Drug Supply

Overview of Drug & Medical Supplies Management
Learning Objectives
• After completing this unit students are expected
to:
Define drug and medical supplies management
Identify the reasons why drugs need management
Identify common problems in drug supply
management
Identify the importance of drug and medical supplies
management
Introduction
The methods of treating illness and disease include
Surgery including organ transplantation
Psycho therapy
Physiotherapy
Radiation
Chemo (pharmaco) therapy

2
Intro…
 Of these pharmacotherapy (treating with drugs) is:
 The most frequent technique for treating disease
 It has the broadest range to application over the greatest
variety of disease states.
 And is usually the most cost effective and preferred method.
 Although surgery is preferred method of treating some
ailments, when alternative methods are available, those
methods (usually pharmacotherapy) will be employed
first if feasible; in the initial attempt to secure
satisfactory relief or control of the condition or a
complete cure.
3
Intro….
The role of modern pharmaceuticals in the

health care:-
 Eliminate / dramatically reduce/ mortality from

most common infections.
 Extend lives of people suffering from chronic
illness.
 Provide relief from pain and sufferings
4
Intro….
 Most leading causes of death and disability (mortality and
morbidity) in developing and developed countries can be
prevented, treated or at least alleviated with cost effective
essential drugs.
 Despite this fact, millions of people do not have regular

access to essential drugs, many of those who do have an
access are given the wrong treatment, receive too little
medicine for their illness, or do not use the drug correctly.
 Therefore managing drug supply is concerned with practical

ways in which high quality essential drugs are available,
affordable, and use rationally. 5
Definition Of Terms
• DRUG
Any chemical compound used on or administered
to humans or animals as an aid in the diagnosis,
treatment or prevention of disease, or other
abnormal condition, for the relief of pain or
suffering, or to control or improve any physiologic
or pathologic state.
A substance used recreationally for its effects on
the central nervous system.
6
Definition cont…
• MEDICAL SUPPLY
– Any article that may be used on the inner or outer
part of the body for diagnosis or treatment of a
disease in man or animal.
• Examples
– suturing materials, syringes & needles, bandages,
gauze, cotton & other similar articles, artificial
teeth, chemicals and x-ray films.
7
Definition cont…
• MEDICAL INSTRUMENT
– Any instrument that may be used on the inner or

outer part of the body for diagnosis or treatment of
a disease in man or animal. Those are medical
supplys that needs some arrengment i.e it needs a
special person to use.
– includes various diagnostic, laboratory, surgery &

dental medical instruments.
8
Definition cont….
• DRUG SUPPLY MANAGEMENT

– A process of planning, organizing, staffing,
directing and controlling the work of personnel
involved towards the objectives of drug supply
system in accordance with agreed policy and
directives using the available resources, such as
human, material, financial, information e.t.c.
– It is a process of planning, implementing, and

controlling the implementation of the major
functions of drug supply system as planned and
required standards. 9
Why Worry About Drugs?
• BECAUSE:
– Drugs save lives and improve health
– Drugs promote trust and participation in
health services
– Drugs are costly
– Drugs are different from other consumer
products
–the consumer often does not choose
the drug 10
Common Problems In Drug Supply
Management
• Drugs are not selected on the basis of local
needs.(during purchasing)
• Most health institutions do not have their own
list of drugs.
• Drug requirements are determined without using
appropriate information/data. it is usually done:
– Based on simple past experience.
– Based on short-term reactions to crisis such as
epidemic out break.
11
Common problems….
 Drug procurement is carried out in an unplanned

way, and with out considering lead time. (the time
between initiation of purchase order and receipt at
the ware house from supplier).
 Absence of and failure to observe adherence to
procurement time table.
 Poor storage system which results in the damage
and deterioration of drugs before their expiry date.
 Poor record-keeping and stock control.
 The available drugs are not used rationally.
12
Common problems….
• Irrational prescribing and dispensing practices are

becoming more common.
– Mislabeling, inadequate packaging, and dispensing with
inappropriate containers and unhygienic conditions.
– Poor patient counseling and communication with the
prescriber.
– Poor prescription (filled and blank) handling, recording
and reporting. 13
Common problems….
– Many patients fail to take the medication in
accordance with medical instruction.
– Many patients take prescription drugs without medical
advice e.g. antibiotics.
– Many patients handle and dispose drugs
inappropriately.
– Health professionals are not involved in the
preparation of drug budget proposal. hence, fail to
14
Common problems….
• The above problems are believed to be

attributable mainly to:
 lack of knowledge and skills on DS mgt,
 lack of manuals on DS mgt,
absence of continuous supervision,
follow up etc
15
The problem results
The problems enumerated above have resulted in:
 Availability of unwanted drug products
 Chronic and wide-speared shortage of highly needed
drugs.
 Over-stock of unwanted as well as needed drugs
 Irrational budgetary constraints.
 Occurrence of drug related hazards such as
 developing of bacterial resistance,
 serious adverse effects.
 Poor forecasting of drug budget for the coming year and
poor utilization and control of drug budget over year. 16
Importance Of Drug And Medical Supplies
Management
• It helps to:
– Achieve financial sustainability that increases
availability while ensuring equity.
– Improve efficiency in public drug supply.
– Change the behavior of providers, patients and
the public to promote rational use of drugs.
– Improve the availability, affordability and rational
use of drugs in the private sector.
– Regulate safety, efficiency and quality through
legislation and regulations.
17
Concept of
Essential Medicines
Definition
“Essential medicines are those that satisfy
the priority health care needs of the
population.”(WHO 1999)
• Should be available at all times, in adequate
amounts, in appropriate dosage forms and
at a price the individual and the community
can afford.
19
Importance of the EMs concept
 Central to a NDP
– Promotes equity and helps to set priorities for the
health care system.
 The use of a limited number of carefully

selected drugs leads to:
– A better supply of drugs
– More rational prescribing and
– Lower costs
20
Principles of the EMs concept
 Common health problems can be treated with

a small number of carefully selected
medicines.
 Most prescribers routinely use < 200 drugs.
 Training & clinical experience should focus on

the proper use of these few drugs.
21
Principles of the EMs concept…
 Procurement, distribution, etc. can be carried

out most efficiently for a limited number of
drugs.
 Patients can be better informed about the

effective use of medicines
22
Advantages of a limited list of EMs
Supply
 Easy procurement, storage and distribution
 Lower stocks
 Better quality assurance
 Easier dispensing
23
Advantage… cont’d
Cost
 Lower prices
 More competition
Lower overhead costs
24
Prescribing
 Training more focused and therefore easier
 More experience with fewer medicines
 No irrational treatment alternatives
available
 Focused drug information
 Better recognition of adverse drug
reactions
25
Patient use
 Focused education efforts
 Reduced confusion and increased adherence

Improved medicine availability
26
Objectives of EM program
To make EMs available and accessible
 To promote RDU (rational drug use)
 To improve the CE of health care

The Formulary process
 Consists of:
– Preparing
– Using and EML, a formulary manual and STGs
– Updating
 Corner stone of good pharmaceutical mgt and RDU.
28
The formulary list (EML)
 A list of drugs approved for use in specific
health care setting.
 It is good if it is localized
 Arranged alphabetically and therapeutically

– Examples: national formulary list, hospital
formulary list
29
Formulary manual
Brings all the important summary

information on medicines in the EML
together in a manual.
– Source of drug information
Drug centered
30
Standard treatment guidelines/STGs
 Systematically developed statements that help

prescribers in deciding on appropriate t/t for specific
clinical conditions.
 Disease centered
– Common disease and complaints, treatment
alternatives.
31
Development and Implementation of
EML
 There should be explicit and previously agreed
process and selection criteria.

 Increase prescribers confidence in the
validity and usefulness of the list.
32
Criteria for the Selection of Essential Drugs:
 The pattern of prevalent diseases
 Sound and adequate scientific data on the

drug to be selected
• efficacy, safety and quality
 Cost /major selection criterion/afordablity of

the drug\
 Benefit/risk ratio 33
Criteria…
 Single CPDs
• Fixed ratio combinations are only acceptable if:
– Therapeutic effect > the sum of the effect of

each(1+1>/=2
– The cost of the combination product < the sum of
the individual products.
– Compliance is improved w/n combined
34
Criteria…
 When two or more drugs are therapeutically
equivalent, preference should be given to drugs:
 With the most favorable pk properties.

• improve compliance, minimize risks, etc
 For which local, reliable manufacturing facilities exist
 With favorable stability
 No one criterion alone is sufficient.
35
Approaches to Developing EMLs
1. Prioritize a list of common diseases

2. Determine the first choice of t/t
– based on STGs, publications by WHO,
unbiased professional organizations &
academia
• The capability of the health care facility and its
staff to handle specific drugs should considered.
36
2. Draft, circulate for comment, and
finalize the document
 Each department
 A draft of the list drugs is used to identify:
– The most important medicines
– The most expensive medicines (Class A)
– whether all the medicines that are prescribed in
large volumes are essential or not (ABC and VEN
analysis)
37
3. Develop policies and guidelines for
implementation
 Should include:
– Who should use the list

– How the list should be reviewed and updated
– A clear mechanism for adding and deleting medicines
– How medical staff can request medicines that are not

included on the list in exceptional or emergency
situations
38
4. Educate staff about the EML and
monitor implementation
– All the staff in the hospital
A common problem is that prescribers
continue to request and use medicines not
on the list.
39
How EML, formularies, and STGs are Developed?
List of common diseases and complaints
Treatment choice
Treatment guidelines Essential medicines

list / National
formulary
Training and Financing and

Supervision Supply of drugs
Prevention
and care
40
Maintaining a formulary list
 New drugs and treatments are emerging all

the time
 Without evaluation the formulary list may
become a collection of older, less effective
drugs
– The entire formulary should be reviewed
every 2–3 years
41
National Drug Policy
Definition
 NDP is a commitment to a goal and a guide
for action.
 A document containing the goals set by gov’t

for the pharmaceutical sector and the main
strategies for reaching those goals.
43
Why is NDP needed?
– To present a formal record of values, aspirations,

aims, decisions and government commitments.
– To define the national goals and objectives for
the pharmaceutical sector.
– To identify the strategies needed to meet those
goals.
– To identify the various actors responsible for
implementing the main components of the
policy.
44
Objectives of NDP
 Health related objectives
 Other goals
45
Objectives of NDP
 The general health related objectives are to ensure:
– Access/equitable availability & affordability of
EMs
– Quality/ the quality, safety & efficacy of all
medicines
– Rational use/ the promotion of therapeutically
sound and cost-effective use of drugs.
46
National drug policy
 Other Goals of NDP include:
– Economic related goals
• Reduce foreign exchange for p’cal import
• Provide jobs (dispensing, production...)
– National development goal
• Develop national p’cal production
• Take a stand on intellectual property rights
47
Key components of a national drug policy
48
Key components ...cont’d
• Selection of essential drugs

– The adoption of the essential drugs concept
– Selection criteria
– Procedures to define and update the
national list(s) of essential drugs
– Selection mechanisms for traditional and
herbal medicines.
49
• Affordability
– Reduction of drug taxes, tariffs and
distribution margins; pricing policy;
– For multi-source products:
• Promotion of competition through
generic policies, generic substitution and
good procurement practices;
– For single-source products:
• Price negotiations
• Therapeutic substitution
50
• Drug financing
– Commitment to measures to improve efficiency and
reduce waste;
– Increased government funding for priority diseases,
and the poor and disadvantaged;
– Use of and limits of development loans for drug
financing;
– Guidelines for drug donations.
51
Supply systems
– Public–private mix in drug supply and distribution
systems;
– commitment to good pharmaceutical
procurement practices in the public sector
– Publication of price information on raw materials
and finished products;
– Inventory control, and prevention of theft and
waste;
– Disposal of unwanted or expired drugs.
52
• Legislative and Regulatory framework

– Government commitment to drug regulation,
including the need to ensure a sound legal basis
and adequate human and financial resources.
– Independence and transparency of the drug
regulatory agency; relations with the ministry of
health (MoH).
– Functioning drug regulatory authority
– Stepwise approach to drug evaluation and
registration.
53
– Pharmaceutical quality assurance including

inspection and enforcement
– Commitment to GMP, inspection and law
enforcement
– Access to drug control facilities
– Commitment to regulation of drug promotion
– Regulation of traditional and herbal medicines
– Need and potential for systems of ADR
monitoring
– International exchange of information.
54
• Rational use
– Development of evidence-based clinical
guidelines, as the basis for:
 Training
Prescribing
Drug utilization review
Drug supply and
Drug reimbursement
55
– Establishment and support DTC
– Promotion of the concepts of essential

drugs, rational drug use and generic
prescribing in basic and in-service
training of health professionals etc.
56
• Research
– Operational research in:
Drug access, quality and rational use
Pharmaceutical development and clinical

research
57
• Human resources development

– Government responsibility for planning and
overseeing the development and training of the
human resources needed for the pharmaceutical
sector.
– Definition of minimum education and training
requirements for each category of staff.
– Career planning and team building in government
service.
– The need for external assistance (national and
international)
58
• Monitoring and evaluation

