Pharmaceutical Inventory Management: Challenges and Solutions

Introduction

In the pharmaceutical industry, the task of keeping track of inventory is a critical process where large investments can either make or break a company. There are so many different things to consider that have a significant impact on an organization’s bottom line.

When it comes to pharmaceutical inventory management there are a certain questions that need to be answered for full accountability, including

• What products or raw materials do we have in inventory?
• Where is it being stored – both physical location and in the production process
• Does the physical inventory on hand match what each department is supposed to have?
• Are there any discrepancies?
• Are any raw materials or products either approaching, at, or past their expiration dates?

If just a few of these questions are left unanswered, the damages to a company can quickly begin to pile up. This can result in a loss of revenue, fines, or worse, risk to human life. Understanding exactly what issues could arise, and how, is the best first step to approaching inventory management in the pharmaceutical industry.

Understanding common causes

With rapidly rising costs for things like materials, transportation, and fines associated with non-compliance, understanding the most common causes of the issues plaguing the industry, and more, is critical to the operations and success of organizations in the pharmaceutical industry.

This lets businesses plan more carefully to be able to successfully manage their inventories down to the smallest detail. Some of the most widely seen causes of pharmaceutical inventory management errors include

1. 1.Human error resulting in misinformation being entered into an organization’s enterprise resource planning (ERP) system.
2. 2. Improper or incorrect storage of finished goods or raw materials.
3. 3. Waste and/or shrinkage (i.e., theft) resulting in incorrect inventory counts and undocumented loss of revenue.
4. 4. Errors caused by incorrect measurements or from using inaccurate equipment.
5. 5. Discrepancies between ordered, shipped and the received quantities.
6. 6. Failures to properly account for expired, damaged or destroyed items including raw materials and finished goods.

Inventory Management Systems

Efficient, accurate inventory management is critical because it controls the amounts of raw materials, work in progress and finished products available at any given time. More companies are taking advantage of today’s modern solutions to achieve a number of functional benefits along with enhanced visibility of their inventory levels. These new systems all support three major goals, including

1. 1.Making sure there are enough raw materials to meet current and anticipated demand.
2. 2.Using working capital on other needs, such as replacing outdated equipment, opposed to buying or storing additional inventory.
3. 3.Balancing the above goals while allowing the company to make a profit.

Along with achieving these goals, these systems let business perform much of the following

Tracking Production Lots

Unlike other industries that track raw materials and finished products by part numbers, many existing pharmaceutical factories tend to produce medicines and other drugs in lots.

The lot method uses various machines to create various lot and batch sizes of a particular drug or product in common increments such as gallons or pounds. Each lot should then be marked with a pedigree serial number as required by the US FDA Safety and Innovation Act (FDASIA). All drugs distributed by wholesalers, repackagers or distributors must have a pedigree serial number for tracking purposes.

The manual and electronic (ePedigree) versions allow for tracking individual drug production lots from start to sale. Lot numbers let healthcare providers know if a particular batch of product:

• Is ready for sale
• Is expired
• Is part of a recall

Lots have codes unique to each batch, making it easy to learn when problems occur. For example, if Batch A is perfect but Batch B has a problem, the manufacturer can use lot codes to narrow down where the problem occurred and correct it.

Pharmaceutical Lot tracking and the Supply Chain

Lot tracking increases supply chain integrity by tracing the pedigree of each batch of drugs manufactured.-2014 article by Lowry

Specific to pharmaceuticals, lot tracking ensures tracing of each ingredient, dosage units, product family, national drug code (NDC) number, strength, schedules and other information for each batch. Lot numbers permit tracing throughout the production, processing and distribution processes.

Each lot is given an expiration date that determines its shelf life. This lot can be tracked through the supply chain to determine:

• When it was made
• Where the lot is at any given moment such as production shipping or a storage warehouse
• Which customers received it
• When the customers received their shipment of a specific lot

Typically, batches nearing their expiration date undergo a quality control test. The quality control lab either extends the expiration date or scraps the batch.

The Drug Supply Chain Security Act (DSCSA) plus the FDA and Drug Enforcement Agency (DEA) are constantly updating regulations related to lot and batch labeling.

Enhanced Tracking Methods

A stand-alone inventory management system, or the more robust ERP offerings in products such as Microsoft Dynamics 365 – Supply Chain, uses lot or batch numbers in the pharmaceutical industry, and/or product codes for internal tracking. Many wholesalers use the FDA-assigned NDC number, which is unique to a specific product. These systems can also track products by brand, brand description, strength and dosage as required by the DSCSA and for suspicious order monitoring.

The Global Trade Item Number (GTIN) is a 12-digit number used with a barcode for tracking purposes in the US and Canada. It is also known as a universal product code (UPC). The first 6-9 digits are the company prefix. The next digits reflect the product while the last digit is a check digit based on a calculation of the first 11 digits. An European Article Number (EAN) is similar to a GTN except it has 13 digits. EANs are used everywhere in the world except in the US and Canada.

Modern Inventory Management Systems

An pharmaceutical inventory management system that works with accounting, such as Microsoft System Dynamics 365 – Supply Chain, allows pharmaceutical companies to track, manage and organize inventory levels plus order, sales and deliveries.

The purpose of inventory management software is to maintain an optimal inventory level, track goods during transport between locations, receive new items, manage pharmaceutical warehouse processes such as picking, packing, and shipping, prevent product obsolescence and spoilage, and ensure your products are never out of stock.-Microsoft

Other advantages of using an inventory management system include

• Inventory optimization
• Product identification and tracking
• Asset tracking
• Reorder point determination

Inventory Management in ERP Systems

When included from the beginning as part of an ERP system, Inventory Management provides a number of additional benefits, such as

• Direct integration into a company’s Supply Chain Management operations
• Tracking of individual lots and batches using barcodes
• Insights from real-time tracking using a cloud-based system, visible on mobile devices at any time
• Artificial Intelligence (AI) recommendations for determining optimal inventory levels
• Quicker, easier software updates for cloud-based systems compared to standard on-premise programs

Final Thoughts

The adoption of modern inventory management systems helps businesses reduce the likelihood of having either too little or too much in terms of raw materials or finished goods. For the pharmaceutical industry, inventory management is critical, offering accurate, continuous tracking of batches and lots. This ensures the company meets stringent federal and state regulations and helps ensure that only current—not expired—products are available to customers. To achieve the best results, businesses need to understand the issues and perform enough research to determine how beneficial adopting a modern inventory management system would be.