Drug House Management PDF Notes

 Drug House Management

Drug House is a American turn used to pharmacy drug House
sale medicine and there other items like cosmetic. The drug House is organised
to make in hospital the drug House Management obtain drug from different

Organisation of Drug

Planning, design making, organising, staffing, directing and
controlling are the functions required to be managed for Organisation

The management function involves all those activities which
are required for making the business economically productive.

Infrastructure of a
Drug House:-

1) Site selection for Drug House

2) Space layout for Drug House

3) Design of Drug House

Selection of Site:-

• Selection of a suitable site is the main objective of
entrepreneurs for making their business successful.

• Site selection is done after taking the decision of
opening a drug House, getting required qualifications and experience.

Space layout of Drug

The layout design is the plane proper and maximum
utilization of space inside four wall of business.

There should be signal iterance for the customer. The shop
area should be required for private room the license should be display.

Ideal features of
layout design

     It should
increase the sale of store.

     It should
fascinate a large number of customers.

     It should
decrease the selling expenses to a minimum.

     It should have
an adequate entrance for incoming goods.

     It should
provide customers satisfaction.

Legal requirements
for establishment of drug.

There are various parameters which should be analysed and
evaluated for deciding whether or not a community requires a pharmacy. These
parameters provide the opportunity for improving services to the community by
encouraging the efficient use of skilled staff.


• In drug store management purchasing refers to acquiring
various types of medicine from the external network.

• In other words purchasing refers to the act of buying the
drugs or medicines from the manufacturers, supplies, wholesalers and their
agents like distributors or from the private or public supplies.

Objectives of

The purchasing of drugs is the most important activity which
is undertaken with the following:

A. Availability of
drugs at the minimum possible costs:-

Procurement of various chemicals for the production of drugs
constitutes inputs for a manufacturing unit at the minimum possible rates

B. Enable regular
flow of production.

Incessant supply of various constituents of inputs ensure a
smooth and continuous production process which in turn keeps the production
cost in check and thereby maintains the profitability level of the pharmacy.

C. Establish cordial
relations with suppliers

Maintaining a cordial relationship with the suppliers goes a
long way in creating an affirmative reputation of the pharmaceutical company in
the market.

1)   Acquisition of
supplies at the most competitive rates.

2)   Getting priority
over others in supply of medicinal products during a period of their shortage.

3)   Getting advance
signals of impending shortage of drug supply.

4)   Timely intimation
of any innovation with regard to a substitute of the medicine currently in use.

5)   Getting facility
of making payments with delay.

Importance of

Purchasing is becoming a core competency of the firm,
finding and developing suppliers and bringing in expertise that is highly
valued by the organization. Purchasing is generally responsible for spending
more than 50% of all the revenues the firm receives as income from sales.

Selection of

A supplier in pharmaceutical industry refers to a person who
is engaged in the activity of selling or supplying the drugs.

The primary motive of the drug store is to properly select
and monitor the supplier for the supply of the pharmaceutical products.

Credit Information:-

The supply by retailer / manufacture of any drug shall be
made against a cash or credit memo containing the following information.

1)   Name, address and
sale license number of dealer.

2)   S.r. number of
the credit memo

3)   Name and quantity
of the drug supplied.

4)   Some important
following particulars:- Date of purchase, Name and address of person, number of
relevant license.

5)   Name of the drug,
quantity and batch number.

Name of the manufacturer
of the drug.


• Tender refers to the procedure in which government gives
the invitation for bidding the contract of large projects and these bids should
be submitted within a specified period of time.

• It also means the invitation of bids for a project or to
give acceptance of the formal offer like takeover bids.


• A contract for goods and services is a legally binding
agreement between a buyer and seller for a specified period of time. In the
public sector the purchaser is usually the government and provide may be a
private sector company.

• In drug house management a contract refers to an agreement
between a retail Pharmacist and wholesaler for the purchase of pharmaceutical
product during a specific time period by law.

Price determination:-

     The price
determination of pharmaceutical product is done at national level.

     India has
developed some practices to control the price from the period of 1970s.

     The essential
commodities act 1955 was established under which drug price control over was
issued and all drugs under the national list of essential medicines falls in
the category of DPCO.

     The authority
responsible to control the price in pharmaceutical industry is national
pharmaceutical pricing authority (NPPA)

     In price
determination a specific factor is taken into consideration for paying
attention towards the level of inflation.

The following factors
of price determination.

a. Purchase price

b. Shipping cost

c. Clearing and custom charge d. Transportation charges

e. Mark-up to cover administrative and other costs.

Legal requirements in
price control on Drugs:-

• The pricing of drugs is administered under the provisions
of the drug price control order (DPCO) and National pharmaceutical pricing
policy by the National pharmaceutical pricing Authority under development of
pharmaceuticals ministry of chemicals and fertilisers.

• Price controls are applicable to what is generally known
as Scheduled drugs.

• Those medicines listed out in the schedule-I of Drug price
control order issued by India government from time to time.


The process of providing codes, symbols or distinct name to
the pharmaceutical products. This is done so that the required materials of
drugs can be easily and quickly identified in the drug store.

