Drug House Management PDF Notes

 Drug House Management

Drug House Management PDF Notes

Drug House is an American turn used to pharmacy drug House sale medicine and other items like cosmetics. The Drug House is organized to make in the hospital the drug House Management obtain drugs from different sources.

Organization of Drug House

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

The management function involves all those activities that are required to make 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 making the decision to open a drug House, and getting the required qualifications and experience.

Space layout of Drug House:-

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

There should be a signal entrance for the customer. The shop area should be required for private rooms the license should be displayed.

Ideal features of layout design

• It should increase the sales of the 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 customer satisfaction.

Legal requirements for the establishment of the drug.

Various parameters should be analyzed and evaluated to decide 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 drugs or medicines from manufacturers, suppliers, wholesalers and their agents like distributors or from private or public supplies.

Objectives of purchasing.

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 staff.

B. Enable regular flow of production.

Incessant supply of various constituents of inputs ensures 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 the supply of medicinal products during a period of shortage.

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

4) Timely intimation of any innovation about a substitute of the medicine currently in use.

5) Getting the facility of making payments with delay.

Importance of Purchasing

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 supplies:

A supplier in the 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 pharmaceutical products.

Credit Information:-

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

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

2) S.r. number of the credit memo

3) Name and quantity of the drug supplied.

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

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

Name of the manufacturer of the drug.


• Tender refers to the procedure in which the government gives the invitation to bid the contract of large projects and these bids should be submitted within a specified 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 time. In the public sector, the purchaser is usually the government, and a provider 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 products during a specific period by law.

Price determination:-

• The price determination of pharmaceutical products is done at the national level.

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

• The Essential Commodities Act 1955 was established under which drug price control was issued and all drugs under the national list of essential medicines in the category of DPCO.

• The authority responsible for controlling the price in the pharmaceutical industry is the National Pharmaceutical Pricing Authority (NPPA)

• In price determination a specific factor is considered for paying attention towards the level of inflation.

The following factors of price determination.

a. Purchase price

b. Shipping cost

c. Clearing and customs charged. 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 the development of the Pharmaceuticals Ministry of Chemicals and fertilizers.

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

• Those medicines listed in Schedule I of the Drug price control order issued by Indian government from time to time.


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

Methods of Codification:-

1) Alphabetical Order

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 at each temperature and with adequate security to facilitate easiness in using the drugs and also to safeguard the medicines from any harmful effects.

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

Inventory Control:-

The procedure of handling inventory of medicines and drugs 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 an adequate supply of medical goods to customers and minimizes the chance of shortages in a drug Store.

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

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

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

5) Inventory control helps in bringing efficiency in purchasing, storing, and medical product production.

Importance of Inventory Control:-

1) Better Service to Customers

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 material

Modern Techniques of Inventory Control

ABC Analysis:- The system of evaluating the drugs in the storage on their cost price is called 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 Analysis

1. Label of Control

2. Careful Accounting

3. Safety Stocks

4. Quantity discount Factor

5. Layout of stores.

Disadvantage of ABC Analysis

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

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 made.

• 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.

• The 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 quantity:-

• 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 disposal

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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