Inventory Inventory Management and Management and

Drug Drug AccountabilityAccountability

Where Are We NowWhere Are We NowRoles and Roles and ProcessesProcesses

Lynn C. Sanders, Pharm D., Lynn C. Sanders, Pharm D., Director Director

PBM Clinical Informatics andPBM Clinical Informatics andPharmacy Re-engineering Pharmacy Re-engineering

Pharmacy Benefits Management Pharmacy Benefits Management

Introduction – What is Introduction – What is Inventory ManagementInventory Management

Inventory Management is primarily about specifying the Inventory Management is primarily about specifying the size and placement of stocked goods. size and placement of stocked goods.

Inventory management is required at different locations Inventory management is required at different locations within a facility or within multiple locations of a supply within a facility or within multiple locations of a supply network to protect the regular and planned course of network to protect the regular and planned course of production against the random disturbance of running out production against the random disturbance of running out of materials or goods. of materials or goods.

The scope of inventory management also concerns the fine The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. returns and defective goods and demand forecasting. Balancing these competing requirements leads to optimal Balancing these competing requirements leads to optimal inventory levels, which is an on-going process as the inventory levels, which is an on-going process as the business needs shift and react to the wider environment. business needs shift and react to the wider environment.

VHA Directive 98-020VHA Directive 98-020Drug Accountability 3.0Drug Accountability 3.0

March 31, 1998March 31, 1998 Mandatory use of Drug Mandatory use of Drug

Accountability SoftwareAccountability Software Impact on E-pharmacy ClaimsImpact on E-pharmacy Claims Prime Vendor InvoicesPrime Vendor Invoices

Updates NDC informationUpdates NDC information Alternative to manual edits.Alternative to manual edits.

Drug Accountability and Drug Accountability and Inventory Management Inventory Management

RelationshipRelationship PurchasingPurchasing Product ControlProduct Control WasteWaste RecallsRecalls ReturnsReturns

OIG Draft Report, Audit of VA Consolidated Mail OIG Draft Report, Audit of VA Consolidated Mail Outpatient PharmaciesOutpatient Pharmacies

Inventory AccountabilityInventory AccountabilityProject No. 2008-02730-R6-0169Project No. 2008-02730-R6-0169

Recommended Improvement Action(s) 1Recommended Improvement Action(s) 1:: Require Require the Deputy Chief Consultant PBM/CMOP enforce the Deputy Chief Consultant PBM/CMOP enforce the annual wall to wall physical inventory the annual wall to wall physical inventory requirement.requirement.

Recommended Improvement Action(s) 2Recommended Improvement Action(s) 2:: Require Require the Deputy Chief Consultant PBM/CMOP perform a the Deputy Chief Consultant PBM/CMOP perform a complete inventory analysis to develop and complete inventory analysis to develop and implement a plan of action to mitigate significant implement a plan of action to mitigate significant variances.variances.

Recommended Improvement Action(s) 3Recommended Improvement Action(s) 3:: Require Require the Deputy Chief Consultant PBM/CMOP develop the Deputy Chief Consultant PBM/CMOP develop policy and establish controls to monitor and control policy and establish controls to monitor and control adjustments to pharmaceutical inventory records.adjustments to pharmaceutical inventory records.

OIG Draft Report, Audit of VA Consolidated Mail Outpatient OIG Draft Report, Audit of VA Consolidated Mail Outpatient PharmaciesPharmacies

Inventory AccountabilityInventory AccountabilityProject No. 2008-02730-R6-0169Project No. 2008-02730-R6-0169

Recommended Improvement Action(s) 4Recommended Improvement Action(s) 4:: Require the Deputy Chief Consultant PBM/CMOP Require the Deputy Chief Consultant PBM/CMOP enforce compliance with the policy for returned enforce compliance with the policy for returned and expired pharmaceuticals.and expired pharmaceuticals.

Recommended Improvement Action(s) 5Recommended Improvement Action(s) 5:: Require the Deputy Chief Consultant PBM/CMOP Require the Deputy Chief Consultant PBM/CMOP establish and enforce procedures that restrict a establish and enforce procedures that restrict a single individual from ordering, receiving, and single individual from ordering, receiving, and adjusting against the same pharmaceutical.adjusting against the same pharmaceutical.

Recommended Improvement Action(s) 6Recommended Improvement Action(s) 6:: Disable Disable all prime vendor generic user IDs and passwords all prime vendor generic user IDs and passwords and establish individual user IDs and passwords and establish individual user IDs and passwords for ordering and receiving pharmaceuticals.for ordering and receiving pharmaceuticals.

