Always, Better and Control - Vital, Essential, Desirable Matrix Analysis of The Drug Store of A Tertiary Care Teaching Hospital of North India

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International Journal of Research in Medical Sciences

Gupta RK et al. Int J Res Med Sci. 2019 Dec;7(12):4728-4732


www.msjonline.org pISSN 2320-6071 | eISSN 2320-6012

DOI: http://dx.doi.org/10.18203/2320-6012.ijrms20195546
Original Research Article

Always, better and control - vital, essential, desirable matrix analysis of


the drug store of a tertiary care teaching hospital of North India
Ravi K. Gupta, Namrata Makkar, Sonali Shamdasani*

Department of Hospital Administration, Government Medical College Hospital, Chandigarh, Punjab, India

Received: 09 October 2019


Revised: 10 October 2019
Accepted: 01 November 2019

*Correspondence:
Dr. Sonali Shamdasani,
E-mail: sonali7872@gmail.com

Copyright: © the author(s), publisher and licensee Medip Academy. This is an open-access article distributed under
the terms of the Creative Commons Attribution Non-Commercial License, which permits unrestricted non-commercial
use, distribution, and reproduction in any medium, provided the original work is properly cited.

ABSTRACT

Background: Substantial improvement can be brought about in the hospital inventory and drug expenditure by
inventory control techniques. These include ABC (always, better and control), VED (vital, essential and desirable)
and ABC-VED matrix analysis. The objective of the study was to categorize the drugs based on cost and criticality
and identify those which require stringent managerial control.
Methods: ABC analysis according to drug expenditure, VED analysis according to criticality of the drugs, ABC-
VED matrix analysis to classify drugs into category I, II and III was done for drug store of a tertiary care teaching
hospital of North India for the period of April, 2018 to March, 2019.
Results: The total number of the drug items used by the drug store was 315. The total drug expenditure was Rs.
9,61,29,859. By ABC analysis, it was found that 15.24%, 22.54% and 62.22% items belonged to A, B and C category
respectively, accounting for 70%, 20% and 10% of Annual Drug Expenditure (ADE). VED analysis showed that
31.11%, 60.32% and 8.57% were V, E, and D category items respectively, accounting for 30.44%, 57.12% and
12.44% of ADE. By ABC-VED matrix analysis, 42.86%, 52.38% and 4.76% items were category I, II and III items
respectively, accounting for 78.91%, 20.15% and 0.94% of ADE.
Conclusions: The study depicted the items belonging to category I which requires top managerial control, also the
items belonging to categories II and III which require control by middle and lower managerial level respectively.

Keywords: Always better and control analysis, Always better and control - vital essential and desirable matrix, Cost,
Drugs, Inventory, Vital essential and desirable analysis

INTRODUCTION care delivery.1 India’s healthcare inflation has been rising


steadily and more alarmingly, it is increasing at double
Inventories in any hospital occupy the most strategic the rate of overall retail inflation. The average retail
position in the working capital and constitute a significant healthcare inflation for India was 7.14 per cent for 2018-
share in total cost. Inventory control is concerned with 19, witnessing a steep rise from 4.39 per cent in the
the acquisition, control, handling and use of inventories previous fiscal.2 As stated in Kant et al, about one-third of
so as to ensure the availability of inventory whenever the annual hospital budget is spent on buying materials
needed, providing adequate provisions for contingencies, and supplies, including medicines.3 It is imperative that
deriving maximum economy and minimizing wastages due efforts should be taken to utilize available funds as
and losses. Advances in medical care and drugs have economically as possible without affecting quality of
disproportionately increased the expenditure on health health care. This emphasizes the need for planning,

International Journal of Research in Medical Sciences | December 2019 | Vol 7 | Issue 12 Page 4728
Gupta RK et al. Int J Res Med Sci. 2019 Dec;7(12):4728-4732

