Healthline pISSN 2239-337X337X/eISSN 2320-1525 Volume 5 Issue 2 July December 2014

Original article

Drug Inventory control analysis in a Primary level Health care facility in

Rural Tamil Nadu, India
Geetha Mani1, Kalaivani Annadurai1, Raja Danasekaran1, Jegadeesh Ramasamy D2
1
Assistant Professor, 2 Professor and Head of the Department, Department of Community
Medicine, Shri Sathya Sai Medical College and Research Institute, Kancheepuram District,
Tamil Nadu
Correspondence to Dr. Geetha Mani, email id: drgeethammc@gmail.com
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Introduction
Inventory is the stock of any item
or resource used in an organization. It can
be described in financial terms as the sum
total value of raw materials; semi
processed and finished goods at any given
time1. Inventory requirement differs with
the type of organisation. In a hospital, this
includes the drugs and all other raw
materials or finished products involved in
diagnostic and therapeutic services for the
patients. In hospital about one-third of the
annual expenditure is spent in buying
those supplies including drugs2,3. Hospitals
as in any other organisation require an
effective inventory management for
maintaining a balance between inventory
investment and demands for supplies. The
basic issue involved in inventory
management is to ensure that adequate
amount of raw materials are available to
meet the demand of the organisation, while
at the same time ensuring that too much
inventory is not accumulated and also
there are no stock-outs in the
organisation4.
In any hospital, high quantities of
inventory in form of large number of
costly drugs and supplies would be
detrimental to profitability and efficient
performance of the hospital due to
blocking of cash in form of idle stores,

36

Conclusions :This analysis allowed for

categorisation of drugs based on cost and
criticality factors and identifies level of
managerial control required.
Keywords:Drug Inventory control, ABC
analysis, VED analysis

Page

Abstract
Introduction:Almost one-third of hospital
budget is spent in buying supplies
including medicines. The cost and need of
these medicines vary widely depending on
the level of health care and the population
catered. Effective and scientific drug
inventory management techniques are
necessary for efficient health care delivery.
Objectives:To categorise the drugs based
on cost and criticality aspects and identify
those which require stringent managerial
control.
Methods: The data related to annual
consumption and annual drug expenditure
(ADE) incurred on each drug during the
year 2012 in a primary level health care
facility in Kancheepuram District, Tamil
Nadu was collected. The drugs were
categorised based on ABC, VED analysis
using Microsoft Office Excel version
2007.
Results :A total of 84 drugs used in the
hospital were included in the analysis. The
ADE on these 84 items, for the year 2012
was, Rs.3,22,697.10. ABC analysis
showed, 15 items (17.9%) in Category A,
17 (20.2%) in Category B and 52 (61.9%)
in Category C consumed 70.6%, 19.47%
and 9.9% of the total ADE. VED analysis
revealed 25 vital items (29.8%), 31
essential items (36.9%) and 28 desirable
items (33.3%) consuming 29.3%, 44.2%
and 26.5% of the ADE respectively. On
ABC-VED matrix analysis, 42.8%, 36.9%
and 20.2% items were categorised under
Category I, II and III respectively
accounting for 78.4%, 17.1% and 4.5% of
ADE.

Materials and Methods

This study was undertaken in a
Rural Health care centre providing primary
level care in Kancheepuram district of
Tamil Nadu state in India and caters a
population of 18000. All the drugs

expended during the period January 2012

to December 2012 were included in the
study.
The data related to annual
consumption of each drug and annual drug
expenditure (ADE) incurred on each drug
was entered in Microsoft (MS) Office
Excel for Windows, version 2007 and
statistical analysis was performed using
MS Excel statistical functions.
For
ABC
Analysis,
the
consumption cost of each medicine/ drug
was worked out for the whole year. All the
drugs were arranged in descending value
of their annual cost, the most expensive
being at the top and the least expensive
being at the bottom. The cumulative cost
was then calculated. The drugs were then
classified into 3 groups, A (items which
consume 70% of total annual cost), B
(items which consume the next 20% of the
total annual cost) and C (items which
consume the remaining 10% of the total
annual cost) based on Paretos principle6.
VED analysis is based on the
criticality of an item in service delivery.
V is for vital items without which the
hospital cannot function, E for essential
items without which a hospital can
function but may affect the quality of the
services and D for desirable items,
unavailability of which will not interfere
with the functioning of the hospital6. For
VED analysis, the list of drugs was
distributed to a panel of 10 medical
personnel comprising physician, surgeon,
obstetrician, paediatrician, orthopaedician,
anaesthetist and four medical officers with
adequate experience in delivering health
care at primary level. They were asked to
classify the drugs into vital, essential and
desirable. The drugs were categorised into
a particular group if more than 50% of the
members of the panel concurred.
The data was coupled into ABC
and VED matrix which again divides the
drugs into 3 categories, as follows,
Category I: AV+BV+CV+AE+AD
Category II: BE+CE+BD
Category III: CD