Audit of VHA's Management of Selected Audit of VHA's Management of Selected Non-Controlled DrugsNon-Controlled Drugs

All PharmaciesAll Pharmacies Recommendation 1.Recommendation 1. We recommend the Under Secretary We recommend the Under Secretary for Health develop procedures to identify high risk non-for Health develop procedures to identify high risk non-controlled drugs and require pharmacy managers to monitor controlled drugs and require pharmacy managers to monitor those drugs by establishing standardized inventory those drugs by establishing standardized inventory discrepancy rates that if exceeded require further discrepancy rates that if exceeded require further investigation.investigation.

Recommendation 2.Recommendation 2. We recommend the Under Secretary We recommend the Under Secretary for Health develop appropriate internal controls to ensure for Health develop appropriate internal controls to ensure pharmacy managers and staff accurately and consistently pharmacy managers and staff accurately and consistently record drug dispensing activities in VistA.record drug dispensing activities in VistA.

Recommendation 3.Recommendation 3. We recommend the Under Secretary We recommend the Under Secretary for Health require that information on drug stocks for Health require that information on drug stocks transferred within a VA health care facility and drugs transferred within a VA health care facility and drugs dispensed by and returned to a facility’s stock is accurately dispensed by and returned to a facility’s stock is accurately and consistently recorded in VistA.and consistently recorded in VistA.

Audit of VHA's Management of Audit of VHA's Management of Selected Non-Controlled DrugsSelected Non-Controlled Drugs

Recommendation 4. Recommendation 4. We recommend the Under Secretary for We recommend the Under Secretary for Health establish a policy on VA health care facilities’ use of drugs Health establish a policy on VA health care facilities’ use of drugs returned in the mail; and if returned drugs are restocked by facilities, returned in the mail; and if returned drugs are restocked by facilities, develop procedures to ensure information on returned quantities of develop procedures to ensure information on returned quantities of CMOP dispensed drugs that are restocked is consistently captured in CMOP dispensed drugs that are restocked is consistently captured in inventory records using standardized procedures.inventory records using standardized procedures.

Recommendation 5.Recommendation 5. We recommend the Under Secretary for We recommend the Under Secretary for Health develops policy to limit access to the VistA label reprint Health develops policy to limit access to the VistA label reprint function to appropriate pharmacy personnel and develop standard function to appropriate pharmacy personnel and develop standard procedures to capture information on drugs dispensed using the procedures to capture information on drugs dispensed using the reprint function.reprint function.

Recommendation 6.Recommendation 6. We recommend the Under Secretary for We recommend the Under Secretary for Health develop standardized electronic annual physical inventory Health develop standardized electronic annual physical inventory reporting formats; develop standards to ensure that annual physical reporting formats; develop standards to ensure that annual physical inventory reports are reasonably accurate; and establish a procedure inventory reports are reasonably accurate; and establish a procedure to hold VA health care facility pharmacy managers accountable for to hold VA health care facility pharmacy managers accountable for the accuracy of annual physical inventory reports.the accuracy of annual physical inventory reports.

How Do We How Do We Accomplish Accomplish Inventory Inventory

Management and Management and Drug Drug

AccountabilityAccountability

What Resources Do We What Resources Do We HaveHave

PeoplePeople PharmacistPharmacist Pharmacy TechniciansPharmacy Technicians Procurement SpecialistsProcurement Specialists Pharmacy Informaticists/ADPACSPharmacy Informaticists/ADPACS Supervisors/ManagersSupervisors/Managers Acquisition Management StaffAcquisition Management Staff Purchasing OfficersPurchasing Officers Inventory ManagersInventory Managers Prime Vendor Staff (McKesson)Prime Vendor Staff (McKesson) InspectorsInspectors

Resources - SystemsResources - Systems

Bar Code TechnologyBar Code Technology Prime Vendor Information - Prime Vendor Information -

MckessonMckesson VistA Software SystemsVistA Software Systems

Drug AccountabilityDrug Accountability ReportsReports

AMISAMIS FileManFileMan PBM ProclarityPBM Proclarity

ResourcesResourcesProcessProcess

DirectivesDirectives PoliciesPolicies ManualsManuals HandbooksHandbooks ProceduresProcedures TrainingTraining

