Spring is here, and you know what that means: time to clean house! But before you grab your mop and duster, let’s talk about a different kind of cleaning—your pharmacy inventory.
Pharmacy inventory is the lifeblood of your pharmacy, but if not managed properly, it can also be your biggest headache and a black hole for your cash. Overstocked shelves, expired products, and slow-moving items can drain your profits and tie up valuable cash flow. With a little spring cleaning, you can streamline your pharmacy inventory, free up cash, and set your pharmacy up for a positive cash-flowing year.
Here’s how to get started.
Step 1: Know Your Wholesaler Return Policies for Pharmacy Inventory
Before cleaning, familiarize yourself with each wholesaler’s return policy. Gather all your wholesalers’ return policies and keep them in a binder or dedicated folder. If you can’t find the return policies, call your sales reps and have them send you a copy.
Key Points:
- Bottles must be unopened, clean, and undamaged.
- Pay attention to expiration windows (some require at least 6-12 months left).
- Follow specific procedures for controlled substances and refrigerated items (many won’t allow refrigerated returns on Thursdays or Fridays).
Pro Tip: Don’t hesitate to ask your wholesaler rep for a one-time override on items outside the return window, especially if doing an initial large cleanup.
Step 2: Conduct a Thorough Pharmacy Inventory Audit
Next, audit your entire pharmacy inventory to identify what should stay, go, or be reordered.
How to Conduct an Audit:
- Categorize Prescription Inventory by Expiry: I suggest using colored stickers to help identify bottles that are getting close to expiring. Red stickers are for 1-2 months, and yellow stickers are for 3-6 months.
- Expired: Immediately pull these from the shelves.
- Expiring in 1-2 Months: Flag these for quick movement, special discounts, or returns.
- Expiring in 3-6 Months: Monitor closely and prioritize dispensing.
- Track Dead Stock: Identify items that haven’t sold in months and plan for returns or sell-offs.
Pro Tip: Use inventory management software like Datarithm to help optimize your overall pharmacy inventory strategy.
Step 3: Pull and Return Pharmacy Inventory
Start pulling products that meet your wholesalers’ return requirements. For items that don’t qualify:
- Use a reverse distributor like Flash Returns or Ark Returns to manage expired returns cost-effectively.
- Sell unreturnable or opened bottles to other pharmacies via PrimeRx Market or ownership groups.
Pro Tip: Process expired returns quarterly or even monthly to stay on top of credits.
Step 4: Make Inventory Cleanup Fun and Goal-Oriented
Pharmacy inventory cleanup doesn’t have to be drudgery. Turn it into a team event!
Ideas to Make It Fun:
- Turn the session into a party with music, food, and contests (e.g., first person to fill a tote wins a gift card).
- Offer immediate bonuses for big returns.
- Let front-end staff spring clean their stations & OTCs while pharmacy staff tackles prescription inventory.
Set Clear Goals:
- Aim to clear 50% of your excess pharmacy inventory in the initial cleanup (bullseye goal).
- A solid target is 35%; anything below 25% may need a second pass.
Step 5: Optimize Your Ordering Process
Once you’ve cleaned out excess stock, make sure it doesn’t build back up.
How to Order Smarter:
- Order from secondary wholesalers with longer payment cycles, those that accept credit cards, and often offer better pricing than primary wholesalers.
- Adopt Just-in-Time (JIT) inventory strategies to reduce overstocking.
- Set clear minimum and maximum stock levels based on sales trends.
- Ensure that your daily ordering is consistently below your daily COGS to prevent over-purchasing and maintain control over your pharmacy inventory.
Step 6: Sell Unreturnable Pharmacy Inventory to Other Pharmacies
Not all pharmacy inventory can be returned. For those unreturnable items:
- Use platforms like PrimeRx Market to sell to other pharmacies within your state.
- Leverage ownership groups to find interested buyers for products you can’t return.
Pro Tip: Keep these transactions well-documented for compliance and accuracy.
Step 7: Leverage Technology and FIFO Systems to Manage Pharmacy Inventory
Use tools like inventory management software and POS integration to maintain control year-round. Implement a First-In, First-Out (FIFO) system to prevent expirations.
Additionally, utilize Datarithm to gain deep insights into your ordering patterns, stock levels, and dead stock. Integrate LSPedia to track and trace your prescription inventory efficiently for DSCSA compliance and better shelf awareness.
Final Thoughts on Pharmacy Inventory Spring Cleaning
Spring cleaning your pharmacy inventory isn’t just about clearing clutter—it’s about freeing up cash, improving profitability, and creating a smooth-running operation. Whether it’s understanding return policies, returning dead stock, or optimizing ordering, these steps will help you turn a chaotic pharmacy inventory into a well-oiled profit machine.
And remember: Make it fun and rewarding for your team. A clean, organized, and profitable pharmacy is worth celebrating!
Pharmacy owners who want to be very profitable in 2025 and beyond are invited to check out my Pharmacy Badass University membership.