– Explicit government commitment to the principles
of monitoring and evaluation
– Monitoring of the pharmaceutical sector through
regular indicator-based surveys;
– Independent external evaluation of the impact of
the NDP on all sectors of the community and the
economy.
59
Drug management
cycle
Learning objectives
• After completing this topic students are
expected to:
– Define Drug selection, quantification,
procurement, distribution and use
– Describe the basic steps and criteria in drug
selection
– Describe the methods of quantification
Introduction
• Drug management functions are undertaken in four
principal phases.
– Drug selection and quantification
– Procurement
– Storage and distribution
– Drug use
• Which are interlinked and are reinforced by
appropriate management support systems.
• A whole range of management capacities are
required and necessitate using the appropriate tools
within a given legal and policy framework.
The drug mgt cycle
Flow of supply activity
Selection
Management Support systems

Drug use
organization, financing, Procurement
information & human resource
mgt
Line of co-ordination
Drug
Distribution
Policy & legal framework

63
Intro…
 Each major function build on the previous
function and leads logically to the next.
 The management support holds the drug mgt

cycle together in coordination.
 Drug QA is part of each and every function

 The entire framework relies on policies, laws
and regulations
64
Definition of terms
• SELECTION
– Deciding what drugs are needed.
• QUANTIFICATION
– Estimating how much of each drug is needed.
• PROCUREMENT
– Selecting suppliers, placing and monitoring orders, checking
delivery quantities and quality, and paying suppliers.
• DISTRIBUTION
– Reception, storage, stock control, transportation, and record
keeping for monitoring and control.
• USE
– Prescription, dispensing and use of drugs, and patients’
compliance with prescriptions
Drug Selection
• Selection: is a process of deciding the type of
needed drug products for the prevalent diseases.
• This involves:
• Reviewing the prevalent health problems
• Identifying treatments of choice
• Choosing individual drugs and dosages forms
• Deciding which drugs will be available at each
level of health care.
Note: being selective has therapeutic, economic
and administrative advantages.
Drug Selection
• Why Do We Need To Be Selective With Drugs?
–Large numbers of drugs are available
–Funds are limited
–Impossible to keep up-to-date with all

the drugs on the market
Drug selection…
• The process of selecting essential drugs begins with

defining a list of common diseases for each level of
health care.
• The treatment of first choice for each health problem is

the basis for the list of essential drugs, the national
formulary, and the treatment guidelines.
• As there is never enough money to pay for drugs, we

need to have some criteria for deciding which ones to
choose.
Criteria for drug selection
Selection of drugs is based on:

• Pattern of prevalent diseases in once environment
• Treatment facilities
• Training and experience of available personnel
• Drug product only for which sound and adequate
scientific data on efficacy , safety , quality,
bioavailability and stability are available.
• Possibilities of easy and prompt procurement and
local manufacture.
Drug selection Criteria….
• Physical facilities for proper distribution and
storage could be assured.
• Drug products with affordable cost by
considering total cost of treatment not only the
unit cost of drugs.
• Single ingredient drug products.
– Note: unless and other wise selection of
combination drug products offer advantages
over a single compound drug product.
Drug selection Criteria ….
• Combination drug products are preferred if

clinical documentation justifies the concomitant
use of more than one drugs,
 The therapeutic effect is greater than the
sum of the effect of each,
 The cost of the combination product is
less than the sum of individual products,
 Compliance is improved
Drug selection ….
• Basic steps in drug selection
I. Establish drug selection committee
II. Determine the prevalent health problems and
patient characteristics
III. Decide which health problems may be treated at
the level of drug selection
IV. Choose the drugs to used for the health problems
V. Structure the list of drug products
VI. Introduce the list of drugs
VII. Up-date the list of drugs
Drug selection…
1. Establishing drug selection committee
– Drugs should be selected by a committee
– Appropriate representation, i.e., the
committee should be composed of:
• Prescribers
• Pharmacy professionals
• Other concerned health personnel
– DTC(diagnostic and treatment center)
Drug selection …
2. Determining the prevalent health problems and
patient characteristics
– Heath problems encountered, should be recorded
using:
– Morbidity registration book
– Patient prescription registration book
– The recorded health problems should be
– Summarized
– Analyzed by age, sex, severity, frequency and
ranked using percentage.
Drug selection..
3. Deciding which health problems may be treated at
the level of drug selection
 The type of health service that can be provided at each level
should be decided according to:
 The diagnostic facilities
 Prescribing capacities
 The curative, preventive and other services that can be
provided at a given health institution are:
 complete treatment
Initial treatment
Follow up treatment
Preventive health service
Drug selection…
4. Choosing the drugs to used for the health
problems
• Select the drug indicated for each health problem
based on selection criteria.
• If two or more drugs seem similar in the above
respect select:
• The most thoroughly investigated drug(s)
• Drug(s) which offers better patient compliance
• Drug product(s) which is locally available
Drug selection…
5. Structuring the list of drug products

• The end result of drug selection is list of drugs
which should be structured:
a. Pharmaco-therapeutically and/or
alphabetically
 E.g. National list of drugs
b. By level of health care
 E.g. the list of Essential medicines for Ethiopia
c. By level of importance
Drug selection…
• Structuring by level of importance
– Vital (V)
• Drugs which are potentially life saving (very essential), and
• Which are of major importance in basic health services
• E.g. Anitmalarials, ORS, Vacciness, etc
– Essential (E)
• Drugs which are effective against less life threatening, but
significant health problems.
• E.g. Certain antibiotics, anti inflammatory
– Normal usage (N) (Less-essential)
• used for minor or self-limiting health problems or
• which have a high cost for small extra effectiveness
• E.g. Cough syrup, Antacid tablet or suspension
Drug selection…
6. Introduce the list of drugs
– The list of drugs should be introduced to health
professionals of the institution and other
concerned bodies.
7. Update the list of drugs
– The list of drugs should be reviewed periodically.
– Any addition into and deletion from the list should
be on the basis of selection criteria.
Drug selection..
Advantage of drug selection
• A better Supply
– Easy to procure, store and distribute
– Adequate stocks
– Better quality assurance
– Easier dispensing
• More rational Prescribing
– More focused training
– More experience with fewer drugs
– No irrational treatment alternative available
– Focused drug information
– Better recognition of adverse drug reactions
Drug selection…
Advantage of drug selection
• More rational Patient use
– Increased adherence to treatment through
consistency among prescriber
– Improved drug availability
– Cost effective treatments are provided
• Lower costs (more competitive prices through

increased competition).
Drug selection….
Monitoring and evaluation of drug selection

• Drug selection should be monitored and evaluated
against its objectives using indicators.
• Sample indicators :
– Availability of drugs which are not relevant
– Availability of drugs above the level of a given health
institution.
– unavailability of relevant drug(s)
– Whether selection of drugs is done without considering
the major factors for drug selection.
• Based on the result of monitoring and evaluation,
necessary adjustment should be made on time.
Drug Quantification
Definition
• It is a process of
determining the amount
of drug products required.
I.e. Quantification
involves estimating the
quantities of specific
drugs needed for
procurement
Drug Quantification…
Advantages of drug quantification
 Proper drug quantification avoids
 over stock and
 stock out of drugs
 Promotes
 Safe
 effective and
 economic use of drugs and increase drug
coverage.
Quantifying Drug Requirements
Four types of quantification methods:

– Consumption method
– Morbidity method
– Adjusted consumption method
– Service-level projection of budget
requirements
85
1. Consumption method
– Uses records of past consumption of
individual drugs to project future needs.
 Preferred when:
 Accurate consumption data are available
 Drug supplies are adequate
 Stock mgt is reasonably good, and wastage
and losses are not excessive.
86
Advantages
 Requires less detailed calculations
 Useful for facilities in which their health

problems are numerous and drug treatments
are complex.
 Reliable if consumption is well-recorded and

stable.
87
Disadvantages
 Does not encourage good morbidity recording
 Unreliable if there had been long stock-outs

(>3 months) and high drug wastage or losses.
 May be difficult to obtain reliable drug

consumption data especially in new or rapidly
changing services.
88
2. Morbidity method
 Estimates the need for specific drugs based on:
 The expected number of attendance
 The incidence of common diseases and
 The standard treatment patterns for the

disease considered.
89
 More appropriate when:
 Available consumption data are incomplete

or unreliable.
 The health facilities or services are new, or

expanding or contracting rapidly, so that
past consumption is not a reliable guide to
future requirements
90
Advantages
 Does not require drug consumption data
 Motivate reliable morbidity recording
 More realistic and provide more reliable

estimated picture than the two methods.
91
3. Adjusted consumption method
 Uses data on:

 Disease incidence
 Drug consumption or utilization, and/or
 Drug expenditures
 from a standard supply system and
extrapolates the consumption or utilization
rates to the target supply system, based on
population coverage or service level to be
provided.
92
4. Service-level projection of budget requirements
 Uses the average drug procurement cost per

attendance or bed-day in different types of
facilities in a standard system to project drug
costs in similar types of facilities in the target
system.
 Only used to forecast budget requirements,
not used to forecast specific drug costs.
93
Symptoms of Poor Quantification
A. Chronic and widespread shortages of

commonly used drugs, despite adequate
funding, procurement, and distribution.
94
Poor Quantification..
B. Surpluses of a significant number of commonly

used drugs
• May be caused by poor selection; the drugs involved
are not:
 Appropriate to the morbidity
pattern of the population or remains unused

 In the form or dosage preferred
by prescribers or by patients 95
C. Irrational adjustments to budgetary constraints

may lead to irrational order quantities.
 If the reduction of order quantities to fit within
budget is left to administrators unfamiliar with
medical priorities, cuts tend to be made
arbitrarily
 Cost-effectiveness approach - cut less essential

drugs first and most, and cut the more essential
drugs least and only as a last resort.
96
D. Irrational and ineffective prescribing

 Prescribers faced with inadequate or
inappropriate drug supplies usually either
shorten treatments or substitute alternative
drugs for those in scarce supply.
97
Steps in the
quantification
98
Consumption Method
1. Prepare a list of drugs to be quantified
2. Determine the period of time to be reviewed for
consumption
3. Enter consumption data for each drug
– For each drug on the list, enter
• Total quantity used during the review period

• No. of days in the review period that the drug was out of stock
• The lead time for the last procurement.
99
Calculate the consumption of each drug
 Two possible methods:

1. Calculation from patient registers - if drug treatments
are recorded in patient registers.
 Reliable only if the records are well kept &

complete
 Requires long and time consuming additions
100
2. Calculation from stock records, using one of the
following methods:
a. Add up all the quantities issued.

– the simplest method
– tedious if there have been many issues
b. using the following formula:
101
Example 1
• Lidocaine (Injectable) 1% 50 ml vials. If the
stock at 1st January was 20 vials, drugs
received during the year were 60 and 70 vials
and the stock at 31 December 30 vials, then
the consumption is calculated as follows:
• Consumption = 20 + (60 + 70) - 30 = 120 vials
102
Adjust consumption for stock-outs if necessary
 For stock-outs longer than 30 days an adjustment

should be made.
 The formula for making this correction is:
= Recorded consumption x period in calculation (in days, weeks, months)

Period in stock (in days, weeks, months)
103
Example 2:
• If recorded consumption is 80,000 tablets for
paracetamol and 1 month effectively out of stock,
with Calculation period of 12 months.
The adjusted consumption for stock-outs becomes:
80,000 x 12 months = 87,273 tablets

11 months
104
4. Calculate the average monthly consumption
 The average monthly consumption should be as

accurate as possible.
 Calculated as follows:
CA= CT ÷ [RM - (Dos ÷30.5)]
CT = total consumption during review period, in basic unit;

CA= Average monthly consumption, adjusted for stock
outs; RM = Review period in months; DOS= Number of days
an item was out of stock during the review period
105
Example 3
• Consider the entry for Antihistamine
decongestant any strength of tablet. The total
consumption for a six-month review period
was 50,000 tablets. The drug was out of stock
for thirty-four days in the six-month period.
Therefore the average monthly consumption
is:
CA= 50,000 ÷ (6 - (34 ÷ 30.5) = 10,235

106
5. Calculate the Safety Stock needed for each drug
 Safety stock is the buffer or reserve stock kept

on hand to protect against stock outs caused
by delayed deliveries, markedly increased
demand, or other unexpected events.
 Calculated based on the average

consumption and the expected lead time
107
Example 4
• If the lead time is three months for the

example mentioned in step 4 then the safety
stock will be calculated as follows:
SS=CA x LT
SS= 10,235 x 3 = 30,705
108
6. Calculate the quantity of each drug
required in the next procurement period
Done in three main steps.

