerable and recyclable. Packaging quantities are considerably lower for plastic vials on a unit container basis, and also vary to a measurable degree between different manufacturers for a given type of container material. From an environmental perspective, waste reduction potential should become an important criterion in the selection of pharmaceutical products for hospital use.     

Challenges in purchasing and inventory control

In this concluding installment in a multipart series, issues that should be considered in the improvement of hospital pharmacy purchasing and inventory control systems are presented. Pharmacists must be aware of possible variation in bioavailability among different formulations of the same drug and evaluate new vendors critically. Hospital pharmacists and industry representatives should strive for a cooperative relationship by fostering ongoing dialogue. Pharmacists must continue to demand competitive bid prices on generically equivalent products of equal quality. Firm contact prices cannot be expected if product use estimates are unreliable. It is unethical to encourage additional price reductions on competitive products after a formal bid has been received. Institutions should limit their participation to one group purchasing organization or wholesaler for the competitive bid process. Inventory management through methods such as ABC analysis, economic-order quantities, calculated optimum reorder points, and other quantitative measurements should become commonplace. The use of data processing systems and devices can enable pharmacists to become more proficient at pharmaceutical purchasing and inventory control. The acquisition and distribution of pharmaceuticals in health-care institutions require good management to capture the opportunities in this area for pharmacy to contribute to fiscally sound health care.     

Purchasing and inventory control systems management

This article introduces a 13-part series of articles on managing the purchasing and inventory control systems for the hospital pharmacy department. The series will focus on the various components of the purchasing and inventory control process. Though the purchasing and inventory control functions are substantially interrelated, each will be presented separately. Most installments will present examples of applications in a wide variety of institutional settings. Topics to be discussed include historical perspectives, assessment of vendors and product selection, bid solicitation and contract negotiation, evaluation of drug procurement alternatives, development of a purchasing system, coordinating the purchasing process, objectives of inventory control, quantitative measurement of inventory control, methods of inventory control, management of the system, automated information systems, and quality assurance.     

Quantitative measurements of inventory control

The use of quantitative measurements for improving inventory management efficiency in hospital pharmacy is reviewed. Proper management of the pharmacy inventory affects the financial operation of the entire hospital. Problems associated with maintaining inadequate or excessive inventory investment are discussed, and the use of inventory valuation and turnover rate for assessing inventory control efficiency is described. Frequency of order placement has an important effect on inventory turnover, carrying costs, and ordering costs. Use of the ABC system of inventory classification for identifying products constituting the majority of inventory dollar investment is outlined, and the economic order value concept is explained. With increasing regulations aimed at controlling hospital costs, pharmacy managers must seek every possible means to improve efficiency. Reducing the amount of money obligated to inventory can substantially improve the financial position of the hospital without requiring a reduction in personnel or quality of service.     

Managing the inventory control system

The four functions of management--planning, organizing, directing, and controlling--are described in relation to the hospital pharmacy inventory control system. Planning includes the development of inventory system objectives and identification of the resources needed to complete them. Organizing requires the manager to decide on the best method of grouping system activities and resources to complete the objectives in order of priority. Directing is a continual activity that involves obtaining optimal performance from the inventory system resources available. Controlling consists of regulation and verification of inventory system activities. The effective inventory system manager integrates planning, organizing, directing, and controlling in a continuous cycle.     

Automating the purchasing and inventory control functions

Factors involved in computerizing the purchasing and inventory control functions in hospital pharmacies are described. When initiating an automated purchasing and inventory control system, a feasibility study should first be conducted to determine the extent of automation needed to develop a cost-effective system. The design of the system will depend on the extent to which the department of materials management is involved with other hospital departments. The advantages and disadvantages of decentralized versus centralized systems are discussed, and criteria for selecting hardware and software vendors are presented. A return-on-investment analysis should be performed to validate the benefits or savings expected from implementing the new automated system. Factors to consider during implementation of the new system and future developments affecting purchasing and inventory control systems, such as bar coding, are discussed. With the current concern about rapidly rising health-care costs and the need to enhance productivity, the development and implementation of automated purchasing and inventory control systems are important strategies for institutions to pursue now.     

Computer-assisted inventory control utilizing ABC inventory analysis and EOQ in a hospital pharmacy.

In this paper, a project whose purpose was to develop and implement a workable inventory control system is discussed. Specific objectives of the project included the avoidance of out-of-stock situations, minimization of total inventory costs, and increased efficiency of the purchasing power. The initial step in the project was the determination of both fixed and variable ordering and carrying costs. Then a micro-computer was enlisted to print an inventory listing according to the total cost based on usage of the item for the past year and the inventory was subsequently classified into A, B and C categories. The economic order quantity (EOQ) was calculated for items in class A, while B and C items were purchased on a min/max basis. Also, a weekly ordering schedule for class A items was developed based on frequency of ordering. Following this schedule, all items to be ordered on a particular week are printed by the computer. The computer maintains a perpetual inventory, and a list of B and C items below minimum quantity is printed upon request. The efficiency of the inventory control increased dramatically (50%) after project implementation. Although cost savings were found, they were not substantial compared to our previous system (less than $5,000). Out-of-stock situations for B and C items occurred almost as frequently as before project implementation. This study demonstrated that the EOQ concept in conjunction with ABC inventory analysis may be an effective inventory control system in hospital pharmacy. Increased efficiency and cost savings were achieved. Protection against unpredictable demand and avoidance of out-of-stock situations can be achieved by closer adherence to stated ordering procedures for B and C items.     

