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Inventory Management, DIR Fees

Building Pharmacy Inventory Optimization Workflow

Datarithm Team July 26 2023

Navigating DIR Changes, Streamlining Operations, and Leveraging Inventory Management

Running a successful pharmacy requires efficient inventory management, especially in today's dynamic healthcare landscape. With both evolving reimbursement models and the coming impact of Direct and Indirect Remuneration (DIR) fees, there’s never been a more optimum time for pharmacy owners to prioritize inventory optimization workflows.  

Why? Simply put, when your inventory is managed and optimized, it means you’ve improved your cash flow because instead of sitting on your shelves in the form of surpluses and ready-to-expire inventory, it’s in your bank account. And because DIR fees are both unpredictable and fast-approaching (January 2024 will be here before you know it), the best way you can be prepared for them is to build liquidity now.  

And if that feels daunting, we’re here to help. Fortunately, there are a few steps you can take that make this easy and achievable—even if your on-hands aren’t currently accurate. In this blog, we’ll delve into the significance of pharmacy inventory optimization workflows, explore how DIR changes are impacting pharmacies, discuss why implementing an inventory workflow is crucial for your pharmacy's success, and introduce Datarithm as an invaluable solution for inventory management. 

What is a Pharmacy Inventory Optimization Workflow? 

The term pharmacy inventory optimization workflow refers to the systematic process of managing and optimizing the stock of medications and supplies in your pharmacy. It involves streamlining inventory levels, monitoring expiration dates, analyzing medication utilization patterns, and establishing efficient ordering and restocking procedures. An effective workflow ensures that pharmacies have the right medications on hand, reduces waste, minimizes carrying costs, and enhances overall operational efficiency.  

Why Now: The Impact of DIR Changes on Pharmacies 

While it’s always a good time to implement an inventory optimization workflow, the fast-arriving DIR fee changes make now an especially good time. When you implement this type of workflow, you’re establishing a process for regularly and systematically redirecting cash from your shelves to your bank account, improving your liquidity, and setting yourself up to respond to fees.  

Direct and Indirect Remuneration (DIR) fees have become a significant concern for pharmacies across the United States. These fees, imposed by pharmacy benefit managers (PBMs) and Medicare Part D plans, are based on performance metrics such as medication adherence, patient outcomes, and cost containment. Unfortunately, the application and timing of DIR fees have been ambiguous and unpredictable, leading to financial challenges for pharmacies. 

The uncertainty surrounding DIR fees has a direct impact on pharmacy inventory management. For instance, DIR fees often result in retroactive adjustments to reimbursement rates, making it difficult for pharmacies to accurately calculate profits and margins.  

Starting in 2024, DIR fees will be based on the actual transaction price of a drug, rather than the list price. This means that pharmacies will be reimbursed based on the price they actually paid for the drug, rather than the price that was listed on the invoice. And while the Centers for Medicare & Medicaid Services (CMS) will require Medicare Part D plans to report their DIR fees more frequently and in a more transparent way, many in the industry are predicting fees to actually increase with these changes—hitting independent pharmacies that much harder. What we’ll see in 2024 is that you won’t be getting overpaid for drugs at point-of-sale, but will still be responsible for retroactive paying out retroactive fees for 2023. 

Because of the ebbs and flows and unpredictability of these fees, an efficient inventory optimization workflow becomes crucial to maintain profitability and ensure proper cash flow. 

How Creating an Inventory Workflow Can Help You 

  1. Cost Optimization: A well-designed inventory workflow allows you to minimize carrying costs by optimizing stock levels. By accurately forecasting medication demand and aligning it with prescription volumes, you can avoid overstocking or understocking situations, reducing unnecessary expenses. 

  2. Inventory Turnover: Maintaining an optimal inventory turnover ratio is essential for pharmacy profitability. An inventory workflow helps identify slow-moving or obsolete medications, allowing you to take appropriate actions such as negotiating returns or adjusting ordering quantities. This way, you can free up valuable shelf space and invest in medications with higher demand, ultimately boosting your revenue.  