Page

requirement of large storage space for

medical stores, substantial handling and
transportation charges, pilferage and cost
of expired medical stores4. The ultimate
aim of inventory control in a health care
setting is to ensure that adequate and
optimal essential items are properly stored,
controlled, are easily retrievable and
distributed to points of uses so that patient
care does not suffer due to lack of these
essential medical supplies. In short, the
objective of inventory management is to
have the appropriate amounts of materials
in the right place, at the right time and at
low cost5.
Literature
search
provides
sufficient
insights
into
inventory
management techniques in tertiary care
hospitals. But there is paucity of similar
studies conducted in primary level health
care centres which cater to the majority of
the population, especially in developing
countries. It is highly essential that
primary health care systems in limited
resource settings have effective inventory
management techniques in place to
provide acceptable and affordable health
care. This study was an initial attempt in
drug inventory analysis in a primary level
health care centre in Kancheepuram
district in Tamil Nadu, India. The health
centre followed a weekly drug indenting
policy depending on the quantity of drugs
dispensed over the week which resulted in
occasional shortages of essential drugs as
well as overstocking of few less used
drugs. The objectives of the study were (i)
to analyse the annual consumption of the
drugs and the expenditure incurred on
them during the year 2012 and (ii) to
evolve a priority system of drug inventory
control based on ABC, VED and ABCVED matrix analysis.

37

Healthline pISSN 2239-337X337X/eISSN 2320-1525 Volume 5 Issue 2 July December 2014

Healthline pISSN 2239-337X337X/eISSN 2320-1525 Volume 5 Issue 2 July December 2014

Table 1: ABC, VED analysis and ABC-VED matrix of

drug store of the health facility
% of
Number % of
Annual
Class
of items
(n=84)

number
of items

Drug
Expenditure
in Indian
rupee

Annual
Drug
Expenditure

A B C analysis
A

15

17.9%

2,27,930.74

70.63%

17

20.2%

62,829.24

19.47%

52

61.9%

31,937.12

9.9%

V E D analysis
V

25

29.8%

94,713.38

29.3%

31

36.9%

1,42,526.22

44.2%

28

33.3%

85457.5

26.5%

Classification based on ABC-VED matrix analysis

Category

36

42.8%

2,53,026

78.4%

I
Category

31

36.9%

55,234

17.1%

II
Category

17

20.2%

14,437.1

4.5%

III

Discussion
The drug formulary the health
centre consisted of 84 items. The total
annual drug expenditure on these 84 items

38

Results
A total of 84 drugs used in the
hospital were included in the analysis. The
ADE on these 84 items, for the year 2012
was, Rs.3,22,697.10. The details of ABC,
VED and ABC-VED matrix analysis are
presented in Tables 1 and 2.

was INR 3, 22,697.10. The aim of

hospitals is to provide timely and efficient
medical care services. Drug Inventory
control is an important element of Health
care management, and is an essential
activity to achieve efficient patient care in
a hospital. The regular availability of the
necessary medicines is the topmost priority
for any hospital. Each hospital has to
evolve its own drug inventory analysis
system depending on the population and
the health care problems it caters. To avoid
stock-outs as well as excess stocks, cost
and criticality of the drugs are two
important factors which have to be taken
into account in drug inventory analysis7.
ABC analysis and VED analysis which
assess the cost and criticality respectively
have been used in this study.
An ABC-VED matrix helped us
identify 36 drugs (42.8%), which consume
78.4% of total annual drug expenditure
under Category I and require stringent
control.
ABC analysis
In our study, 15 items (17.9%) in
Category A consume 70%, 17 items
(20.2%) in Category B consume 19.47%
and 52 items (61.9%) in Category C
consume 9.9% of the total ADE.
Considering ABC analysis alone will
enable us to ensure adequate control over
17.9% of items which consume 70% of
total annual drug inventory cost. But this
analysis does not take into account the
vital items in B and C categories.
VED analysis
VED analysis of the drug inventory
in our study shows that, 25 items (29.8%)
in vital category consume 29.3%, 31 items
(36.9%) in essential category consume
44.2% and 28 items (33.3%) in desirable
category consume 26.5% of the annual
drug expenditure. When VED analysis is
considered alone, the 4 desirable items
included in category A and consume
considerable
cost
are
ignored
Page

Category I: All the vital and costly items,

whose shortage may adversely affect the
functioning of the hospital and over
stocking, may lead to financial loss to the
hospital.
Category II: Essential but less costly; can
have less stringent controls
Category III: Stores and medicines which
are desirable but would not affect the
functioning of the hospital even if
unavailable for a long time4.