Methods of

1)   Alphabetical

2)   Dosage forms

3)   Random Bin

4)   System Level

5)   Frequency of Use

6)   Commodity Code

Handling of Drugs
storage and other hospital supplies:-

• The medicinal products should be stored in each
temperature and with the adequate security in order to facilitate easiness in
using the drugs and also to safeguard the medicines from any harmful effect.

• The main objective of handling of Drugs store is to
safeguard the different medicinal products stored in the drug store from theft,
losses and wastage to smooth supply of pharmaceutical product to the ultimate
user in a cheapest way.

Inventory Control:-

The procedure of handling inventory of medicines, drugs so
as to fulfill the demand of the customers at comparatively lower prices and
with less amount of investment is called Inventory control.

Objectives of
Inventory Control:-

1)   It assures
adequate supply of medical goods to customers and minimums the changes of
shortages in a drug Store.

2)   It helps in
maintaining proper records in the drugs Store.

3)   It helps in
short-term and long-term planning for the production of medical product.

4)   It also optimizes
the amount of capital tied up in inventory of a drug store.

5)   Inventory control
helps in bringing efficiency in purchasing, storing, accounting for medical

Importance of
Inventory Control:-

1)   Better Service to

2)   Continuity of
Production Operations

3)   Reduces the risk
of loss

4)   Protects variation
in Output

5)   Proper
Utilisation of working capital

6)   Check on loss of

Modern Techniques of
Inventory Control

ABC Analysis:- The system of evaluating the drugs that are
present in the storage on their cost price is called as ABC Analysis.

They are classified into three groups

1)   Category A

2)   Category B

3)   Category C

Category A of the
ABC Analysis Carries maximum amount of the total stock of drugs.

The drug store wants to take benefits from these drugs in
terms of money then they need to manage these drugs properly.

The calculation of annual expenditure is done by multiplying
the annual consumption from its unit cost in ABC analysis. The cumulative cost
of drugs was calculated by organising the Annual Drug Expenditure (ADE) in the descending
order according to the value of money.

They need to manage those drugs properly. To reduce the cost
of acquiring, storing and issuing of drugs right supervision is required.

Category B
comparatively less supervision is required and the orders are required to be
placed semi-annually.

Category C are
drugs bought in large quantity and therefore its control is leveraged.

Advantage of ABC

1.   Label of Control

2.   Careful

3.   Safety Stocks

4.   Quantity discount

5.   Layout of stores.

Disadvantage of ABC

1.   In big industries
there are large number of drugs so the recording and calculations become very

2.   Increase stock of
drugs of category C may lead to deterioration and obsolescence.

3.   Modification in
some items falling in category B drugs could be very important.

VED Analysis:-

This analysis depends on the crucial values and the shortage
cost of drugs.

VED Are classified in three groups.

1. Vital (V) :-
The vital category contains drugs that are necessary for the life of the
patient and needs to be present all the time in the hospital. These Drugs it
will hamper the daily working of the drug store.

2. Essential (E) :-
The essential category contains medicine which are comparatively less crucial and
kept in the hospital under this group. The categorisation of these drugs is
done according to the urgency of the stock.

3. Desirable (D) :-
The Desirable category contains medicine which are not crucial and are kept in
the hospital under this category.

The shortage of these drugs dose not cause any harm to the
life of the patient.

Lead Time:-

• The average time period between the placing of order of
medicines and receipt of medicines is called Lead Time.

• It is considered when the other of the medicines is to be

• It helps in identifying the amount of medicines to be
ordered in time so that there is no scarcity of medicines in the hospital.

Inventory Carrying Cost:-

     Carrying cost
refers to the cost which is incurred due to storing of drugs in an inventory.

     It is also
popular by the name of holding cost.

     The elements of
carrying cost include the following.

     The opportunity
cost of capital invested in the stock.

     The obsolescence
cost includes scrapping and possible rework.

determination cost and costs incurred in preventing deteriorations.

Safety Stocks or
Buffer Stock:-

Safety stock, also referred to as buffer stock, is the
excess inventory that a company carries to make sure they don’t run out of
stock on something.

You can think of this like just in case inventory. It’s
extra merchandise stored just in case they run out of the items on the shelves.

Minimum and Maximum
stock levels:-

• Minimum and maximum stock levels are stock limits for the
customer location product that the customer agrees upon with the supplier. The
projected stock must not fall below the minimum stock level. For more
information, see Calculation of Projected Stock.

• The maximum stock level is the maximum quantity of stock
that is to be on hand at the customer. You can use different methods to determine
these stock parameters.

Economic order

• Ordering costs and carrying cost of drugs are taken into
consideration while determining economics order quantity of a Drug store.

• Ordering costs is basically the cost associated with
receiving an inventory while carrying costs includes handling warehousing and
allied cost.

Scarp and surplus

The residue attained in the manufacturing process is called
scrap. These are the items whose value can be recovered but in a very less
amount without being processed further.

Example- granules that are found in the manufacturing of
tablet packing cases and containers that is not to be returned.

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