  3. Minimizing Expiry + Waste: Medication expiration can lead to significant financial losses. An inventory workflow ensures proper monitoring of expiry dates, enabling proactive measures such as prioritizing near-expiry medications for dispensing and rotating stock to minimize waste. By efficiently managing expiration dates, you can avoid unnecessary costs and ensure patient safety.  

  4. Enhanced Patient Care: An optimized inventory workflow ensures that you always have essential medications in stock, improving patient satisfaction and safety. With a streamlined process for identifying and procuring critical drugs, you can avoid situations where patients need to wait or be referred elsewhere due to unavailability. 

Combined with the use of the Datarithm system, these workflows actually take work off your techs’ plates—not add to it—by giving them a simple process to follow and enabling them to do their jobs more efficiently. Which frees them up to focus on other things, like quality patient care, translating into better patient outcomes, and strengthening your pharmacy's reputation.  

Providing high-quality patient care is another way to ensure patients keep returning, building a loyal customer base that will continue to support your business in the face of changing regulations and reimbursement models.

Leveraging Datarithm for Inventory Management  

With Datarithm, you benefit from taking the guesswork off your shelves. Your staff can simply log on each day and see the work that’s there for them to do. When you combine this with an inventory management workflow, you provide them with simple-to-follow guidance through our task bar, so they’re not flying blind. Instead of wandering the shelves looking for possible surplus items, our system brings tasks like surplus, returns, and expirations to them, making what needs to be done clear and easy.  

  1. Intelligent Cycle Counting: Our system’s intelligent cycle counting ensures on-hand precision all year, a crucial point when improving your cash flow to be prepared for next year’s DIR changes. If your on-hands are not currently accurate, we know it can feel like you’re in a double-bind: you know it needs to be done, but it’s also expensive and time-consuming to manually count inventory to bring it up to date. 

    Our cycle counting can be configured so that as a pharmacy owner you can say, "I want everything that’s in my store to be touched within a month.” Instead of hiring someone or taking a whole weekend to do a count and paying people overtime, you can turn on Datarithm and know that within one month—or within whatever time frame you specify—our system’s cycle counting can be configured to deliver that, within your regular business hours.  

  2. Accurate Demand Forecasting: Datarithm utilizes historical data, prescription trends, and machine learning algorithms to provide accurate demand forecasts. This enables pharmacies to optimize their inventory levels, reduce stockouts, and avoid excess inventory. 

  3. Automated Ordering + Replenishment: Our software automates the ordering and replenishment process, eliminating manual errors and delays. Datarithm.io integrates with suppliers and wholesalers, facilitating seamless electronic ordering and real-time communication to ensure timely restocking. 

  4. Expiry Date Monitoring: Datarithm incorporates expiry date tracking functionalities, alerting pharmacies to medications approaching expiration. This feature allows proactive management of near-expiry medications, reducing waste and potential financial losses. 

  5. Surplus Inventory Management: Datarithm helps identify surplus inventory through data analysis and inventory turnover calculations. It enables pharmacies to optimize stock levels, negotiate returns or exchanges with suppliers, and redirect resources to high-demand medications.

Get Your Pharmacy Inventory Workflow Working 

Pharmacy inventory optimization workflows are essential for navigating the impact of DIR changes, streamlining operations, and maximizing profitability. By implementing an efficient inventory workflow and leveraging tools like Datarithm, pharmacies can optimize stock levels, minimize waste, ensure regulatory compliance, and provide superior patient care.  

With the DIR fee changing looming cash on hand has never been more important to pharmacy owners. Even if your on-hand counts aren’t perfect, Datarithm makes it both easy and doable to get you to precision, ensuring that your information is accurate, and your inventory is accounted for.  

Schedule a Demo 

Datarithm® Pharmacy Inventory Management 

With Datarithm®, the benefits you'll see from our inventory management solution will pay for themselves in less than 3 months. Get a Daily Action Plan, add time & efficiency, improve liquidity—and get prepared for 2024’s DIR fee impact. 

Schedule a demo to see our 3-step process to optimize your prescription drug inventory. 

Schedule a free demo with Datarithm today

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