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Independent Pharmacies

Rx Management: Why Today's Surplus is Tomorrow's Nightmare

Datarithm Team August 05 2022

Pharmaceutical inventory is a tricky beast. On the surface, it might seem like yesterday's surplus is today's lucky windfall, but that's not typically the case. In fact, depending on the drug and how it's used, surplus quantities of some medications can actually lead to big problems for independent pharmacies as it relates to cash flow.

Inventory Is Likely Your Largest Investment

Inventory represents a pharmacy's largest investment and expense, which is why proper inventory management is such a critical area of focus for pharmacies. The goal of inventory management is to ensure that the pharmacy has the right medications in stock at all times, while also minimizing waste and maximizing profit. There are several different methods that can be used to manage inventory, including the use of software or an outside service.

However, no matter what method is used, there are some basic principles that should always be followed:

  1. First, it is important to track both incoming and outgoing inventory. This will help to ensure that stock levels are accurate and that medications are not being stolen or wasted.

  2. Second, it is important to set up a system for ordering new medications. This system should include a way to track backorders and make sure that new medications are received in a timely manner.

  3. Finally, it is important to have a system for managing expired medications. This system should ensure that expired medications are disposed of properly and that they are not taking up valuable space in the pharmacy.

By following these basic principles, independent pharmacies can ensure that their inventory is well-managed and that they are able to minimize waste and maximize profits.

Prescription Surpluses Keep Cash "On The Shelf"

Prescription surpluses reduce pharmacies' cash flow by tying up their money in inventory instead of having it in the bank. This can be a significant problem for pharmacies, as they may need to take out loans to cover their operating expenses.

A surplus occurs when a pharmacy buys more drugs than it can sell within a certain period of time. The most common cause of surplus is when changes are made to insurance reimbursement rates. When rates go down, pharmacies may find themselves with excess inventory that they can't sell at a profit.

Another cause of surpluses comes from changes in drug utilization patterns. For example, if a new drug comes on the market that is similar to an existing drug, patients may switch to the new drug, leaving the pharmacy with a surplus of the old drug. 

Surpluses can also occur when patients don't fill their prescriptions or when they switch to another pharmacy. Pharmacies typically try to sell their surpluses to other pharmacies or to wholesalers, but this can be difficult if there is a lot of competition for the same drugs.

When surpluses tie up a pharmacy's cash flow, it can be difficult for the pharmacy to pay its bills on time. This can lead to late fees and penalties, which can add up quickly. In some cases, pharmacies may even have to take out loans to cover their expenses.

The Perpetual Inventory Method

As a pharmacy owner, you are always looking for ways to optimize cash flow and increase efficiency. The Perpetual Inventory Method is an automated way to keep track of your inventory and ensure that you have the products you need when you need them.

The Perpetual Inventory Method is a type of inventory management system that uses real-time data to track inventory levels. This information is then used to replenish stock as needed so that you never run out of the products you need. This system can be used for both physical and electronic inventory.

There are many benefits to using the Perpetual Inventory Method, including:

  • Reduced Costs: By using this system, you can reduce the amount of time and money you spend on inventory management.

  • Increased Efficiency: This system can help you to become more efficient in your operations, as you will no longer need to manually check stock levels or place orders.

  • Improved Customer Service: By always having the products you need in stock, you can provide better customer service and build loyalty among your clients.

If you are looking for a way to optimize cash flow and increase efficiency in your pharmacy business, the Perpetual Inventory Method is a great option to consider. This automated system can save you time and money, while also improving your customer service. It's one way to combat prescription surpluses and ensure that your pharmacy has the cash it needs to operate. This method will help you keep track of your stock and avoid having too much (or too little) medication on hand.

Download Guide: 5 Tech Trends We're Tracking in Pharmacy Inventory Management

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