VHA Policy on Inventory VHA Policy on Inventory ManagementManagement

VHA is establishing goals for reducing inventory VHA is establishing goals for reducing inventory levels, with mandatory use of Generic Inventory levels, with mandatory use of Generic Inventory Package (GIP), or its successor system, to manage Package (GIP), or its successor system, to manage all inventories. All recurring or repetitive stock all inventories. All recurring or repetitive stock items, defined as all items held for future use items, defined as all items held for future use regardless of turn rate, and funded as operating regardless of turn rate, and funded as operating supplies, must be in the Item Master File (IMF) supplies, must be in the Item Master File (IMF) and GIP. In addition, all purchase transactions and GIP. In addition, all purchase transactions must reflect the IMF, and National Item File must reflect the IMF, and National Item File number. This allows for a consistent inventory number. This allows for a consistent inventory system and common source for data to support the system and common source for data to support the VHA Standardization Program and the National VHA Standardization Program and the National Procurement History File, and to fully automate Procurement History File, and to fully automate the management of all unofficial inventories. the management of all unofficial inventories. Annual wall-to-wall inventory audits are required Annual wall-to-wall inventory audits are required to maintain accuracy. to maintain accuracy.

Inventory of Controlled Inventory of Controlled SubstancesSubstances

A physical inventory of the pharmacy vault, A physical inventory of the pharmacy vault, including the Pharmacy Drug Cache, for all including the Pharmacy Drug Cache, for all schedules of controlled substances must be schedules of controlled substances must be maintained and verified by Pharmacy Service at a maintained and verified by Pharmacy Service at a minimum of every 72 hours, excluding those weeks minimum of every 72 hours, excluding those weeks containing a Federal holiday when only two containing a Federal holiday when only two inspections are required. Documentation of the inspections are required. Documentation of the verification must be made on the appropriate VA verification must be made on the appropriate VA Form 10-2320, or electronic equivalent. Controlled Form 10-2320, or electronic equivalent. Controlled substances in the emergency drug cache must be substances in the emergency drug cache must be inspected every 72 hours, unless a waiver for inspected every 72 hours, unless a waiver for weekly inspections is approved by the Pharmacy weekly inspections is approved by the Pharmacy Benefits Management (PBM) Strategic Health Benefits Management (PBM) Strategic Health Group (SHG). These inventories must be inspected Group (SHG). These inventories must be inspected during the monthly, unannounced narcotic during the monthly, unannounced narcotic inspections. inspections.

Inventory of Controlled Inventory of Controlled SubstancesSubstances

The VistA Controlled Substances The VistA Controlled Substances Software must be used for all controlled Software must be used for all controlled substances transactions. The forms substances transactions. The forms mentioned in this Handbook apply to the mentioned in this Handbook apply to the electronic and the manual forms. A electronic and the manual forms. A printed copy of VA Form 10-2638, printed copy of VA Form 10-2638, Controlled Substance Administration Controlled Substance Administration Record, may be used on rare occasions Record, may be used on rare occasions for documenting the administration of a for documenting the administration of a single dose. single dose.

ORDERING AND RECEIVING ORDERING AND RECEIVING CONTROLLED SUBSTANCES CONTROLLED SUBSTANCES

Medical centers must establish written Medical centers must establish written procedures for the ordering and receipt procedures for the ordering and receipt of controlled substances. These of controlled substances. These procedures must indicate the individuals procedures must indicate the individuals from Acquisition and Materiel from Acquisition and Materiel Management Service (A&MMS) and Management Service (A&MMS) and Pharmacy Service who have the Pharmacy Service who have the designated authority to order, receive, designated authority to order, receive, post, and verify controlled substances post, and verify controlled substances orders (see VA Handbook 7127). orders (see VA Handbook 7127).

Bar Code Bar Code Technology in Technology in

Inventory Inventory ManagementManagement((Ron Schneider)Ron Schneider)Closed Loop TechnologyClosed Loop Technology

Bar Code TechnologyBar Code Technology

Links Prime Vendor to VistA softwareLinks Prime Vendor to VistA software Product bar codes on shelvesProduct bar codes on shelves

enter # of itemsenter # of items transmit to Prime Vendortransmit to Prime Vendor

Dispensing of items can be tracked by Dispensing of items can be tracked by VistA softwareVistA software

Perpetual inventoryPerpetual inventory Add items into data dictionary as they Add items into data dictionary as they

arrivearrive

Drug Accountability – Bar Drug Accountability – Bar Code TechnologyCode Technology

