Hospital pharmacy indexes: a tool for assessing purchasing and inventory control performance

The development and use of price and value indexes that differentiate between the effects of price and volume changes on a hospital's cost of drug products and related supplies are discussed. To construct a price index it is necessary to (1) compile a general list of drug products representative of a major portion of the institution's annual drug expenditure, (2) assign appropriate weights (quantity determinants) to these listed products, (3) select a base period that reflects normal hospital operations, and (4) select a suitable equation, the authors' choice being a fixed-weight aggregates method. The value index, which measures the combined effects of acquisition cost changes and volume changes, can be calculated when the acquisition cost change for the period is known. Information derived from the indexes can be used in (1) cost analysis and operational forecasts, (2) measurement and assessment of purchasing and inventory control, and (3) simplification of procurement and inventory processes.