A. Multiply the average consumption by the
sum of the lead time and the procurement
period.
B. Add the quantity needed for safety stock.
C. Add the quantity of stock on hand and the
stock on order together, then subtract this
from the previous total.
109
Example 5: Using example 3 of antihistamine
decongestant any strength of tablet with stock on hand
(Si) of around 345 tablets and stock on order (SO ) of
62,500 tablets, the quantity to order is:
QO = CA x (LT+PP) + SS - (Si+SO)
= 10,235 x (3+6) + 30,705 – (345 + 62,500)
= 122,820 – 62,845 = 59,975
110
7. Adjust for expected changes in consumption
 Using example 3 of antihistamine, if it is

expected that utilization will increase by 5
percent in the coming year, We have to adjust
the six month forecast by 2.5 percent.
 This would bring the total to 61,474 tablets.
111
8. Adjust for losses
 Quantification estimates should be adjusted to
allow for losses, in order to avoid stock outs.
9. Compile decentralized quantification
 In a decentralized quantification, staff at each facility
or storage point enters their own consumption
quantities and stock out information
– Estimates of the individual facilities are totaled
and compiled on the master quantification list.
112
10. Estimating the cost of the Drug
Quantities Required
Procurement costs = Quantities estimated

for each drug X expected
next purchase price
113
11. Compare total costs with budget and
make adjustment
If the total expected procurement cost >

the available budget, the only two choices:
 Obtain more funds
 Reduce the number of drugs required
114
Exercise
• The following information is taken from bin card of
Paracetamole 500mg tab.
• If the average lead time for paracitamol is 2months,
procurement period is 6 month and there is no stock
now on order .
Calculate:
• Average monthly consumption
• Safety stock
• Calculate the quantity of paracitamol required in the
next procurement period
Date Received Receive Qty Issued Qty Balance Remark
from/Issued to
01/01/11 E.C Opening stock 200
5/01/11E.C Dispensary 60 140
15/01/11 E.C PFSA 100 240
20/01/11 E.C Dispensary 60 180
15/02/11 E.C Dispensary 60 50
10/05/11E.C PFSA 200 200
Morbidity Method
 Uses data on:

 Patient utilization (attendances at health facilities) and
 Morbidity (the frequency of common health problems)
 Requires:
 A list of common health problems
 List of drugs for the problems and
 A set of standard treatment
117
Steps of Quantification using morbidity
method
– Prepare Average Standard Treatment Schedules
(ASTS)
– Estimate number of Treatment Episodes for each
Health Problem
– Calculate total quantity of each drug(s) required
– Estimate the cost of the drug quantities required
– Prepare Annual Drug Budget
– Reconcile drug quantities to budget/fund
– Estimate the cost of drug quantities required
Steps
1: Specify the list of problems
2: Establish the list drugs to be quantified
3. Prepare Average standard Treatment

schedules
 the average quantity of a drug per course of
t/t
119
Example 1: Calculate the average standard treatment
schedule of cotrimoxazole suspension needed to
treat otitis media in patients under five years old
with 5 basic unit per dose, taking twice a day for 10
days.
QE = DCU X ND X LD = 100ml
QE = the quantity of each drug needed for each treatment

episode, DCU = Basic units per dose, ND = Number of doses per
day, LD = Length of treatment
120
4. Estimate number of treatment Episodes for each health problem
 Episode is patient contact for which a standard course

of drug treatment is required.
 The number of treatment Episodes (ET) is calculated as
follows:
ET = NC x F
ET = number of treatment Episodes , NC = expected total

number of contacts in thousands, F = the expected
frequency of the problem
121
Example 2: If there were 3,123,408 contacts in the
past year and if 106 episodes per 1,000 contacts were
for otitis media in patients under five years old.
Calculate the estimated number of t/t episodes.
106 x 3,123.4= 331,080
 Then number of t/t episodes must be adjusted for

expected changes in patient utilization. (5% expected
rate of increase):
331,080+(331,080 x 0.05) = 347,634
 Projected number of episodes.
122
5. Calculate total quantity of each drug(s)
QT=ET X QE X PT
QT= Total quantity of each drug, ET = The projected
number of t/t episodes, QE = Quantity of drugs for
each treatment episode and PT = the percentage of
cases that are expected to be treated
123
Example 3: If 90 % of patients under 5 with otitis
media are expected to be treated with
cotrimoxazole suspension. Calculate the
quantity of cotrimoxazole suspension needed
to treat otitis media.
347,634 x 100mL x 0.9= 31,287,060
124
6. Combine the estimates for each drug from the various
health problems into a master procurement list
For example paracetamol solution which is

included for different health problem must be
added to yield the total number of ml of
paracetamol needed.
125
7. Adjust Quantities to cover other health
problems
 It is rarely feasible to get reliable data for all major health

problems.
– In such situations, the morbidity-based quantification cannot predict
total drug needs,
– it is necessary to adjust for drug needs not addressed in the
quantification.
• Expert opinion” may be used to estimate what percentage

adjustment should be made.
126
8. Adjust for filling the pipeline and current stock position
 If there have been major stock outs that need to be

corrected, additional stock will be necessary to fill
the pipeline.
 If applicable, make adjustments for stock on hand,
stock on order and lead time to finalize the
preliminary estimates.
127
9. Adjust quantities for expected losses
 In most supply systems, losses are a reality and

unless they are considered in the quantification
process, stock outs will be unavoidable.
10. Estimate the cost of the drug quantities

required
 Total cost of each drug = Number of packs X
price per pack
128
11. Compare total costs with budget and make adjustment
Use VEN system to reconcile budget and

need.
129
Example
• If the number of treatment episodes for

Amoebiasis treated annually by a given health
centre was 1000 of which 60% were adults
and all cases were treated with metronidazole
oral preparation, calculate the quantity of
metronidazole.
Calculate the total quantity of each drug
• When a drug is indicated for
more than one standard
treatments, add the quantities
required for each one to obtain
the total quantity of the drug by
re-organizing the quantities in
step 3 by the drug to be
quantified.
Example
• If the number of treatment episodes for amoebiasis,
Giardiasis and trichomoniasis treated with
metronidazole 250 mg capsule are 1000 (600 Adult
and 400 children); 1000 and 1000 respectively. Then
the total quantity of metronidazole 250 mg capsules
is calculated as shown in the table below.
Drug Drug generic ICD code No. Total quantity for all standard
Code Name or treatment
No. strength, Health No of Quantity/ Total
And dosage problem treatment Average Quantity
form episodes STS
Metronidazole Amoebiasis
250mg capsule
- Adults 600 45 27,000
capsules caps.
- Children 400 6 capsules 2,400
caps.
Giardiasis 1000 15 15,000
capsules caps.
Trichomoniasis 1000 8 capsules 8,000
caps.
Total Metronidazole 250 mg capsule 52,400cap
s.
Adjusted consumption method
 When neither consumption nor morbidity

methods are feasible, the best option is
extrapolating from consumption data from
another region or health system.
 Uses known consumption data from one
system, called the standard, to estimate the
drug needs in a similar or expended system,
known as the target.
134
Can be:
a. Population based- drug use per 1,000
population or
b. Service based - drug use per specified
patient case.
A complete quantification may use a

combination of these two.
135
• This method is used when:
– Consumption and morbidity method are not

available
– Health facility is new
– Country is working on planning a heath

program that intends to cover populations that
have not been served in the past and to
control the target diseases
Steps
1. Select the standard system for comparison and

extrapolation.
 The standard facilities should closely resemble the
target facilities in terms of:
 Geography and climate
 Patient population served
 Morbidity patterns
 Prescribing practices and
 Drug supply status
137
2. Develop the drug list
 Same as the consumption method.
3. Establish the time period to be covered in

review
 Determine the number of months’ worth of

data to be reviewed in the standard system.
138
4. Review records from the standard system
 Use available reports on patient contacts or

population data in the standard system.
 If reports are not already compiled with suitable
data, a survey of standard facilities can be done to
determine the number of patient contacts during the
time period established.
139
5. Establish the Denominator for Extrapolation
 The denominator used to extrapolate consumption

can be either population in the area served or
number of patient contacts, depending on the data
obtainable through step 4.
 Whichever one is used, the denominator is usually

thousands of patient contacts or thousands of
inhabitants in the region.
140
6. Determine the consumption rate in the standard system
 For each drug, produce an adjusted average monthly

consumption.
Example 1: if there are 50,000 inhabitants and 32,500 outpatient

contacts in standard system and 59,500 total usages in 6-month
period for 500 mg of ampicilline capsule with zero out of stock.
a. Calculate the adjusted average monthly consumption.
9,917 capsules
b. Calculate the adjusted annual consumption
119,004 capsules 141
c. Calculate the consumption rate of SS.
i. Consumption rate per inhabitants

119,004/50,000 inhabitants
=2,380 per 1,000 inhabitants
ii. Consumption rate per outpatient contacts
119,004/32,500 outpatient contacts
=3,662 per 1,000 outpatient contacts.
142
7. Extrapolate the standard system’s consumption rate to the target system
Projected requirements in the target system =

consumption rate in the standard system X the estimated number
of thousands of contacts or inhabitants in the target system
143
Example 2: If there is 80,000 inhabitants in example 1
above and unknown outpatient contacts in the target
system, then calculate the projected requirement in
the target system.
2.38 x 80,000 inhabitants
=190,400 capsules
144
8. Adjust for expected losses
 Because quantities calculated via adjusted

consumption method are very rough estimates, and
it may be unclear what percentages of losses were
experienced in the standard system, it may not be
realistic to adjust for losses.
 However, if there are known losses, add a percentage

allowance, at least for vital drugs.
145
9. Estimate costs for each drug and total costs and make adjustments
Example 3: If pack size for ampicilline is 1,000, then the

order quantity of packs becomes :
190,400/1000 = 190 packs
146
Service level projection of budget
requirements
 Used to estimate financial requirements based on
costs
 Information needed
1. Average number of curative outpatient

attendance, non curative attendance and patient
bed days for each type of facility
2. The average cost per curative attendance, per non

curative attendance and per bed-day
147
Steps
1. Establish the categories of facilities and
determine the number in each
category .
2.Determine the patient contact

denominator for each type of facility and
estimate the average number of patients
contacts of each type at each category of
facility. 148
3) Calculate the average cost per contact:
– The total drug purchases for the

facility or facilities in class divided by
the attendances or bed-days
4) Calculate the total projected drug costs
149
Managing Procurement
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Introduction
• The pharmaceutical procurement system is a
major determinate of pharmaceutical
availability and total pharmaceutical costs.
• In most developing countries, pharmaceutical
purchase represent the single largest health
expenditure after personnel cost.
• Pharmaceuticals also consume the major share
of health related foreign currency exchange.
151
Introduction…
• Therefore, pharmaceutical procurement is a
complex process which involves many steps,
agencies, ministries and manufacturers.
• Existing government policies, rules and regulations

for procurement as well as institutional structures
are frequently inadequate and sometimes hinder
overall efficiency in responding to the modern
pharmaceutical market.
152
An effective procurement process should
• Seek to manage the buyer- seller relation ship

in a transparent and ethical manner
• Procure the right medicine in the right
quantities
• Obtain the lowest practical purchase price
• Ensure that all pharmaceuticals procured meet
recognized standards of quality
• Arrange timely delivery to avoid shortage and
stock outs.
An effective procurement process should…
• Ensure supplier reliability with respect to

service and quality.
• Set the purchasing schedule, formulas for
order quantities, and safety stock levels to
achieve the lowest total cost of purchasing at
each level of the system
• Achieve these objectives in the most efficient
manner possible.
The four Strategic objectives of pharmaceutical
procurement (WHO – 1999)
155
• Procure the most cost-

effective drugs in the
right quantities.
• Select reliable suppliers
of high-quality products.
• Ensure timely delivery.
• Achieve the lowest
possible total cost.
Remember;
• All Pharmaceuticals procured must fulfill
Quality, safety and Efficacy criteria.
• Appropriate procurement requires the
acquisition of drug products of:
The right quality
In the right quantity
At the right price
At the right time and
From the right sources
156
Defining key terms in health
commodity procurement
• Tender
– The documentation and initiation of a process for
soliciting bids; the specifications for the product/service
desired and opening the contract to the bidding process.
• Bid
– A written offer for a quantity of goods, works, or
services, at a stated price; based on technical
specifications and other terms and conditions.
02/20/2024
Terms ….
• Procurement
– The process of acquiring supplies from private or public
supplier or through purchasing from manufacturer or
agencies or bilateral aids program.
– The decision making process you follow when you
buy products or services; you usually have many options.
• Purchasing
– Subset of procurement
– Refers to buying goods or services, receiving and making
payments.
02/20/2024
Procurement ….cont’d
• Product selection and quantification
– Submit to the procurement unit to obtain the correct
quantities of the correct products from international,
regional, or local marketplaces.
• Specifications
– Mechanism of protecting populations against counterfeit
or substandard products;
– Ensure proper labeling, protection or storage, and
shipment.
02/20/2024
Assessment and Selection of
Procurement Options
• Pharmaceutical procurement methods ,at any
level of a health system, generally fall in to a
few basic categories ; open tender, restricted
tender, competitive negotiation and direct
procurement.
• Each of theses methods can be used with any of
the standard reorder frequency models-
annual, scheduled, or perpetual review- given
the right sort of procurement contact.
02/20/2024
Assessment and Selection of
Procurement Options
• Open tender
– Is a formal procedure by which quotations are invited
from any suppliers on a local or worldwide basis,
subjects to the terms and conditions specified in the
tender invitation
– The preferred procedure of procurement.
– A method other than open bidding is used only
where conditions for use of other method are
satisfied.
02/20/2024
Procurement methods
• Restricted tendering
– Interested suppliers must be approved in
advance (prequalification process)
– e.g Adhering to GMP, past supply
performance, financial viability and related
factor
– The pre qualification process is often open
for any supplier that wishes to apply
02/20/2024
Procurement methods
• Conditions for RESTRICTED TENDERING

– The required object of procurement is
available only with limited suppliers;
– The cost of procurement does not exceed the
threshold specified
02/20/2024
Procurement methods
• Direct Procurement
– is when the purchaser establishes direct
contact with suppliers or their representatives.
– Simplest, most expensive method of
procurement
– For single source drugs
• negotiated or direct procurement
• selection of alternative drugs
02/20/2024
Procurement methods…
• Conditions for Direct Procurement
– In absence of competitions
• provided only by one candidate
– For additional deliveries of goods by the original
supplier
• Replacement , or as the extension of existing
supplies,
– Additional works, which have been not included in the
initial contract
– During emergency
02/20/2024
Procurement Methods
• E- procurement and reverse auction
• E- procurement is internet based
tendering
02/20/2024
• Reverse auction
– Variation of restricted tender
– Qualified bidders submit an official offer
– The lowest offer received is posted publicly without
naming the bidder in the first round
– Qualified bidders are invited to offer lower prices than
posted low price.
– The process continues round by round until no more
prices are submitted.

