In pharmacy, there are a few different ways that drug product is organized on the shelves. This organization is important because there are thousands of different combinations of drug and strength. Efficiently in finding the correct product on the shelf is important. The two systems that are used in our stores are alphabetizing drugs on their name (brands by brand name, generic by generic name) and having two sections, one for brand and one for generic, both alphabetized.
The brand section for oral solids at one of our stores once spanned an equal number of bays as the generic drugs. Over the years, with brands going generic and fewer new brands being released, the shelving space relegated to the brand name drugs has diminished. Significantly. Currently we have about twelve 4-foot shelves tasked to organizing our brand name medications: about a quarter of the size it was back in 2003 when I began my ownership journey.
Bulk medications, like inhalers, for example, have maintained a higher percentage of brand name product over the years. This has to do with the specialization required to create generics of these dosage forms. Here, our brand and generic products are stored side-by-side. We have about 36 feet of shelving dedicated for this section.
So, why am I describing my shelves to you? In the last months, we have made the decision to significantly cut back on our inventory of brand name medications in order to increase turns and to free up cash flow. For faster-moving products like Eliquis, we are maintaining a 2-3 day supply on the shelf. For slower moving items, we would typically have just a partial bottle or even no stock. For bulk items, the number carried is often zero.
As I pursued my shelves the other day, I was struck by how bare certain areas of the shelves were. The inhaler section, which normally was stacked 1-3 units deep and covered most of the available space was almost bare. The oral solid brand shelves were also very spare. We were approaching zero stock on most of these expensive items.
The question, therefore, is what impact is this having on the practice. And because we are approaching the end of the year, our inventory crew just happened to be scheduled for a visit. The result? Our inventory turns have improved, and are >14, and our overall inventory was down by $90,000.
This transition was not made in isolation. We have worked hard to use MedSync to ensure that patients have their medications on time. We have socialized these changes to our patients, asking them to give us a day or more notice on certain refills if they are not in MedSync. And while there are always outliers, this has worked well.
Our purchases went down for a short time as we burned through excess inventory, but now that we are back at equilibrium, we are still spending the same amount with the wholesalers. The differences are two fold: we don’t have the extra inventory on our shelves and we have more cash on hand if needed.
Given the challenging situations that have been thrust upon pharmacy, with brand name medications often being paid below our costs, this was a logical first step. If legislators don’t take action to reign in the anti-competitive practices of the pharmacy benefit managers, the next steps will be to start paring our brand offerings or shifting those prescriptions to mail order as perviously described.
Pharmacy owners need to be nimble today. Make changes quickly, responding before the crisis occurs. Make Every inventory Encounter Count.
