Financial Analysis in Pharmacy Practice

Pharmacy managers face unique challenges when it comes to the proper management of inventory, with balancing inventory levels that satisfy patients’ needs while minimizing costs the primary goal. This goal is not met when inventory is managed without careful planning and analysis – for example, just ordering substantial quantities of each formulary medication in an institutional setting. While this method of controlling inventory may result in meeting the objective of appropriate patient care, it will also result in excess levels of inventory sitting on the shelves and represent a significant use of cash. The secondmajor consideration for pharmacymanagers is to decide the appropriate level of resources (cash) to be committed to inventory. Recognizing that inventory is included on the balance sheet as a current asset, it is less liquid given its little value to the pharmacy operation until it is dispensed, billed for and payment/reimbursement collected, which is known as the cash conversion cycle. Recently in large chain/grocery chain/mass merchandise pharmacies, inventory control has become automated using barcode technology to provide identification of inventory and track transactions in real time as they occur.