02/20/2024
Procurement Methods
Competitive negotiation or negotiated

procurement
– Buyer approaches a limited number of
selected supplier (at least three) for price
quotation.
– Possible to bargain specific price or service
arrangements
– E.g. reduced price for ARV
– Mainly used in private sector
02/20/2024
International or local shopping
• As with competitive negotiation, in
international or local shopping, the buyer
obtains at least three quotes from
suppliers.
• However, bargaining or negotiation of

any kind are generally not permitted.
02/20/2024
Procurement Challenges
• Accurate quantification and forecast data

• Lengthy procurement process
• Delays in funding allocation and release
• Product quality assurance
• Transparency
02/20/2024
Factors influencing pharmaceutical prices
and total costs
1. Unit price
– Competition among supplier
• number of products and generic version
– The ‘’Rule of five’’ in pharmaceutical pricing says that in
general the lowest competitive prices are available when five
or more generic alternatives for a particular product are
available or when, in a tender ,there are at least five bids per
item ( WHO1999).
• Gov’t policy
– registration, licensing, prescribing, dispensing
• Procurement method
02/20/2024
Factors …
2. Reorder frequency and the total
cost of pharmaceutical purchasing
– Total cost = Drug acquisition price + inventory
holding cost + purchase operating cost + shortage
cost( extra costs incurred when stock outs occur)
• Although procurement offices typically concern mainly

with pharmaceutical acquisition costs, other cost
component may increase the total purchasing cost by
50% or more.
02/20/2024
Factors …
– For each country's situation, total purchasing
costs can be minimized by choosing the
optimal reorder frequency model.
– Cost minimized by Reorder frequency

• Interval b/n order (annual, scheduled, perpetual)
• Safety stock target- which vary according to
supplier lead time, consumption pattern,
02/20/2024
Factors …
3. Visible and hidden costs
• The total procurement cost has four component;
– Drug acquisition price
– Inventory holding cost
– Purchase operating cost and
– shortage cost
• Some of these costs are visible to managers- the
total expenditure for pharmaceutical acquisition or
the salaries of procurement staff.
02/20/2024
Factors …
• However the cost associated with shortages and poor
supplier performance are not so obvious; hidden costs
associated with poor performance by the supplier or the
procurement office include-
• Increased acquisition cost due to emergency procurement
• Replacement cost
• Storage ,port charges and administrative expenses
• Health and economic costs of stock outs resulting from
delay or default on delivery
• Total cost= Hidden cost + visible cost
02/20/2024
02/20/2024
International Commercial Terms, Payment
Modalities and Documents used
• INCOTERMS (international trade acronym)

– Are a series of pre-defined commercial terms
published by the ICC (International Chamber of
Commerce ) widely used in international
commercial transactions.
International Commercial Terms, Payment
Modalities and Documents used
• Intended primarily
– To clearly communicate the tasks, costs and
risks associated with the transportation and
delivery of goods.
– To reduce or remove altogether uncertainties
arising from different interpretation of the
rules in different countries.
– Accepted by governments, legal authorities and
practitioners worldwide for the interpretation of
most commonly used terms in international trade.
INCOTERMS AND THE EXPORTER
• INCOTERMS
– Define the responsibilities of exporters and
importers in the arrangement of shipments
and the transfer of liability involved at various
stages of the transaction.
– Affect the costs and responsibilities involved
in shipping, insurance and tariffs.

• The 2010 version is the latest one
• Each terms which helps users deal with
different situations involving the movement of
goods.
• The duties of the buyer and the seller
• Who takes care of the insurances, licences,
permissions and all other formalities
• Who arranges the transport untill which point
and who is responsible for this
• The point where the costs and risks pass on
from the seller to the buyer.
INCOTERMS…cont’d
• The 2010 version consists 11 terms grouped into two
• Rules for Sea and Inland Waterway
Transport:
• FAS - Free Alongside Ship
– Risk passes to buyer, including payment of all transportation
and insurance costs, once delivered alongside the ship
(realistically at named port terminal) by the seller.
– The export clearance obligation rests with the seller.

• FOB - Free On Board
– Risk passes to buyer, including payment of all
transportation and insurance costs, once
delivered on board the ship by the seller.
– A step further than FAS.

02/20/2024
• CFR - Cost and Freight

– Seller delivers goods and risk passes to buyer
when on board the vessel. Seller arranges
and pays cost and freight to the named
destination port.
– A step further than FOB.
20/02/2024
• CIF - Cost, Insurance and Freight

– Risk passes to buyer when delivered on board
the ship. Seller arranges and pays cost,
freight and insurance to destination port.
– Adds insurance costs to CFR.
20/02/2024
• Rules for Any Mode or Modes of
Transportation:
• EXW - Ex Works
– Seller delivers (without loading) the goods at disposal
of buyer at seller's premises.
– Long held as the most preferable term for those new-
to-export because it represents the minimum
liability to the seller.

Rules for Any Mode or Modes of Transportation: …..cont
• FCA - Free Carrier
– Seller delivers the goods to the carrier and may
be responsible for clearing the goods for export.
– More realistic than EXW because it includes
loading at pick-up, which is commonly
expected, and sellers are more concerned about
export violations.
• CPT - Carriage Paid To

– Seller delivers goods to the carrier at an
agreed place, shifting risk to the buyer, but
seller must pay cost of carriage to the named
place of destination.
02/20/2024
• CIP - Carriage and Insurance Paid To

– Seller delivers goods to the carrier at an
agreed place, shifting risk to the buyer, but
seller pays carriage and insurance to the
named place of destination.
02/20/2024
• DAT - Delivered at Terminal

– Seller bears cost, risk and responsibility until
goods are unloaded (delivered) at named quay,
warehouse, yard, or terminal at destination.
– Demurrage or detention charges may apply to
seller.
– Seller clears goods for export, not import.

• DAP - Delivered at Place

– Seller bears cost, risk and responsibility for
goods until made available to buyer at
named place of destination.
– Seller clears goods for export, not import.

• DDP - Delivered Duty Paid
– Seller bears cost, risk and responsibility for
cleared goods at named place of destination
at buyers disposal.
– Buyer is responsible for unloading.
– The seller has an obligation to clear the goods
not only for export but also for import, to pay
any duty for both export and import and to
carry out all customs formalities.
02/20/2024
• The only difference between Incoterms
DDP and DAP is that in DDP all costs and taxes
of import clearance are paid by the seller
while inDAP are paid by the buyer.
INCOTERMS 2000 – Risk Snapshot
196
Role of Banks (Commercial /National)
Banks provide services such as advice on financial

issues, IT processes, documentation, banking
procedures and the potential risks involved.
Documentary requirements
• Buyer - What documents does he needs?
• Seller - With what documents will he be able to
supply?
• Country of export - what documents are required
under the regulations of the exporting country?
• Country of import - what documents are required
under the regulations of the importing country?
197
Role of Banks (Commercial / National)
• Wants/needs and problem of trading partners
Partner Wants / Needs Problems
Buyer 1. Contract 1. Am I going to get the goods? (in good condition / in time)
Wants fulfillment. 2. Does the settlement method safeguard these risks?
2. Convenience. 3. Before we pay—how to check the goods are exactly those
3. Credit. ordered?
4. Advice and 4. Any credit terms available Prefers to delay paying for the
assistance goods until they are sold.
5. From where can I get information on the exporter’s
creditability
Seller 1. Contract 1. Will I be paid?

Needs fulfillment. 2. When will I be paid?
2. Convenience. 3. How to minimize risk of non-payment?
3. Prompt payment. 4. How to maintain secrecy of our supplier?
4. Advice and
assistance
198
Role of Banks (Commercial / National)
 Basic agreement (International Trade – Sale Contract)
1. Preliminary Quotation & Commitment (Invoicing / order etc)
2. The Merchandise (goods to be imported / exported)
3. Packing (instructions regarding packing of imported /
exported merchandise)
4. Method of Settlement (Immediate or Credit /
Advance / LC Collection???)
5. Shipping Instructions (trans shipment – partial shipment etc)
6. Price and its components (INCOTERMS 2010)
7. Delivery Mode ,Period, Place (Sea, Air, Road – place of
shipment and last date of shipment)
8. Documents (Invoice, packing list, inspection report,
certificate of origin, etc)
199
Making and Receiving Payment Internationally :
International Payment Instruments
Payment methods • Clean Payments

• Documentary
Collections
• Letters of Credit
Clean Payments
•Characterized by trust.
• Either the Exporter sends the goods and trusts
the Importer to pay once the goods have been
received, or the Importer trusts the Exporter to
send the goods after payment is effected.
• All shipping documents, including title
documents, are handled directly by the trading
parties.
• The role of banks is limited to clearing funds as
required.
Clean Payments
•Two types of Clean Payments: Open Account
& Payment in Advance.
• Open Account. The Importer is trusted
to pay the Exporter after receipt of the
goods.
• Payment in Advance. An arrangement
whereby the Exporter is trusted to ship
the goods after receiving payment from
the Importer.
Clean Payments
How does an Open Account transaction work?
OPEN ACCOUNT: The Exporter

Exporter ships the goods
and the documents
directly to the Importer
GOODS PAYMENT
and waits for the Importer 1 2
to send payment.
Importer
Clean Payments
How does a Payment in Advance transaction work?
PAYMENT IN ADVANCE:
The Importer sends Exporter
payment directly to the
Exporter and waits for the
Exporter to send the
GOODS PAYMENT
goods and documents. 2 1
Importer
Documentary Collections
What is a Documentary Collection?
•A method of payment used in international trade

whereby the Exporter entrusts the handling of
commercial and often financial documents to
banks and gives the banks instructions concerning the
release of these documents to the Importer.
•Banks involved do not provide any guarantee of

payment.
Documents Against Payment (D/P) & Documents
Against Acceptance (D/A)
• Documentary Collections may be carried out in two

different ways:
• Documents Against Payment. Documents are released

to the Importer only against payment. Also known as a
Sight Collection or Cash Against Documents (CAD).
• Documents Against Acceptance. Documents are

released to the Importer only against acceptance of a
draft. Also known as a Term Collection.
02/20/2024
Documentary Collections
How does a Documentary Collection work?
The mechanics of a Documentary Collection are
easily understood when separated into the following
three steps:
» Flow of Goods
» Flow of Documents
» Flow of Payment
Documentary Collections:
Flow of Documents
• After the goods are shipped, documents originating with the
Exporter (e.g. commercial invoice) and the transport company
(e.g. bill of lading) are delivered to a bank, called the Remitting
Bank in the Collection process.
• The role of the Remitting Bank is to send these documents
accompanied by a Collection Instruction giving complete and
precise instructions to a bank in the Importer’s country, referred
to as the Collecting/ Presenting Bank in the Collection process.
• The Collecting/ Presenting Bank acts in accordance with the
instructions given in the Collection Instruction and releases the
documents to the Importer against payment or acceptance,
according to the Remitting Bank’s Collection instructions.
Flow of Documents
2
Documents
Exporter/
Remitting
Drawer
Bank
1
Documents
3
GOODS
Documents
4
Importer/ Collecting/
Drawee Presenting Bank
Flow of Payment
4
Payment is forwarded
Exporter/ Remitting
to the Remitting Bank Drawer Bank
for the Exporter’s
account. And the
3
Importer can now
present the transport GOODS
document* to the 1
carrier in exchange for
the goods.
Documents
Importer/ Presenting/
Drawee 2 Collecting Bank
• A letter of Credit
• Is a written undertaking by the Importer’s
bank, known as the Issuing Bank, on behalf of
its customer, the Importer (Applicant),
promising to effect payment in favor of the
Exporter (Beneficiary) up to a stated sum of
money, within a prescribed time limit and
against stipulated documents.
• A key principle underlying Letters of Credit is
that banks deal only in documents and
not in goods.
02/20/2024
A letter of Credit…
• The decision to pay under a Letter of Credit

will be based entirely on whether the
documents presented to the bank appear on
their face to be in accordance with the terms
and conditions of the Letter of Credit.
• It would be prohibitive for the banks to
physically check whether all merchandise has
been shipped exactly as per each letter of
Credit.
02/20/2024
Letters of Credit
How does a Letter of Credit work?
The mechanics of a Letter of Credit are easily
understood when separated into the following
three steps:
» Issuance
» Flow of Goods
» Flow of Documents & Payment
Letters of Credit:
Issuance
After the trading parties agree on a sale 4
of goods where payment is made by
Advice
Letter of Credit, the Importer requests
/Confirmation
that its bank (the Issuing Bank) issue a Exporter/ of the Letter of Advising/
Letter of Credit in favour of the Beneficiary Credit. Confirming Bank
Exporter (Beneficiary).
The Issuing Bank then sends the Letter
of Credit to the Advising Bank. A
Request to advise
request may be included for the Contract
& possibly
Advising Bank to add its confirmation. Negotiations confirm the
The Advising Bank is usually located in 1 Letter of Credit
3
the country where the Exporter does
business and may be the Exporter’s
Importer applies for
bank, but does not have to be. Letter of Credit.
Next, the Advising/Confirming Bank
verifies the Letter of Credit for
Importer/ 2
authenticity and sends it to the Issuing Bank
Exporter.
Applicant
Note: For the purpose of the Crash Course, the Advising Bank is
also acting as the Confirming Bank. However, the roles of
advising and confirmingthe Letter of Credit may be performed
by two separate banks.
Letters of Credit:
Flow of Goods
Upon receipt of the Letter of

