Evaluation of hospital medication inventory policies

As supply chain costs constitute a large portion of hospitals' operating expenses and with $27.7 billion spent by the US hospitals on drugs alone in 2009, improving medication inventory management provides a great opportunity to decrease the cost of healthcare. This study investigates different management approaches for a system consisting of one central storage location, the main pharmacy, and multiple dispensing machines located in each department. Each medication has a specific unit cost, availability from suppliers, criticality level, and expiration date. Event-driven simulation is used to evaluate the performance of several inventory policies based on the total cost and patient safety (service level) under various arrangements of the system defined by the number of drugs and departments, and drugs' criticality, availability, and expiration levels. Our results show that policies that incorporate drug characteristics in ordering decisions can address the tradeoff between patient safety and cost. Indeed, this study shows that such policies can result in higher patient safety and lower overall cost when compared to traditional approaches. Additional insights from this study allow for better understanding of the medication inventory system's dynamics and suggest several directions for future research in this topic. Findings of this study can be applied to help hospital pharmacies with managing their inventory.