Predictive Analytics: New Frontiers in Hospital Pharmaceutical Inventory Management

The following article, written by Paul R. DeMuro, Ph.D. and Richard M. Klass, was published by South Florida Hospital News and Healthcare Report.

It’s 3:00 a.m. The administrator on duty gets a frantic call from the pharmacy. “We ran out of cytarabine! This means no treatment for our existing leukemia patients and turning away ten newly diagnosed with appointments tomorrow! My doctors are screaming at me!

Panic sets in. The administrator thinks: “What if we can’t get other hospitals to lend us a supply? Do I dare access the ‘gray market’? Can we compound the drug ourselves?”

A good inventory control model can reduce such frenzied situations and:

• Minimize total inventory costs, including holding (interest rate) and order placement expenses.
• Support just in time inventory levels – having supplies when you need them and stocking nothing else saves cash outlays, and optimizes storage space. Remember, over-stocking is just as bad as under-stocking.
• Ameliorate out-of-stock situations of the most critical drugs, particularly those with no substitute alternative.
• Minimize expired pharmaceutical waste. “U.S. hospitals and long-term care facilities annually flush approximately 250 million pounds of unused pharmaceuticals down the drain.” Mismanaged expiration dates is a big cost driver.

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