Credit, the Exporter reviews the
Letter of Credit to ensure that it Exporter/Beneficiary
corresponds to the terms and
conditions in the purchase and
sales agreement; that the
documents stipulated in the Letter
of Credit can be produced; and that GOODS
the terms and conditions of the
Letter of Credit can be fulfilled.
Assuming the Exporter is in
agreement with the above, it
arranges for shipment of the goods.
Importer/Applicant
Letters of Credit:
Flow of Documents & Payment
3
After the goods are shipped, the
Exporter presents the
documents specified in the Documents
Letter of Credit to the Advising/ Exporter/ 2 Advising/
Beneficiary Confirming Bank
Confirming Bank.
Once the documents are 4
checked and found to comply
Documents
5
with the Letter of Credit (i.e.
without discrepancies), the GOODS
Advising/ Confirming Bank 1
forwards these documents to
the Issuing Bank. The drawing is
negotiated, paid or accepted as
the case may be.
Importer/
Issuing Bank
Applicant
Letters of Credit:
Flow of Documents & Payment
3
In turn, the Issuing Bank
examines the documents to
ensure they comply with the Exporter/ Documents
Advising/
Letter of Credit. If the 2
Beneficiary Confirming Bank
documents are in order, the
Issuing Bank will obtain 4
payment from the Importer for
Documents
5
payment already made to the
GOODS
Confirming Bank.
1
Documents are delivered to the
Importer to allow it to take 7
Documents
possession of the goods.
Importer/
6 Issuing Bank
Applicant
Quality Assurance for Drug
Procurement
• Drug quality
• Quality of the final drug product is determined
– Raw material (ingredient)
– Equipment
– Technical knowhow
– Packaging
– storage
• Defining assessing drug quality
– Establish quality standards:
• e.g. BP, USP, EP,IP
– Identity, Purity:, Uniformity of dosage form,
Bioavailability: Bioequivalent, Stability etc
02/20/2024 219
Quality Assurance for Drug Procurement
• Consequence of poor drug quality
– Lack of therapeutic effect may lead to

prolonged illness
– May induce toxic or adverse reactions
– wastes money
– May affect program credibility
02/20/2024 220
Quality Assurance …
• Practical approaches to quality assurance
– Careful product selection
• Powders for reconstitution instead of
injectable liquids
• Powders for reconstitution instead of oral
suspensions
• Tablets instead of capsules
– Careful supplier selection
• Certification, supplier reliability, product quality
• inspecting product sample
02/20/2024 221
– Certification of good manufacturing practice
• GMP certificate
– Batch certification
– Inclusion of detailed specification in the contract
• Name of the pharmacopeia reference standard
to assess drug quality
• Language for the product label
• Minimum information required on the label
• Additional information such as product
registration
• Standard for packaging
– Withstand storage and transport conditions
02/20/2024 222
• Procedures to verify that the shipped good

meet the specification.
– Pre and post shipment inspection
– Analytical drug testing
02/20/2024 223
• Procedures to monitor and maintain the quality of drug
– Proper storage and distribution procedures
– Appropriate dispensing
– Instructions to the patient on proper use of
medications
– Product defect reporting programs
02/20/2024 224
Drug Donation
• Disaster and suffering
– Donation of medicines
• Problems with drug donations

– Donate drugs are often not relevant for the emergency situation
or for the level of care that is available
– Health workers are not always familiar with donated drugs
– The drugs are often not registered for use in the recipient country
– May not comply with local treatment guidelines
02/20/2024 225
Drug Donation
– The drugs that arrive are frequently unsorted,
difficult to identify, unknown in the recipient
country, labeled with brand names or a labeled in
a language that is not locally understood
– The quality of the drugs does not always
comply with standard in the donor country.

02/20/2024 226
Drug Donation
– Donated drugs may have expired or may
expire before they reach the patient, or they
may be returned drugs (half finished packages
that have been returned to the pharmacy
– The distribution plan often ignores normal
administrative procedures.
– Donation of returned drugs

02/20/2024 227
Drug Donation…
• Core principles of donation
– Donation should be intended only to assist
the recipient and all efforts should be made to
maximize its positive effect.
– Donation should be given with full respect of
the authority of the recipient and be
supportive of existing government policies and

02/20/2024 228
administrative arrangements.
Drug Donation…
• Core principles of donation
– No double standard
– Effective communication must be
maintained between the donor and the
recipient: donation should be based on
expressed need and should be sent
02/20/2024
unannounced. 229
TERMS AND CONDITIONS OF AGREEMENT
DONATION IN ETHIOPIA
1) Products should have minimum 50% of its
shelf life on arrival at Addis Ababa/port of
entry.
2) No drugs should be donated:
– That have been issued to patents and then
returned to a pharmacy or elsewhere.
– That were given to health professionals as free
samples.
– That were collected from any where, repacked
and relabeled
230
AGREEMENT DONATION IN ETHIOPIA…..
3) Language used for writing label, leaflet and

other documents shall be in English.
4) All packing should be suitable for road, air and

sea transport under tropical conditions.
231
5) The label of the immediate container should at
least include:-
– The name of the product, brand and Generic/INN
– Pharmaceutical dosage form and route of
administration
– Composition of active ingredient(s)
– Quantity in container, Technical directions for use
– Handling and storage requirements
– Batch number, manufacturing and expiry dates
– Name and address of the manufacturer
232
6) Accompanying invoice should be as per the purchase
order including Batch number, manufacturing and
expiry date of each item.
7) Every product should be accompanied by a leaflet in its
immediate container, a leaflet must bear adequate
information for use and it should at least include:
– The name of the product; brand and generic /INN
– Description appearance, pharmaceutical dosage form and
route of administration
– Qualitative and quantitative composition of active
ingredients
– Clinical Pharmacology, indication(s), warnings, precautions,
contraindications, adverse reactions/side effects
– Dosage and administration (directions for use)
– Over dosage, storage instruction, package quantity, Name
233
and address of manufacturer
Good Procurement Practice
• Good Procurement Practice
– Generic name
– Limited to EML list or formulary list
– Bulk purchases
– Formal supplier qualification and monitoring
– Competitive bidding process
– Commitment to a sole source
– Order quantities based on reliable estimate of actual need
– Reliable payment and good financial management
– Transparency and written procedures
– Separation of key functions
– Product quality assurance program
– Annual audit with published results
– Regular reporting on performance
02/20/2024 234
Storage and distribution
02/20/2024 235
Medical Stores Management
What is the problem with this poor medical store

management?
02/20/2024 236
The Objectives of Good Medical Stores
Management
• To guarantee a continuous supply
• To maintain the quality of products during the whole
distribution process.
• To minimize losses through expiration and deterioration.
• To control theft and corruption.
• To keep accurate inventory records.
• To provide stock movement information
02/20/2024 237
Key storage activities
• Material receiving and incoming inspection
– visual inspection
• Damaged, quantities
• Put away
– move products from the unloading dock to their
designated storage area.
– Correctly record on the stock keeping records
02/20/2024 238
Key storage activities…….cont’d
• Picking and packing
– Products must be located, pulled from inventory,
and prepared for shipment.
– Label correctly any new packing or repacking
• Shipping
– Check the list of products and their quantities
– Appropriate vehicle
02/20/2024 239
Key storage activities…….cont’d
02/20/2024 240
Good storage practices
• Storage condition based on temperature

– Information directly from the manufacturer.
– In a deep freeze (-15°C)
– In a refrigerator/cold 2°C -8°C
– Cool temperature 8°C-15°C
– Room temperature 15°C - 25°C
02/20/2024 241
Good storage practices
• Clean and disinfect storeroom regularly
– Rodents and insects
– Avoid food and drink
• Store supplies in a dry, well-lit, well-
ventilated storeroom out of direct sunlight.
– extreme heat and exposure
– E.g Latex condom (> 40 Co )
– air conditioning
– ceiling fans and forced ventilation.
– Avoid direct sunlight( dark colored or opaque
bottle
02/20/2024 242
Vaccines vial monitoring
02/20/2024 243
Storage Guidelines……….cont’d
• Secure storeroom from water penetration.
– Destroy supplies and packaging
– Repair leaky roofs and windows
– Use dehumidifiers
– Stack supplies off the floor on pallets
• 10 cm high and 30 cm away from walls
02/20/2024 244
• Store condoms and other latex products

away from electric motors and
fluorescent lights.
– Emit ozone → rapidly deteriorate condoms
– proper packaging (i.e., boxes and cartons)
– Keep away from light and motors
02/20/2024 245
• Ensure that fire safety equipment is available and
accessible and personnel are trained to use it.
– Strictly prohibit smoking in the store.
– Place smoke detectors
– Check smoke detectors every 2–3 months to ensure

that they are working properly.
– Stopping the fire
02/20/2024 246
– fire extinguishers
– water douses wood and paper fires
– use buckets of sand
– Train staff in the use of the available fire safety
equipment
– Flammables
• Must be stored in special buildings or rooms.
• well ventilated and fireproof.
02/20/2024 247
How to use fire extinguisher???
02/20/2024 248
• Maintain cold storage, including a cold
chain, for commodities that require it.
– Ex. Insulin, Oxytocin, vaccines
– Damage if the cold chain is broken
– Refrigeration (electric or kerosene powered)
– Cold boxes or insulated coolers
02/20/2024 249
• Keep narcotics and other controlled substances in a
locked place.
– Dangerous when misused
– Stolen for sale on the black market
– Limit access to the storeroom
– Track the movement of products.
– Physical inventories
02/20/2024 250
• Store flammable products separately from other
products.
– bottled gas or kerosene powers
– Refrigerators
– Alcohol
– mineral spirits power
– Bunsen burner
– Store away from other products
– Fire extinguisher.
02/20/2024 251
• Stack cartons at least 10 cm off the floor, 30 cm
away from the walls and other stacks, and not more
than 2.5 m high.
– promote air circulation
– facilitate the movement of stock
– cleaning and inspection
– Pallets - pest, water, and dirt
– Stocked pallet, Pallet racking, Shelves

02/20/2024 252
Floor pallet
02/20/2024 253
Block-Stacked Pallets
02/20/2024 254
Pallet racking
02/20/2024 255
Shelves
02/20/2024 256
• Store medical supplies away from

insecticides, chemicals, old files,
office supplies, and other materials.
– shelf life
– Reduce space
– Make products less accessible

02/20/2024 257
• Arrange cartons so that arrows point

up.
– Ensure visibility of
• Labels
• Expiry dates
• Manufacturing dates
– First expire first out (FEFO)

02/20/2024 258
• Store supplies in a manner accessible for

FEFO, counting, and general
management.
• Separate and dispose damaged or expired
products immediately.
• Security
02/20/2024 259
Zoning Stocks within the Stores
 A zone can be:

– a separate building or room
– a locked cupboard
– a refrigerator
– a freezer or
– a cold room
 follow the product manufacturer’s storage
instructions to the extent possible
02/20/2024 260
• If no specific storage instructions are given,
“normal storage conditions” apply.
– Normal storage conditions for drugs - “storage in

dry, well ventilated premises at temperatures of
+15 oC to +25 oC, or depending upon climatic
conditions, up to +30 oC”.
02/20/2024 261
• Cold Storage
– Most importantly required for drug products

whose potency depends on cold storage
• vaccines, sera, and test kits.
• Secure Storage
– Narcotics and other controlled substances
– Ideally a red warning light or warning bell that will
activate when the door is unlocked should be fixed
close to the store.
02/20/2024 262
• Flammables
– Must be stored in special buildings or rooms.

– A separate building is best
• greatly reduces the risk of a fire’s spreading to the
main store.
– The flammables store must be well ventilated and
fireproof.
02/20/2024 263
Storage of vaccines
• All vaccines and diluents must be stored in the
refrigerator for short term between 2°C and 8°C in a
pharmacy that issues to the end- user or clinics.
• For long terms storage -20°C is preferred only for
BCG, OPV and measles.
• Do not freeze other vaccines.
• Domestic refrigerator, ice lined refrigerator are used
for short term storage and deep freezer for long term
storage.
264
Potency & temperature for storage vaccines
265
266
• Always have enough frozen icepacks to
transport items requiring cold storage in cold
boxes and /or vaccine carries.
• Use only icepacks filled with water.
• Do not use icepacks prefilled with other liquids,

which are usually blue or green.
267
• If there is enough space, place a few plastic
bottles of water in the refrigerator.
– Help to maintain the temperature for a longer
period of time if the power is cut off.
• Place refrigerators and freezers with space

between and about an arm’s length away
from the wall.
– This will increase the air circulation 268
• Under ideal conditions, rooms with multiple
refrigerators and /or freezers should have air
conditioning.
– Refrigerators and freezers generate large amount
of heat, which can damage the equipment over
time.
• It is not possible to have air conditioning, install fans
around the equipment to increase air flow.
• Ideally, larger facilities should have a cold room
rather than numerous refrigerators.
269
• National and regional vaccine stores should be
equipped with standby generators; ideally,
district vaccine stores should have them as
well.
• Having backups ensures that vaccines and

other products are protected in the event of a
power failure.
270
Stock Location within a Zone
• Within each zone stock may be located

in:
– Fixed
– fluid or
– semi-fluid locations
02/20/2024 271
Fixed location
– Each stock item is allocated to specific shelves,

pallet racking, or an area of floor.
– For this system to work well the store has to be

large enough to accommodate the maximum
possible level of stock for every item, including its
safety stock.
02/20/2024 272
Fluid Location
– The store is divided in to many designated

locations.
– Each location is assigned a code.
– Individual items are stored wherever space is

available at the time of delivery.
02/20/2024 273
Semi-fluid Location
– A combination of the previous two systems.