CS Perpetual inventoryCS Perpetual inventory Manually enter item as receivedManually enter item as received Added to total on handAdded to total on hand Dispense to patientDispense to patient Dispense to drug cabinetDispense to drug cabinet Dispense to ward stockDispense to ward stock

Reports: can sort by: Reports: can sort by: productproduct patientpatient drug cabinetdrug cabinet wardward

Outpatient Dispensing Outpatient Dispensing Using BarcodesUsing Barcodes

Facility automationFacility automation Many vendors in useMany vendors in use Bar codes on labels Bar codes on labels Checking pharmacist receives bar code dailyChecking pharmacist receives bar code daily Picture of medication available for checkingPicture of medication available for checking

Consolidated Mail Out PharmacyConsolidated Mail Out Pharmacy 8 located across country8 located across country Fill 75% of prescriptionsFill 75% of prescriptions Bar code scanned on arrival, before filled in Bar code scanned on arrival, before filled in

automation, when checkingautomation, when checking Error rate at 5 SigmaError rate at 5 Sigma

Inpatient Dispensing Using Inpatient Dispensing Using BarcodeBarcode

Automated packagersAutomated packagers Drug Dispensing cabinetsDrug Dispensing cabinets

Patient profilingPatient profiling All items bar codedAll items bar coded

Utilize manufactures bar coded productsUtilize manufactures bar coded products Quality Directive for unit dose packaging and bar code labeling Quality Directive for unit dose packaging and bar code labeling

ensures medication in data dictionaryensures medication in data dictionary Ensures medication will scan at the point of careEnsures medication will scan at the point of care

Repack itemsRepack items Items not supplied with bar codesItems not supplied with bar codes Linear bar code-Internal entry numberLinear bar code-Internal entry number

IV LabelsIV Labels Bar code unique to that patientBar code unique to that patient

Automated Automated Storage Storage

Dispensing Dispensing SystemsSystems

23

InpatientInpatientInventory

ManagementInventory

Management

Automated Dispensing

Cabinets

Automated Dispensing

Cabinets

OutpatientOutpatient

Pharmacy

Inventory Using Automation

Automated Dispensing

Units

Automated Dispensing

Units

Automated After Hours

Pickup

Automated After Hours

Pickup

Automated Prescription

Filling

Automated Prescription

FillingRemote

Tele-pharmacyUnits

RemoteTele-pharmacy

Units

24

Omnicell Pharmacy CentralOmnicell Pharmacy Central

Items are scanned into inventory upon receiptItems are scanned into inventory upon receipt

Must use password to pick medicationMust use password to pick medication

Can have different levels of access to Can have different levels of access to medicationmedication

High capacity storage optimized use of spaceHigh capacity storage optimized use of space

Medication usage reporting availableMedication usage reporting available

Inventory Management Inventory Management with Automationwith Automation

25

Pyxis Carousel with autoPharmPyxis Carousel with autoPharm

Support Accuracy of Picking with Bar Code Support Accuracy of Picking with Bar Code VerificationVerification

Up to 50% reduction in floor space devoted Up to 50% reduction in floor space devoted to storage of medicationto storage of medication

Inventory Management Inventory Management with Automationwith Automation

26

MedCarouselMedCarousel

1900 to 3800 medication storage locations 1900 to 3800 medication storage locations available to store medication using less available to store medication using less floor spacefloor space

Manages and tracks inventory, can Manages and tracks inventory, can increase inventory turns by up to 60%increase inventory turns by up to 60%

Expiration Date Tracking AvailableExpiration Date Tracking Available Supports accuracy of picking through bar Supports accuracy of picking through bar