Healthline pISSN 2239-337X337X/eISSN 2320-1525 Volume 5 Issue 2 July December 2014

.
Table 2: ABC-VED Matrix
V

Total

15

17

16

19

17

52

Total

25

31

28

84

Gupta
et al6

Mahatme
et al8

Junita
et al9

Khurana
et al7

Devnani
et al10

Present
study

14.6

14.5

7.74

3.45

13.78

17.9

22.4

18.2

11.01

6.9

21.85

20.2

63

67.3

81.25

89.65

64.37

61.9

7.4

24.2

6.6

32.41

12.11

29.8

49.2

68.5

33.6

61.38

59.38

36.9

43.4

7.3

59.8

6.2

28.51

33.3

20.9

31.5

11.9

33.8

22.09

42.8

II

48.9

68.5

37.8

60

54.63

36.9

III

30.2

50.3

6.2

23.28

20.2

An ABC-VED matrix provides a

balanced classification of the drug
inventory into 3 categories based on both
cost and criticality of the items. In the
present study, 36 items (42.8%)
consuming 78.4% of the ADE belong to
Category I, 31 items (36.9%) consuming
17.1% of the ADE belong to Category II
and 17 items (20.2%) consuming 4.5% of
the ADE belong to Category III. ABCVED matrix enables us to apply stringent
managerial control measures to the 36
items in Category I which are either
expensive or vital. These drugs should
always be maintained in stock since they
are either vital or essential. But

considering the high cost of these drugs, a

low buffer stock should be maintained and
strict control should be exerted on the
prescription and utilization of these drugs.
Category II drugs can be controlled by the
middle level management and Category III
drugs can be controlled by lower
managerial level. Appropriate ordering
techniques should be employed for the
different categories. Comparing our results
with similar studies revealed considerable
differences (Table 3). The differences
could most probably be due to the fact all
these hospitals were providing tertiary
level care or speciality care. The studies by

Page

Category

39

Table 3: Comparison of ABC, VED and ABC-VED matrix analysis of different studies*

Healthline pISSN 2239-337X337X/eISSN 2320-1525 Volume 5 Issue 2 July December 2014

References
1. Chase, Richard B. Operations Management for
Competitive Advantage; 10th ed.; McGrawHill/Irwin; New York, 2004.

40

Conclusions
The drug inventory analysis
enabled their classification into categories
based on their priority and assignment to
appropriate managerial levels. This
analysis is hoped to promote effective
management of drug inventory with
minimal monetary resources while
maintaining required safety stocks of high
priority drugs and reduce frequency of
drug supply shortage. An efficient
inventory management system at a primary
health care level will contribute to
provision of uncompromised patient care.

2. Doshi RP, Patel N, Jani N, Basu M. Mathew,

Simy. ABC and VED analyses of drug
management in a government tertiary care hospital
in Kerala. Explorations in Health Economics Paper.
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Department of Community Medicine, Armed
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5. Tersine, Richard J. Principles of Inventory and
Materials Management; 4th ed.; Prentice, 1994.
6. Gupta R, Gupta KK, Jain BR, Garg RK. ABC
and VED Analysis in Medical Stores Inventory;
MJAFI; 2007; 63: 325-327
7. Khurana S, Chhillar N, Gautam VKS. Inventory
control techniques in medical stores of a tertiary
care neuropsychiatry hospital in Delhi. Health
2013; 5(1): 8-13
8. Mahatme MS, Dakhale GN, Hiware SK, Shinde
AT, Salve AM. Medical store management: An
integrated economic analysis of a Tertiary Care
Hospital in Central India. J Young Pharm
2012;4:114-8
9. Junita I, Sari RK. ABC-VED Analysis and
Economic Order Interval (EOI)-Multiple Items for
Medicines Inventory Control in Hospital. Presented
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and Management, 2012, September 6-7.
10. Devnani M, Gupta AK, Nigah R. ABC and
VED Analysis of the Pharmacy Store of a Tertiary
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Institute of India. J Young Pharm. 2010;2(2): 201205

Page

Mahatme et al, Gupta et al, Junita

et al, Devnani et al was done in tertiary
care hospital and Khurana et al analysed
the inventory control techniques in a
neuropsychiatry hospital6,7,8,9,10. No such
literature was available to compare the
inventory analysis techniques in primary
level health care settings. There is a need
for adoption of such scientific techniques
of inventory control at all levels of health
care and published data regarding the
same.