designing and organizing the drug store in a manner that The present study has been conducted in a tertiary care
results in efficient clinical and administrative services.4 teaching hospital of North India where there is huge
The goal of the hospital supply system is to ensure inflow of patients directly or through referrals. To satisfy
adequate stock of the required items so that an the healthcare needs of rising number of patients, it is
uninterrupted supply of such items is maintained. necessary to use the resources wisely. Thus, ABC
Therefore, hospitals need to adapt efficient techniques for analysis, VED analysis and thereafter, ABC-VED matrix
inventory control. A savings of 1% or 2% from these analysis was done so as to have strict inventory control
costs can lead to a significant increase in hospital over the items in drug store. The objective of the study
productivity, profitability, financial performance and was to categorize the drugs based on cost and criticality
increase competitive advantage. Yiğit stated that aspects and identify those which require stringent
inventory control analysis and precautions taken in a managerial control.
study conducted in a 1500-bedded hospital, resulted in
saving 20% of the cost of expensive drugs.5 The ability to METHODS
provide the financial sustainability of hospital enterprises
with today's highly complex, technological and Study period
competitive structure can only be possible by the
availability of medical supplies and medicines at the right Study was conducted for the period of 1 year i.e., from
location, time, quantity, quality and price, protecting April 2018 to March 2019.
against the fluctuation in supply and demand, uncertainty
and minimizing waiting time.6,7 The need of the hour is to Inclusion criteria
follow the principles of rational drug use and inventory
management techniques so that in the existing budget it • The drug formulary of the hospital consisted of 377
can cater to more number of patients.8 items. Out of these, the items which were procured
by the hospital drug store during the study period
There are some commonly used inventory management were included in the study i.e. 315 items.
techniques such as:
Exclusion criteria
• ABC (Always Better Control),
• VED (Vital, Essential, Desirable items), • The items which were not purchased by the hospital
• SDE analysis (Scarce items, Difficult and Easily drug store as requirement was not raised by any
available items), department during the study period were excluded
• HML (High, Medium, Low cost items), from the study i.e. 62 items.
• FSN (Fast moving, Slow moving, Non-moving
items).9 The methodology is list of drugs purchased by the drug
store of tertiary care hospital along with their costs for the
Most commonly used amongst them are ABC and VED period of 1 year i.e. from April 2018 to March, 2019 was
analysis. obtained. The data was then transcribed in an MS Excel
spread sheet. The statistical analysis was carried out
ABC analysis, popularly known as “Always Better using MS Excel statistical functions.
Control”, is an important tool used worldwide, to identify
items that need greater attention for control. According to For ABC analysis, total cost of each item was calculated
it, 10% items consume 70% of budget (Category A), next by multiplying cost of each unit by the total quantity of
20% consume about 20% of the budget (Category B) and that item. The items were arranged in descending order of
the remaining 70% account for just 10% of the budget their costs. Cumulative cost of the list was calculated.
(Category C).10 The items were then categorized according to their costs
as per ABC analysis. The items accounting for the top
An additional parameter of assessment is criticality by 70% expenditure were classified as category A, next 20%
VED analysis. “V” is for vital items without which a as category B and the last 10% as category C. For VED
hospital cannot function, “E” for essential items without analysis, items were then classified into 3 categories
which a hospital can function but may affect the quality according to their criticality, namely, Vital, Essential and
of the services and “D” stands for desirable items, Desirable. The VED status of each item was decided with
unavailability of which will not interfere with justification by the committee which consisted of faculty
functioning.11 members and Consultant In charge, Pharmacy.
Thereafter, number and percentage of items in each
Combining these two techniques, ABC-VED matrix has category was calculated.
emerged and this matrix is the most suitable method for
hospital medical materials.12 The data from ABC and VED analysis was further used
to perform ABC-VED matrix using MS Excel worksheet.
Different classifications were presented by various The items were classified as shown in (Table 1) and
authors using ABC and VED analyses.13-16

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Gupta RK et al. Int J Res Med Sci. 2019 Dec;7(12):4728-4732

further categorized into category I, category II and (52.38%) fall in category II and 20.15% of ADE was
category III based on their criticality and cost aspects. done on them. Only 15 items (4.76%) were in category
III, consumed 0.94% of ADE and needs lowest
Table 1: ABC-VED matrix. managerial control.

V E D Table 3: VED analysis.