– Each item is assigned some fixed space for picking
stock.
– When an order is prepared, the order-picking
staffs know where to find each item.
– The remainder of the store is filled on the fluid
location principle.
– When the picking stock runs low, the fixed
locations are restocked from the fluid locations.
02/20/2024 274
Stock Classification
• Seven ways of classification:

– Therapeutic or pharmacological category
– Clinical indication
– Alphabetical order
– Level of use
– Dosage form
– Random bin
– Commodity code
02/20/2024 275
Therapeutic or pharmacological category
– May be effective in smaller stores and in the

dispensaries of small clinical facilities where the
storekeeper is also the dispenser
– Not an advantage in larger stores
02/20/2024 276
Clinical indication
– Similar to therapeutic category

– Convenient in small warehouses
– Many drugs have multiple clinical indications
• requires a high level of professional knowledge that
stores staff are unlikely to have
– If staff do acquire this knowledge, theft may

become a problem.
02/20/2024 277
Alphabetical order
– Also attractive in peripheral stores that keep

a small number of items
– May not result in optimal use of available

space
02/20/2024 278
Level of use
– Products used in only one level of facility are

stored together.
– More storage space is required
– many commonly used items appear at more than one level
– Distribution on a FIFO or FEFO basis becomes

more difficult to achieve
– One of the other methods of organization is
needed within each level of use
02/20/2024 279
Dosage form
– Tablets and capsules are stored together,

with separate areas for oral liquids,
injections, creams and ointments, and
topical liquids.
– Advantages:
• the forms are easy to recognize when receiving
good sand it allows optimal use of space.
02/20/2024 280
Random bin
– A unique storage space identified by a

code.
– For example, a shelving unit can be

divided vertically and horizontally into
cells, each with unique location code.
02/20/2024 281
Commodity code
• Based on a unique article code combined with a
unique location code.
• Offers maximum flexibility
• Can be used equally well in small and large stores
• Can be used in any kind of stock location system
• The first 4 methods may become inappropriate…
02/20/2024 282
PHARMACEUTICAL
DISTRIBUTION
 Managing distribution
 Importation and port clearing
 Medical store mgt
02/20/2024 283
Managing distribution
 Pharmaceutical distribution is a continuous

process of
– Receiving
– Storing
– Stock controlling
– Delivering and
– Record keeping of drugs from the supplier and
moving them safely to the health care systems.
02/20/2024 3
Objective
 To maintain a steady supply of drugs and

supplies to facilities where they are needed
while ensuring that resources are being used
in the most effective way.
02/20/2024 4
A well run PD system can help to:
– Maintain a constant supply of drugs
– Minimize drug loses due to spoilage and expiry
– Rationalize drug storage points
– Use available transport as efficiently as possible
– Reduce theft and fraud

02/20/2024 286
The pharmaceutical distribution cycle
Port
Clearin
g Receipt
Drug
and
Procureme
Inspectio
nt
n
Consumpti Inventor
on y
Reporting Control
Dispensin
Storag
g to
e
patients
Deliver
Requisition
y of Supplies
02/20/2024 5
1. Drug procurement
– process of acquiring supplies from public or
private suppliers.
2. Port Clearing
– involves:
• processing shipments as soon as they arrive in port
• storing drugs properly until they leave the port
• surveying the shipment for losses & signs of damage and
• collecting the drugs as soon as they have been cleared
02/20/2024 6
3. Receipt and inspection
– Checking for compliance with the contract

condition concerning:
• Drug type
• Quality
• Presentation
• Packaging
• labeling etc and
• any damage…
02/20/2024 7
4. Inventory control
– Establishing and maintaining effective inventory

records and procedures are the basis for:
• coordinating the flow of drugs through the distribution

system and
• the primary protection against theft and corruption.
02/20/2024 8
5. Storage
– Proper location, construction, organization, and

maintenance of storage facilities help:
• maintain drug quality

• minimize theft and
• maintain regular supply to health facilities
02/20/2024 291
6.Requisition of supplies
– Can be manual or computerized

– should always be designed to simplify distribution
by facilitating inventory control.
02/20/2024 9
7. Dispensing to patients
– The distribution process achieves its purpose
when drugs reach hospital wards, outpatient
clinics, health centers or community health
workers and are appropriately prescribed and
dispensed to patients
02/20/2024 293
8. Consumption Reporting
– The closing link in the distribution cycle
– useful in quantifying procurement needs
02/20/2024 10
Pharmaceutical Distribution system Design
 Designing PD system requires systematic cost

effectiveness analysis and operational planning
 Basic features of PD system designs include:

 its degree of centralization
the number of levels in the system and
the geographical or population coverage

02/20/2024 11
Distribution Network
Four-level distribution system
S S S
CMS Key
S suppier
RS RS CMS central medical stores
RS regional store
DS HOSP DS HOSP DS Distric store
HOSP hospital
HC health center
HC HC
HC HC
02/20/2024 296
Push system Vs. Pull system
Push system
– Also known as an allocation or ration system
Pull system
– Also called an independent demand or a
requisition system
02/20/2024 297
Conditions favoring a push system
– Lower level staff are not competent in inventory
control
– Demand greatly exceeds supply, making rationing

necessary
– Limited number of products is being handled
– Disaster relief is needed (e.g. pre-packed kits)

02/20/2024 298
Conditions favoring a pull system
– Lower level staff are competent in assessing

needs and managing inventory
– Sufficient supplies are available at supply sources

to meet all program needs
– A large range of products is being handled
– Field staff are regularly supervised and

performance is monitored
02/20/2024 299
Resupply intervals
– Determining whether deliveries are made quarterly,

monthly, weekly, etc.
– If delivery interval is short

• the likelihood of stock outs will decrease
• transport costs will be very high
– suit individual program needs
– Most public programs use intervals of 1-3 months

02/20/2024 300
Delivery systems Vs. Collection Systems
Transport
– Is frequently the least reliable link in the

distribution system & is often a source of great
frustration.
02/20/2024 301
Delivery schedules
 Good planning is needed to ensure that each facility
receives supplies regularly and on time.
 Points to be considered:
Storage capacity of primary, intermediate and health
facility stores,
Increased transport costs per units supplied for
deliveries to small, remote facilities
Efficient vehicle usage,
climatic factors.
02/20/2024 302
Inventory Management
02/20/2024 303
Inventory Management
• Purpose of an Inventory Control System
– To determine when stock should be ordered/issued
– To determine how much stock should be ordered/issued
– To maintain an appropriate stock level of all products
• A well designed and well operated inventory control
system
– prevents shortages, oversupply, and expiry of
pharmaceuticals
02/20/2024 304
Issues to be considered…….cont’d
Selection of items to be stocked as
standard items
Reason to hold a stock
– To ensure availability
– To maintain confidence in the system
– To reduce the unit cost of medicine
– To avoid shortage cost
– To minimize ordering cost
– To minimize transport cost
– To allow fluctuation in demand
02/20/2024 305
• Disadvantage of holding high stock
– Capital can be tied up in inventory →

unavailable for other purpose
– Cost (personnel, utilities, insurance, storage
facilities and other
– Loss (spoilage, expiry, obsolescence, theft)
02/20/2024 306
– Which item to be stocked?

• Stock movement (high vs low)
– ABC analysis
– VEN system
• Level of use
– Aspirin, Anticancer ( all level vs tertiary
care hospital)
• Local availability
02/20/2024 307
Maintenance of appropriate level for

different class of items
– Service level:
• percentage of individual items ordered from a
supplier or warehouse that is issued from stock
on hand
– Service level= (# items issued/# items requested) x 100
Decision rule or a model for
determining when to order and
determining how much to reorder
02/20/2024 308
• To help maintain adequate stock levels for each
health facility in the system
• The maximum months of stock
– is the largest amount of each pharmaceutical a facility
should hold at any one time.
• overstocked and expired
• The minimum months of stock

– is the approximate level of stock on hand at the end of
the reporting period when an order is placed.
• The emergency order point
– is the level where the risk of stocking out is likely, and
02/20/2024 an emergency order should be placed immediately. 309
Example: Health logistics system of
Ethiopia
Maximum Minimum Emergency

Review
Level Months of Months of Order
Period
Stock Stock Point
Every
other 0.5
HC and
month 4 months 2 months months (=
Hospitals
2 wks)
0.25
Health
Monthly 2 months 1 months months
Posts
02/20/2024 310
(= 1 wk)
Types of Max-Min inventory Control
Systems
• Determining How Much to Order or Issue
• Stock Status
– Purpose of assessing stock status is to determine
how long supplies will last.
How much we have of a certain product = How long that product will last(in # of periods
How much we use during a given period
02/20/2024 311
Types of Max-Min………….cont’d
• Calculating Order or Issue Quantities

– Order/issue quantity = Max stock quantity − stock on hand
• If there is not received previous order or issue

– Order/issue quantity = Max stock quantity − stock on hand − quantity on
order
02/20/2024 312
Example on Forced ordering ICS.

– Calculate the quantity of Chloroquine to order if the
maximum stock level for Chloroquine is 4 months
and an emergency order point of 1 month. One
case of 300 Chloroquine was ordered and has not
yet been received. Use an average of the last 6
months data for your calculations.
02/20/2024 313
Chloroquine Dispensed to Users

October 11 178
November 11 552
December 11 540
January 12 846
February 12 630
March 12 578
April 12 812
May 12 508
Balance of Chloroquine on hand February 30, 2015 is 756 tablets
02/20/2024 314
• Step 1: Calculate average monthly quantity of Chloroquine

consumed
• AMC = Total Chloroquine tabs/6 months = 3914/6=652 tabs
per month
• Step 2: Calculate reorder quantity
– Max cons Qty = AMC X MAX months
– Max cons Qty = 652 X 4 = 2608
– Order Quantity =max Qty  SOH  SOO
– Order Quantity =2,608  756  300 =1552
02/20/2024 315
Types of Max-Min ICS
• Three Types of Max-Min Inventory Control

Systems
– Forced-ordering system
• end of the review period
– Continuous review system

• when the facility reaches the minimum level.
– Standard system
• end of the review period for the commodities that
02/20/2024 are at the minimum level. 316
Forced-ordering max-min system
• The inventory control system of Ethiopia.

• all facilities are required to report on a fixed
schedule for all products
– Health Posts – monthly
– Health Centres and Hospitals – every other
month
02/20/2024 317
Forced-ordering max-min system
• Storekeeper decision rule to resupply

– At the end of each review period, review all stock
levels and order or issue enough stock to bring
the levels up to the max.
– Place an emergency order if the stock level
for any item falls below the emergency order
point before the end of the review period.
– all products are re-supplied each time a report is
completed
02/20/2024 318
Types of Max-Min ….
• Advantages of forced-ordering max-min
system
– rule for resupply is simple
• order/issue every item at the end of the period.
– easier to ensure the availability of transport
resources
• b/c orders are placed at regular intervals
– Every facility orders or is resupplied at the end
of every review period
– No need of storekeepers constantly assess
stock status, unless they think a potential
stockout is possible
02/20/2024 319
• Disadvantage of a forced-ordering system-

– orders for some items may be for small
quantities
• B/c all items are ordered regardless of the
stock on hand.
02/20/2024 320
Types of Max-Min Inventory Control
Systems
• Forced –ordering variation: delivery truck
system
– also called a topping up or bread truck system
or Vendor Managed Inventory (VMI) system.
– difference b/n regular vs delivery truck forced-
ordering system
• the way the deliveries are made
• a truck is loaded with supplies at the end of the review
period.
• The truck and a delivery team travel to each facility
• assess the stock & leave (top up) an amount of
each product
02/20/2024 321
Types of Max-Min …
• Advantages of the forced-ordering
delivery truck system
– The order is filled on the spot
• the lead time is zero → lead time stock to
zero
• lowers the min and the max stock levels.
– Damaged or expired products can be put
back on the truck for disposal
02/20/2024 322
Advantages of the forced-ordering delivery truck
system
– The truck can be sent out with a full load of

supplies, eliminating multiple small
orders.
– The LMIS report can be completed and
collected at the time of delivery.
• Avoid delayed reporting
– The training requirements are significantly
less for the facility staff.
– If a supervisor goes on the truck for
deliveries, on-the-job training and
02/20/2024
supervision at the various stops. 323
• Disadvantages of the forced-ordering delivery
truck system
– All types of max-min systems rely on their delivery
trucks.
• system is vulnerable to breakdowns