code technologycode technology

Inventory Management Inventory Management with Automationwith Automation

Prime Vendor’s Prime Vendor’s Inventory and Inventory and

Purchasing SystemPurchasing System

Prime Vendor PurchasingPrime Vendor Purchasing

Comparison of Comparison of Product Product

Information in Information in McKesson vs VistA McKesson vs VistA

Drug Drug AccountabilityAccountability

Drug Accountability Drug Accountability Receipt of ProductReceipt of Product

<<< EDIT INVOICES TO BE VERIFIED SCREEN >>><<< EDIT INVOICES TO BE VERIFIED SCREEN >>>    Order#: C75002184A00 Invoice#: 7309505724 Invoice Date: Jul 03, 2007Order#: C75002184A00 Invoice#: 7309505724 Invoice Date: Jul 03, 2007 -------------------------------------------------------------------------------------------------------------------------------------------------------------- 50 *DISULFIRAM 250MG TAB50 *DISULFIRAM 250MG TAB Qty Invoiced: 1 UPC: 35128552302Qty Invoiced: 1 UPC: 35128552302 Order Unit : EA NDC: 51285-0523-02Order Unit : EA NDC: 51285-0523-02 Unit Price : $234.62 VSN: 1898022Unit Price : $234.62 VSN: 1898022    PV-Drug-Descrip: Not Available. Item is OTC or new after May 2006PV-Drug-Descrip: Not Available. Item is OTC or new after May 2006    Dispense Units: TABDispense Units: TAB Dispense Units Per Order Unit: 100Dispense Units Per Order Unit: 100 Stock Level : 400Stock Level : 400 Reorder Level : 100Reorder Level : 100 -------------------------------------------------------------------------------------------------------------------------------------------------------------- 1. Drug1. Drug 2. Quantity Received2. Quantity Received 3. Order Unit3. Order Unit 4. Dispense Units per Order Unit4. Dispense Units per Order Unit 5. Stock Level5. Stock Level 6. Reorder Level6. Reorder Level    Edit fields: (1-6):Edit fields: (1-6):

Purchasing of Drug – Purchasing of Drug – McKesson SoftwareMcKesson Software

Purchasing Details - Purchasing Details - MckessonMckesson

Methods to Methods to Assess and Assess and

Control InventoryControl Inventory

Agency OversightAgency OversightInspections/ReviewsInspections/Reviews

Organizations that provide oversightOrganizations that provide oversight Drug Enforcement Agency (DEA)Drug Enforcement Agency (DEA) Office of Inspector General (OIG)Office of Inspector General (OIG) General Accounting Organization (GAO)General Accounting Organization (GAO) SOARSSOARS VISN Level ReviewsVISN Level Reviews National Center for Quality AssuranceNational Center for Quality Assurance Joint Commission on Accreditation (JCA)Joint Commission on Accreditation (JCA)

VHA Pharmacy Annual VHA Pharmacy Annual Inventory ReportInventory Report

Created ByCreated By Facility Name & NumberFacility Name & Number VISNVISN Reason for exclusionReason for exclusion ANNUAL prime vendor purchases. ANNUAL prime vendor purchases. ANNUAL direct purchases. ANNUAL direct purchases. TotalTotal

Facility Name & NumberFacility Name & Number VISNVISN Reason for exclusionReason for exclusion ANNUAL prime vendor purchases. ANNUAL prime vendor purchases. ANNUAL direct purchases. ANNUAL direct purchases. Total dollar amount of wall to wall inventory.Total dollar amount of wall to wall inventory. Inventory TurnInventory Turn Was the inventory completed by inventory service?Was the inventory completed by inventory service? What company was used?What company was used? If inventory service used what was the cost?If inventory service used what was the cost? Estimated number of VA employee hours spent by facility on Estimated number of VA employee hours spent by facility on

inventory process.inventory process. Was a inventory file submitted?Was a inventory file submitted? If the answer is "No" why? (Do not answer if you previously entered If the answer is "No" why? (Do not answer if you previously entered

a reason for exclusion)a reason for exclusion)

Inspections Inspections

Identify waste, excess, and non-Identify waste, excess, and non-compliancecompliance

PBM Annual Inventory Audit and PBM Annual Inventory Audit and ReportReport

Local Financial Reports and AnalysisLocal Financial Reports and Analysis Local Narcotic InspectionsLocal Narcotic Inspections Local Non-pharmacy inspectionsLocal Non-pharmacy inspections

Nursing/Clinics/ Surgery Unit InspectionsNursing/Clinics/ Surgery Unit Inspections

Reporting and AnalysisReporting and Analysis

Tracking of UsageTracking of Usage Cost ManagementCost Management Product ManagementProduct Management Usage Projections and ForecastingUsage Projections and Forecasting Safety – RecallsSafety – Recalls Patient Specific Utilization Patient Specific Utilization

(compliance) – Returns(compliance) – Returns Auto ReplenishmentAuto Replenishment

The Importance of This The Importance of This Meeting Meeting

- Going in Forward- Going in Forward• Improve Technology ResourcesImprove Technology Resources

Accountability, Inventory Management, Accountability, Inventory Management, ReportingReporting

• Identify Training and Skills Identify Training and Skills Enhancement Tools for Our People Enhancement Tools for Our People ResourcesResources

• Improve EfficiencyImprove Efficiency• Improve Safety Improve Safety • Reduce Costs and WasteReduce Costs and Waste

QuestionsQuestions