Quality assurance standards for purchasing and inventory control

A process is described for quality assurance in pharmaceutical purchasing and inventory control. A quality assurance program should ensure that quality drugs are purchased at the lowest price, drug products are available when needed, the system is managed efficiently, internal controls are provided, drug products are stored under appropriate conditions, and laws, regulations, accreditation standards, and procedures are followed. To meet these objectives, product quality, vendor performance, the department's system of internal controls, purchasing data, and storage conditions should be monitored. A checklist for evaluating purchasing and inventory practices and a sample audit form listing quality assurance criteria, standards, procedures, and recommended actions are provided. A quality assurance program for pharmaceutical purchasing and inventory control should define institution-specific criteria and standards and use these standards for continual evaluation of all aspects of the purchasing and inventory control system. Documentation of quality assurance activities should be provided for use by the purchasing department, hospital administration, and regulatory bodies.     

Chemotherapy waste reduction through shelf-life extension

Minimization of total drug expenditures within the health care system, without affecting patient outcome has become a rational goal in today's economic, environment. The objective of this study was to observe the effect of extending the shelf-life for three chemotherapy medications, [doxorubicin, epirubicin and mitoxantrone] on wastage of these medications. Prior to and following the introduction of new, longer, shelf-lives for these three medications, prospective, non-randomized, unblinded four-month chemotherapy wastage audits for all chemotherapy medications were completed at 18 institutional sites within Ontario (six Ontario Cancer Treatment and Research Foundation clinics, ten Ontario hospitals and two preparation sites in a large cancer treatment centre). Data were provided by 18 sites in 1989 but from only 12 sites in 1990. Ten of the 12 sites extended their shelf-lives for each of doxorubicin, epirubicin and mitoxantrone, and on average, waste at these sites was reduced to less than 1% of the 1989 total for epirubicin, less than 15% for doxorubicin and 35% for mitoxantrone. Many sites eliminated waste entirely for these drugs. For sites which did not extend their shelf-lives, the waste remained unchanged. We conclude that appropriate extension of the shelf-life for chemotherapy medications can reduce waste, and is a relatively simple method of reducing expenditures without affecting health outcomes or adding additional complications to IV chemotherapy.     

Improving a pharmaceutical purchasing and inventory control system

A method by which a pharmacy department improved its purchasing and inventory control system is described. System changes to the computerized inventory control system included implementation of a formulary, affiliation with a group purchasing association, and transfer of specified purchasing and inventory control functions to the technical staff of the purchasing department. Pharmacy maintained the decision-making authority over all vendors and dosage forms of drug products. Optimal results were achieved when the purchasing department's pharmacy buyer position was staffed with an employee who had previous experience as a clerical worker in the pharmacy. The authors state that this system has proved to be an effective, cost efficient method of purchasing and inventory control of pharmaceuticals in their hospital.     

Electronic data interchange for pharmacy inventory control

The use of electronic data interchange (EDI) for controlling pharmacy inventory at a 303-bed hospital is described. The hospital, which belongs to a group purchasing consortium, uses EDI to exchange information with its primary drug wholesaler. The pharmacy's personal computer and software provided by the wholesaler are used. EDI enables the pharmacy to (1) select and order items by using hand-held bar-code scanning devices, (2) upload this information into the pharmacy's computer, (3) review the order before transmission, and (4) access the wholesaler's inventory. The pharmacy also uses EDI with its primary i.v. supplier. Using EDI for placing the daily pharmaceutical and i.v.-supply orders reduces by one half the daily time expenditure for purchasing. In addition, EDI provides various inventory-related reports. EDI provides an efficient and effective way to control pharmacy inventory.     

利用周期订货法进行药品库存控制管理

目的：在保证临床用药的基础上，降低药品库存水平。方法：采取ABC分类法及周期订货法，对重点药品的库存进行最高库存管理。结果：实施库存控制后，有效地降低了库存总量。结论：在使用ABC分类法及周期订货法时，结合计算机管理，使库存管理有效、简便、准确、快速。     

环孢菌素A菌渣无害化减量化技术研究

目的 采用嗜热微生物处理环孢菌素菌渣，实现环孢菌素生产过程中的菌渣减量排放。方法 将培养好的厌氧芽孢杆菌(Anoxybacillus mongoliensis SIIA-1501a)、土芽孢杆菌(Geobacillus sp. SIIA-1501g)和极端嗜热菌(Calditerricola yamamurae SIIA-1501c)依次分期加入环孢菌素菌渣堆肥培养，使菌渣减量化，并使菌渣中的环孢菌素残留降低。结果 环孢菌素菌渣经过厌氧芽孢杆菌堆肥处理5~8d，嗜热地芽孢杆菌堆肥处理4~7d和极端嗜热菌堆肥处理4~6d，环孢菌素菌渣减量80%以上，废渣中环孢菌素残留去除率近99%。结论 采用三联菌处理环孢菌素菌渣，实现了无害化和减量化，废渣中环孢菌素残留基本去除，具备较好的环境效益和社会效益。     

Social change and the control of psychotropic drugs-risk management, harm reduction and 'postmodernity'

This paper argues that in order to understand the broad tide of change in drug control in recent times, we need to link these changes to a general understanding of social change. The paper sketches out how modern society arose and how it is giving way to the postmodern. Two themes are then developed. The first concerns the way that the state shrinks in postmodernity and links this to drug control, mentioning the example of random drug testing in the workplace as a good example of the change. It then moves to looking at the related shift in social control regimes from the 'corporal' regime of the premodern through the 'carceral' regime of the modern to population and risk management in the postmodern. It argues that in society in general there is a tension between carceral discipline and the amoral management of risk and that this is exhibited in drug control as a struggle between individual treatment and law enforcement on the one hand and 'harm reduction' on the other. This is illustrated by reference to a persistent tension within the NCADA enterprise.