– A sufficient number of staff must be available in the
office
• team leaders are away making deliveries.
– Require larger trucks
• always carry more stock then they will actually
02/20/2024
deliver. 324
• Continuous review max-min
system
– Store keeper decision rule
• Review the stock level of each item every
time you make an issue.
• If the stock level is at the min, or has
fallen below the min, order enough stock
to bring the level up to the max.
– The least appropriate for most health
programs….why????
02/20/2024 325
• In a continuous review system—
– The review period is not fixed
– The storekeeper must know both the max and min stock
levels.
– The storekeeper does not need an emergency order point
• an order can be placed any time stock is needed.
– The storekeeper must assess stock status each time an
issue is made.
• storekeeper’s workload increases if there is many item
– The storekeeper must be able to order – pull system
• b/c only the storekeeper determine stock level (min or not)
– A continuous review system must be a pull system.
02/20/2024 326
Systems
• Advantages of continuous review
max-min system
– rule for resupply is simple: reaching
minimum
– The system is more responsive and
flexible
• orders can be placed at any time.
– Small orders are eliminated
• stock levels are at the min when an order is
placed.
02/20/2024 327
Systems
• Disadvantages of a continuous review
system
– Transportation resources are harder to schedule.
– Overload storekeepers in large facilities with a
large number of products
02/20/2024 328
• Continuous review
system variation: two
bin
– Resupply rule is the same
– The difference
• the way of determining
when the min has been
reached.
– two equal-sized bins of
each individual product
– When the first bin is
empty, the min has been
reached.
02/20/2024 329
• Advantages continuous review system
variation: two bin.
– Require less training than a normal pull systems
• empty bin
– No calculations are required and paperwork is
minimal.
• Disadvantages:
– bin size must be continually reviewed
• If consumption for products is not stable
02/20/2024 330
• Standard max-min system
– Resupply (when to and how much to order) is
based on
• Reviewing all stock levels at the end of each
review period.
• Falling below the min
02/20/2024 331
• In a standard system—
– Ordering/issuing new stock is based on the min
stock level and the review period.
– The storekeeper must know the min, max, and
review period.
– An emergency order point is needed
• to ensure that a stock out does not occur
between review periods.
– The stock status must be assessed at the end
02/20/2024
of each review period 332
• Advantages of standard max-min
system
– Eliminate small orders
– Avoid the need to assess stock status
continually
– Reduce the number of calculations
– Transportation can be scheduled for specific
times
02/20/2024 333
• Disadvantages:
– Higher min stock level
• Increase the likelihood of expiry
• Require more storage capacity,
• Increased costs.
– More training for the storekeepers may be required

• b/c of their decision rules are more complex.
02/20/2024 334
Distribution….cont’d
• Collection vs Delivery
• Transport
– Using private sector alternatives
– Evaluating fleet capacity
– Planning transport system improvements
– Acquiring and disposing vehicles
– Managing vehicle use
– Maintaining vehicles
– Maintaining medicines quality during transport
– Season or weather
02/20/2024 335
Health Care Waste Management
• Health care waste (HCW) products
– Sharps (including used needles), used gauze,
blood/IV lines, gloves, infusion sets, scalpels, blades,
and broken glass
– Expired drugs, laboratory reagents, and cleaning

solvents are also HCW products.
– Non-hazardous waste— paper and packaging,

bottles, cans, and glass for general use.
02/20/2024 336
Health Care Waste Management….cont’d
• HCW is a major health and

environmental concern
– to protect HWs and facility staff, the
community, and the environment.
– adequate storage, handling, and transport
from the originating facility to the final HCW
disposal.
02/20/2024 337
HCW storage and handling
• Follow any existing SOPs

– Separate expired pharmaceuticals from unexpired
– separate HCW generated as

• infectious hazardous
• non-hazardous waste
• non-infectious but hazardous
• general waste.
02/20/2024 338
HCW transportation and disposal
– Separate hazardous waste from regular

waste
• To avoid contamination during transport
02/20/2024 339
HCW transportation and disposal cont’d
• The disposal of HCW uses different methods

– Autoclaving
– Encapsulation
– Incineration
– Burial in a protected pit
– Burial and fill for disposal.
02/20/2024 340
Rational Drug Use
02/20/2024 341
Drug Use- is a process of prescribing, Dispensing and
patient use of drugs.
02/20/2024 342
 Rational drug use requires that patients
receive medications appropriate to their
clinical needs, in doses that meet their
individual requirements, for an adequate
period of time, and at the lowest possible cost
to them and their community (WHO).
02/20/2024 343
Components of RDU
 Rational prescribing practice

– Good diagnosis practice
– Good prescribing practice
 Rational dispensing practice
– Good dispensing practice
– Good stock management practice
 Rational patient use
– Patient adherence/compliance
02/20/2024 344
Irrational use of Drugs
 May occur either due to:

– irrational Prescribing
– irrational dispensing or
– irrational patient use
 Prescribing problems categories:
– Under prescribing
– Incorrect prescribing
– Extravagant
– Over
– Multiple prescribing
02/20/2024 345
Irrational…cont’d
Irrational dispensing practices:

– Incorrect interpretation of the prescription
– Inaccurate counting, compounding or pouring
– Inaccurate labeling
– Unsanitary procedures
– Improper packaging
02/20/2024 346
Irrational…cont’d
 Irrational drug use by patients:
– Not taking drugs as intended

– Self-medication with POMs
– Misuse of antimicrobials
– Overuse of injections
– Unsafe use of herbal drugs
– Use of needlessly expensive drugs
02/20/2024 347
Factors influencing the use of medicines
Prescriber,
Policy, legal and
dispenser and
regulatory
their
framework
workplaces
Client/patient Pharmaceutical
and community supply system
Rational
use of
medicines
02/20/2024 348
Client/patient and community
Patient-centred factors
– Demographic
– Psychosocial
– Patient-provider relationship
– Health literacy
– Patient knowledge
– Physical difficulties
– Forgetfulness
02/20/2024 349
Client/patient...cont’d
Therapy-related factors
• Route of administration
• Treatment complexity
• Duration of the treatment period
• Medication side effects
• Degree of behavioral change required
• Taste of the medication
• Requirements for drug storage
02/20/2024 350
Client/patient...cont’d
Healthcare system factors
• Accessibility
• Long waiting time
• Difficulty in getting prescriptions filled
• Supplies
• Unhappy clinic visits
02/20/2024 351
Social and economic factors
• Inability to take time off work
• Cost and Income
• Social support
 Disease factors
• Disease symptoms
• Severity of the disease
02/20/2024 352
Prescriber and dispenser
Training issues:
– Inappropriate role models
– Limited experience/training
– Poor attitude about dispensing and

packaging
02/20/2024 353
Prescriber and …cont’d
 System flaws:
– Lack of unbiased, updated medicine information
or guidelines
– Lack of skill or conscientiousness by practitioners
– Unlicensed practitioners
– Lack of reporting or monitoring for ADRs
– Poor record-keeping
– Financial incentives
02/20/2024 354
Prescriber and …cont’d
 Use of poor judgment:
– Inappropriate “prestige overprescribing”

– Inappropriate interpretation or use of laboratory
tests
– Fear-induced prescribing (”uncertain diagnosis”)
02/20/2024 355
Workplaces
System flaws:
– Lack of a DTC
– Lack of SOPs
– No ADR monitoring and reporting system
– Pressure to prescribe and dispense
02/20/2024 356
Workplaces…cont’d
 Unmet equipment and supply needs:
– Lack of adequate laboratory facilities

– Lack of equipment or facilities for
dispensing
– No packaging/labeling materials
– Adequate packaging thought to be too
costly
02/20/2024 357
Work places… cont’d
Unmet personnel needs:
– Lack of continuing education
– Insufficient staffing
02/20/2024 358
Pharmaceutical supply system
– Medicine quality problems
– Unreliable suppliers
– Poor forecasting and poor
quantifications
– Inadequate inventory management
– Inadequate distribution system
02/20/2024 359
Pharmaceutical regulation
– Non formal prescribers/dispensers
– Lack of regulation enforcement
– Out-of-date or nonexistent STGs and
EDLs
– No DTC
– No pharmacovigilance program
02/20/2024 360
Strategies to improve use of medicines
02/20/2024 361
Tools to investigate
the use of
Medicicines
02/20/2024 362
• 4 main methods of measuring use of
medicines:
a. Aggregate data methods
b. Drug indicators studies
c. Qualitative methods and

d. Drug use evaluation
02/20/2024 363
Stepwise approach to investigate the use of
medicines
STEP 1: General investigation to identify problem areas

• Initial investigation should identify broad areas of
inappropriate use of medicines.
• There are two main ways of doing this:
a. Aggregate data methods

b. Indicator study methods
02/20/2024 364
Aggregate data methods
• use data that are not collected at the

individual patient level
• Aggregate data are often routinely available
for purposes other than investigating drug use
• can be collected relatively easily
02/20/2024 365
• Sources of aggregate data on drug use
Procurement records
Warehouse drug records
Pharmacy stock and dispensing records
Medication error records and
Adverse drug reaction (ADR) records.
02/20/2024 366
• Aggregate data sources can be used to obtain a
variety of information, for example:
– Cost of drugs used – individual drugs and drug
categories
– Which are the most expensive drugs? (ABC)
– On which drugs is most money spent?
– What are the most expensive therapeutic categories?
– What is the percentage of the budget spent on certain

drugs or drug classes?
02/20/2024 367
– Quantities (in units, for example
tablets) of drugs used
– Which are the most frequently and
infrequently used drugs?
– Does actual drug consumption match
expected consumption according to
morbidity records?
02/20/2024 368
Indicator study methods
• Use data which are collected at the
individual patient level
• Examples...
02/20/2024 369
STEP 2: In-depth investigation of specific
problems
• Once an area of inappropriate medicine use is

identified, it should be examined in depth in
order to determine the size and nature of the
problem and the reasons underlying the
problem.
02/20/2024 370
Can be done using:
I. Prescription audit to see if the treatment

of a specific disease is in accordance with
Guidelines ( the percentage of prescribing
encounters in accordance with standard
treatment guidelines).
02/20/2024 371
II. Qualitative methods
• Used to determine the causes of a drug use
problem
• Examples: focus group discussion, in-depth
interview, structured observation and structured
questionnaires are useful for identifying why
drug use problems occur.
02/20/2024 372
iii. Drug utilization review
• Is a system of ongoing criteria-based evaluation of
drug use.
• Involves the detailed analysis of individual patient
data
• Help to ensure appropriate use at the individual
patient level.
• Provide detail about the exact nature of the
irrational use.
02/20/2024 373
• Such details may concern incorrect medicine
choices, incorrect dose, prescribing drugs that
cause ADRs or drug interactions, and the use
of expensive drugs when cheaper ones would
do.
02/20/2024 374
STEP 3: Develop, implement and evaluate
strategies to correct the problem
• After inappropriate use has been identified, a

strategy will be developed and implemented
to reduce inappropriate use.
02/20/2024 375
WHO/INRUD drug use indicators for health
facilities
• provide information to health-care managers

concerning medicine use, prescribing habits
and important aspects of patient care.
02/20/2024 376
• Used to:
 describe current treatment practices to determine
whether there are problems in medicine use, and
which facilities or prescribers have problems.
 show trends over time through the repeated

measurement of the indicators so providing a
monitoring mechanism.
02/20/2024 377
Motivate health-care providers and DTC
members to improve and follow established
health-care standards.
Evaluate the impact of interventions
designed to change prescribing behaviour by
measuring indicators in control and
intervention facilities before and after the
intervention
02/20/2024 378
Core drug use indicators
• 3 types of core drug use indicators:

a. Prescribing indicators
b. Patient care indicators
c. Facility indicators
02/20/2024 379
Prescribing indicators
– Average number of drugs per encounter
– Percentage of drugs prescribed by generic name
– Percentage of encounters with an antibiotic prescribed
– Percentage of encounters with an injection prescribed
– Percentage of drugs prescribed from essential

medicines list or formulary
02/20/2024 380
Patient care indicators
– Average consultation time
– Average dispensing time
– Percentage of drugs actually dispensed
– Percentage of drugs adequately labeled
– Patients’ knowledge of correct doses
02/20/2024 381
Facility indicators
– Availability of essential medicines list or

formulary to practitioners
– Availability of standard treatment guidelines
– Availability of key drugs
02/20/2024 382
Qualitative methods to investigate causes
of problems of medicine use
• Quantitative methods of data collection can

show the nature and size of medicine use
problem
• Do not tell why there is a problem.
02/20/2024 383
Types
A. A focus group discussion
B. The in-depth interview
C. The structured observation study method
D. Using a structured questionnaire
02/20/2024 384
DRUG MANAGEMENT
INFORMATION SYSTEMS
Definition
DMIS is an organized system for