A AV AE AD
B BV BE BD Items Items Annual drug
Category
C CV CE CD (n=315) (%) expenditure(%)
V 98 31.11 30.44
Category I = AV + BV + CV + AE + AD E 190 60.32 57.12
Category II = BE + CE + BD D 27 8.57 12.44
Category III = CD
Table 4: ABC VED matrix.
Statistical analysis
Category V E D
The statistical analysis was carried out using basic A 11 31 6
statistical tools like mean and percentages. B 20 45 6
C 67 114 15
RESULTS
Table 5: Categories as per ABC-VED matrix analysis.
The drug formulary of the hospital consisted of 377
items. The total number of the items purchased by the Items Items Annual drug
drug store from April 2018 to March 2019 was 315 and Category
(n=315) (%) expenditure (%)
study was conducted for these items only. The total I 135 42.86 78.91
expenditure incurred on these items was Rs. 9,61,29,859. II 165 52.38 20.15
III 15 4.76 0.94
Table 2 shows classification of items according to their
cost i.e. ABC analysis. 48 items (15.24%) which
consumed 70% of the annual drug expenditure (ADE) DISCUSSION
were classified as Category A items; 71 items (22.54%)
accounting for 20% of ADE were categorized as The drug formulary of the hospital consisted of 377
Category B and only 10% of ADE was done on items. Out of these, 315 items procured by the drug store
remaining 196 items (62.22%) which fall in category C. of the hospital from April 2018 to March 2019. The total
Annual Drug Expenditure (ADE) on these 315 items was
Table 2: ABC analysis. INR 9,61,29,859. Drug inventory control is an important
element of health care management and is an essential
Annual drug activity to achieve efficient patient care in a hospital. The
Items regular availability of the necessary medicines is the
Category Items (%) expenditure
(n=315) topmost priority for any hospital. Each hospital has to
(%)
evolve its own drug inventory analysis system depending
A 48 15.24 70
on the population and the health care problems it caters.
B 71 22.54 20
To avoid stock-outs as well as excess stocks, cost and
C 196 62.22 10 criticality of the drugs are two important factors which
have to be taken into account in drug inventory analysis.7
Table 3 illustrates the classification of drugs according to ABC analysis and VED analysis which assess the cost
their criticality. This classification was done at the and criticality respectively have been used in this study.
organizational level by the committee, 98 items (31.11%) Further, ABC-VED matrix analysis was done to identity
were classified as vital items without which the hospital the level of managerial control to be exercised for
cannot function. These items accounted for 30.44% of different items.
ADE. Essential items were found to be 190 (60.32%) and
consumed 57.12% of ADE. Remaining, 27 items (8.57%) In this study, 48 items (15.24%) in category A consume
were desirable and 12.44% of ADE was done for 70%, 71 items (22.54%) in category B consume 20% and
procuring these items. 196 items (62.22%) in category C consume 10% of the
total ADE. Considering ABC analysis alone will enable
Table 4 shows number of items as per ABC VED matrix. us to ensure adequate control over 15.24% of items which
Further, the items were classified based on cost and consume 70% of total annual drug inventory cost. The
criticality into Category I, II, III (Table 5). Category I results in the present study are almost similar to the study
items were 135 (42.86%) which consumed 78.91% of done by Wandalkar et al, Devnani et al, and Mahatame et
ADE and needs strict managerial control. 165 items al.15-17 Contrary to this, study by Khurana et al, shows

International Journal of Research in Medical Sciences | December 2019 | Vol 7 | Issue 12 Page 4730
Gupta RK et al. Int J Res Med Sci. 2019 Dec;7(12):4728-4732

that almost 90% of drugs are in Category C.8 However, An ABC-VED matrix provides a balanced classification
ABC analysis has certain limitation that it is based only of the drug inventory into 3 categories based on both cost
on monetary value and cost of consumption of items. and criticality of the items. In the present study, 135
Some items of low monetary value are vital or lifesaving. items (42.86%) consuming 78.91% of the ADE belong to
Their importance cannot be overlooked simply because Category I, 165 items (52.38%) consuming 20.15% of the
they are not in category A. Therefore, an additional ADE belong to Category II and 15 items (4.76%)
parameter of assessment is their criticality by VED consuming 0.94% of the ADE belong to Category III.
analysis. Different studies have shown variable results for ABC
VED matrix analysis as shown in (Table 6). ABC-VED
VED analysis of the drug inventory in this study shows matrix enables us to apply stringent managerial control
that, 98 items (31.11%) in vital category which accounts measures to the 135 items in Category I which are either
for 30.44% ADE, 190 items (60.32%) in essential expensive or vital.
category and expenditure incurred is 57.12% and 27
items (8.57%) in desirable category accounts for 12.44% These drugs should always be maintained in stock since
of the ADE. Similar results were observed by Khurana et they are either vital or essential. But considering the high
al8 and Mahatame et al, in their study.17 However, study cost of these drugs, a low buffer stock should be
by Wandalkar et al, classified almost 50% of the items as maintained, and strict control should be exerted on the
vital.15 So, the categorization of the items as per this prescription and utilization of these drugs. Category II
classification depends on type of healthcare facilities drugs can be controlled by the middle level management
being provided i.e. primary, secondary or tertiary. and Category III drugs can be controlled by lower
managerial level. Appropriate ordering techniques should
be employed for the different categories.

Table 6: Comparison of various ABC, VED and ABC-VED matrix study results.

Category Wandalkar et al 15 Mahatme et al 17 Khurana et al 8 Devnani et al 16 Present study


A 13.40 14.5 3.45 13.78 15.24
B 16.50 18.2 6.9 21.85 22.54
C 70.10 67.3 89.65 64.37 62.22
V 50.90 24.2 32.41 12.11 31.11
E 40.20 68.5 61.38 59.38 60.32
D 08.90 7.3 6.2 28.51 8.57
I 57 31.5 33.8 22.09 42.86
II 35 68.5 60 54.63 52.38
III 8 - 6.2 23.28 4.76

CONCLUSION maintaining required safety stocks of high priority drugs


and reduce frequency of drug supply shortage. This
Stringent upper managerial control should be applied to analysis should be performed every quarterly by the drug
Category I drugs and these should never be out of stock store to ensure efficient and judicious use of resources.
as they are either vital or essential. But considering the
high cost of these drugs, a low buffer stock should be Funding: No funding sources
maintained, and strict control should be exerted on Conflict of interest: None declared
prescription and utilization of these drugs. An effort Ethical approval: Not required
should be made to bring down the number of AD items
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