– Collecting
– Processing
– Reporting and for decision making
– Using information
Tena M. 386
Importance
• Logistics Management Information System
(LMIS):
– Collects essential data about stock

status and consumption and
– Ensures accountability and cost

effectiveness for all products in the supply
chain.
Tena M. 387
Functions
 Synthesize the large volume of data generated by drug

management operations.
 Processes the data to information for use in:
– Planning activities
– Estimating demand
– Allocating resources and
– Monitoring and evaluating drug management
operations.
Tena M. 388
Functions…cont’d
 To improve accountability
– Much of the recording and reporting in a DMIS is
intended to create a paper audit trail for products
as they enter or leave a drug supply system.
– Every item that moves in and out of inventory
must be tracked, and decisions must be made
about how much to bill.
Tena M. 389
 LMIS helps managers’ answers questions such
as:
How do expenditures compare with the

budget in the CMS?
How effective is the inventory control
system in eliminating stock outs and cutting
stock losses?
What is the delivery performance over the
last period?
Tena M. 390
Components of DMIS
 The operational system level of the DMIS

contains four subsystems:
Selection
 Procurement
Distribution and
Use
Tena M. 391
• Information is necessary with in each of
these subsystems to manage:
Finances
Drug stocks and
Personnel efficiently
Tena M. 392
Information for each subsystem is
collected by:
– Record keeping documents
– Data reporting forms and
– Feedback reports
Tena M. 393
Steps in designing or revising DMIS
–Identify users
– Identify information needs
– Review the existing information system
– Match the existing information system with needs
–Draft record-keeping and reporting procedures to
fill the gaps
–Develop procedures for users to analyze data and
present findings.
Tena M. 394
Steps …cont’d
– Field test new forms and records

– Make modifications according to the field
test results
– Prepare a detailed instruction manual
– Develop feedback procedures
– Train users in data collection, reporting
procedures and use of information
Tena M. 395
Steps …cont’d
– Train users in basic computer skills, if

necessary
– Monitor the system
– Adapt the records, report forms, software,

etc. as information needs evolve
Tena M. 396
Steps in Transforming Data into Action
Information
Processed Interpreted for
In to
Raw Data
Decision making
Feedback
Tena M. 397
Accounting principles
Tena M. 398
INTRODUCTION
• In business activity a lot of “give & take” exist
which is known as transaction.
• The exchange of money, goods & services
between the parties is known to have resulted
in a transaction.
• It is necessary to record all these transactions
very systematically & scientifically.
• The procedure to record all these transactions
is known as “Book-keeping”.
Tena M. 399
• Book keeping is the recording phase of
accounting.
• Accounting is based on an efficient
system of book keeping.
• Accounting is the analysis &
interpretation of book keeping records.
Tena M. 400
• Accounting is the process of recording,
summarizing, analyzing, and interpreting
financial (money related) activities to permit
individuals and organizations to make
informed judgments and decisions.
• By law all businesses must keep accounting
records.
• Decisions are based on accounting
information for profit and non-profit
companies alike.
Tena M. 401
THE ELEMENTS OF ACCOUNTING
• Assets: are items with money value that are
owned by a business or anything of use in
the future operations of the enterprise &
belonging to the enterprise. E.g., land,
building, machinery, cash etc.
• Equity: In broader sense, the term equity
refers to total claims against the enterprise. It
is further divided into two categories.
• i. Owner Claim or - Capital
• ii. Outsider’s Claim – Liability
Tena M. 402
Elements…
• OWNER’S EQUITY; the difference between

Assets and Liabilities is Owner’s Equity. The
can also be called capital, proprietorship, or
net worth.
• The excess of assets over liabilities of the
enterprise. e.g.,: if on a particular date the
assets of the business amount to 100,000birr
& liabilities to 30,000 birr then the capital on
that date would be 70,000/-.
Tena M. 403
Elements…
• Liability: are debts owed by the business.

Paying cash is often not possible or
convenient, so businesses purchase goods and
services on credit. The name of the account
used is Accounts Payable.
• Another type of liability is Notes Payable. This

is a formal written promise to pay a specific
amount of money at a definite future date.
Tena M. 404
Elements…
• Revenue: It is a monetary value of the products or
services sold to the customers during the period. It
results from sales, services & sources like interest,
commission.
• Expense/Cost: Expenditure incurred by the
enterprise to earn revenue is termed as expense or
cost.
• Withdrawal (Drawing) is the removal of business
assets for personal use by the owner. This transaction
decreases the asset taken and the value of the
business.
Tena M. 405
BUSINESS TRANSACTIONS AND THE ACCOUNTING
EQUATION
• Assets = Liabilities + Owner’s Equity

• A transaction is any activity that changes the
value of a firm’s assets, liabilities, or owner’s
equity.
• Each transaction has a dual effect on the basic
accounting elements.
Tena M. 406
BUSINESS TRANSACTIONS AND THE ACCOUNTING
EQUATION
• Each transaction increases or decreases (or

both) the basic elements in the accounting
equation.
• The effect of recording a business transaction
must always leave the two sides of the
accounting equation in balance.
• DEBITS MUST ALWAYS EQUAL CREDITS
Tena M. 407
FINANCIAL STATEMENTS
• Summaries of financial activities are called financial
statements which are prepared on a regular basis at
the end of an accounting period.
• The accounting period typically is one year; however,
it can be any length of time for which records are
maintained.
• Usually the minimum is one month and the
maximum length of time is one year for financial
statements.
Tena M. 408
FINANCIAL STATEMENTS…
• There are several financial statements. You are going

to prepare the Income Statement, Statement of
Owner’s Equity, and Balance Sheet.
• These must be completed in that order.
1. Income Statement. This is a summary of a business’s
revenue and expenses for a specific period of time.
• It ONLY shows revenue and expenses. These should be
listed in order from largest to smallest.
• Net Income is realized when revenue exceeds
expenses.
• Net loss is realized when expenses exceed revenue.
Tena M. 409
FINANCIAL STATEMENTS…
2. Statement of Owner’s Equity. This is a summary of

the changes that have occurred in the owner’s
equity during a specific period of time.
• This statement will show either an increase or
decrease in the capital account.
3. Balance Sheet. This statement is a listing of the firm’s

assets, liabilities, and owner’s equity at a specific
point in time.
Total Assets must equal the addition of Liabilities and
Owner’s Equity.
Tena M. 410
• ACCOUNT. An account is an individual record or form
to record and summarize information for each asset,
liability, or owner’s equity transaction.
• Each account will have a title and number.
– Debit means left side.
– Credit means right side.
• Double-entry accounting means that there will
be at least two (2) accounts affected by each
transaction.
• Debits and Credits can either be increases or
decreases depending on the type of account.
Tena M. 411
The Accounting Cycle
THE ACCOUNTING CYCLE

• 1. Analyze transactions
• 2. Record in a journal
• 3. Post from the journal to the ledger
• 4. Prepare a trial balance of the ledger
Tena M. 412
Accounting Cycle….
• ANALYZE. Decide debits and credits and in

which accounts they will be entered
• RECORD in journal (diary of information of day-
to-day transactions)
• JOURNALIZING is the recording of transactions
in a journal.
Tena M. 413
ADVANTAGES OF USING A JOURNAL
􀂾 Provides a chronological record of transactions

􀂾 A place is provided for an explanation
􀂾 Lessens the chance of error—debits and
credits are recorded together
􀂾 Easier to locate errors
Tena M. 414
Contents of a journal
• 1. Journal pages numbered
• 2. Date
• 3. Account Title
• 4. Posting reference column
• 5. Debit and Credit columns
Tena M. 415
PRINCIPAL BOOK: LEDGER
• A ledger is a group of accounts.
• From the journal a trader cannot know his

total cash, purchases, amount spent under
each head of expense and amount earned
under each head of income.
Tena M. 416
LEDGER….
• Every ledger has two sides namely debit and
credit.
• Left hand side is debit and right hand side is

credit.
• Each side of the ledger has columns on date,

particulars, journal folio and amount.
Tena M. 417
• In the particulars column of the debit side the
name of the account from which benefit is
received is recorded and
• On the credit side, the name of the account to

which benefit is given is recorded.
• The words ‘To’ and ‘By’ are affixed to the

name of the amount entered on debit and
credit sides respectively.
Tena M. 418
Ledger Posting
• Transferring the entries from the journal or a
subsidiary book to the ledger is known as
posting.
• Posting the ledger from journal is easy as the
transactions in the journal are already
classified into debit and credit.
Tena M. 419
Ledger Posting….
• However, the following points must be
noted while posting the ledger.
For the same person or expense only one
account should be opened.
Cash and credit sales should be posted to
Sales Account and cash and credit
purchases to Purchase Account.
The word Debit as Dr. and Credit as Cr.
should not be omitted.
Tena M. 420
TRIAL BALANCE
• The trial balance is simply a list of names of

the accounts, and the balances in each
account as at a given moment of time, with
debit balances in one column and credit
balances in another column.
Tena M. 421
TRIAL BALANCE
• The preparation of trial balance serves two

principal purposes
• (i) it shows whether the equality of debits and
credits has been maintained and
• (ii) it provides a convenient transcript of the
ledger record as a basis for making
adjustments and closing entries for
preparation of final accounts.
Tena M. 422
DC= ADE LER
• ASSET = DEBIT
• LIABILITY = CREDIT
• OWNER’S EQUITY = CREDIT
• Drawing – Debit
• Expenses – Debit
• Revenue – Credit
Tena M. 423
Example how to Journalize
• Business transactions of Mr. A for the month of

Jan.1997.
• 1st January, 1997 A started business with cash
Rs.20,000/-
• 3rd January, 1997 Goods purchased for cash Rs.6,000/-
• 5th January, 1997 Goods purchased from S Rs.4,000/-
• 7th January,1997 Goods sold for cash Rs.2,000/-
• 10th January, 1997 Goods sold to B Rs.6,000/-
• 12th January, 1997 Cash paid to S Rs.2,000/-
Tena M. 424
Cont…
• 17th January, 1997 Cash received from B
Rs.4,000/-
• 23rd January, 1997 Paid wages Rs.100/-
• 25th January, 1997 Furniture purchased from
R Rs.400/-
• 28th January, 1997 Paid for interest Rs.200/-
• 31st January, 1997 Paid salaries Rs.200/
Tena M. 425
Tena M. 426
Tena M. 427
How to Post to lager account
Tena M. 428
Tena M. 429
Tena M. 430
Tena M. 431
Tena M. 432
Tena M. 433
Tena M. 434
Tena M. 435
Pharmaceutical marketing and promotion
• DEFINITION OF ADVERTISISNG
• The word advertising originates from a Latin
word advertise, which means to turn to. The
dictionary meaning of the term is “to give
public notice or to announce publicly”.
Tena M. 436
Concept of Sales Promotion
• Sales promotion consists of diverse collection

of incentive tools, mostly short-term designed
to stimulate quicker and / or greater purchase
of a particular product by consumers or the
trade. Where as advertising offers a reason to
buy, sales promotion offers an incentive to
buy.
Tena M. 437
Pharmaceutical marketing and promotion
• It is increasingly important to understand the

effects that drug promotion has on prescribing
and the use of medication given the growing
amounts of money companies are devoting to
this activity.
• Attempts to control promotion have largely
relied on a combination of voluntary codes
adopted by industry associations and medical
organizations.
Tena M. 438
• The mission of trade associations, such as
Pharmaceutical Research and Manufacturers
of America (PhRMA), is primarily to increase
sales and profit.
• As a result voluntary codes tend to be

reactive, they lack transparency, they omit
large areas of concern, and they lack effective
sanctions
Tena M. 439
• If promotion leads to better prescribing, more
rational use of medications or improved cost‐
effectiveness then there would be no concern.
• While the evidence is not conclusive, what there is all
points in the direction of a strong association
between reliance on promotion and less appropriate
overall use of prescription drugs.
• Heavy promotion of new drugs leads to widespread
prescribing and use before the safety profile of these
products is fully understood.
• Newer, more expensive medicines displace older, less
costly ones without any evidence of an improvement
in therapeutic outcomes .
Tena M. 440
Now your turn
Tena M. 441

Drug Supply

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Drug Supply

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Overview of Drug & Medical Supplies Management

The methods of treating illness and disease include

Surgery including organ transplantation

Chemo (pharmaco) therapy

The role of modern pharmaceuticals in the

 Eliminate / dramatically reduce/ mortality from

 Despite this fact, millions of people do not have regular

 Therefore managing drug supply is concerned with practical

– Any instrument that may be used on the inner or

– includes various diagnostic, laboratory, surgery &

• DRUG SUPPLY MANAGEMENT

– It is a process of planning, implementing, and

 Drug procurement is carried out in an unplanned

• Irrational prescribing and dispensing practices are

• The above problems are believed to be

 The use of a limited number of carefully

 Common health problems can be treated with

 Most prescribers routinely use < 200 drugs.

 Training & clinical experience should focus on

 Procurement, distribution, etc. can be carried

 Patients can be better informed about the

 Better quality assurance

Lower overhead costs

 Focused education efforts

 Reduced confusion and increased adherence

To make EMs available and accessible

 To promote RDU (rational drug use)

 To improve the CE of health care

 Corner stone of good pharmaceutical mgt and RDU.

 Arranged alphabetically and therapeutically

Brings all the important summary

 Systematically developed statements that help

 There should be explicit and previously agreed

process and selection criteria.

 The pattern of prevalent diseases

 Sound and adequate scientific data on the

 Cost /major selection criterion/afordablity of

– Therapeutic effect > the sum of the effect of

 With the most favorable pk properties.

 No one criterion alone is sufficient.

1. Prioritize a list of common diseases

– Who should use the list

– How medical staff can request medicines that are not

List of common diseases and complaints

Treatment guidelines Essential medicines

Training and Financing and

 New drugs and treatments are emerging all

 A document containing the goals set by gov’t

– To present a formal record of values, aspirations,

• Selection of essential drugs

• Legislative and Regulatory framework

– Pharmaceutical quality assurance including

– Establishment and support DTC

– Promotion of the concepts of essential

Pharmaceutical development and clinical

• Human resources development

• Monitoring and evaluation

Management Support systems