A simulation-based approach for inventory modeling of perishable pharmaceuticals

Pharmaceutical expenditures are increasing for hospital systems nationwide. We model the inventory and ordering policies for perishable drugs in the setting of an inpatient hospital pharmacy. We consider two stages of inventory: raw material and finished good (e.g. intravenous). We use a two-phased approach to explore policy structures that could be implemented in the hospital pharmacy. We develop a policy which is based on the idea that hospitals can improve both costs and patient demand fulfillment by using knowledge of patient mix to guide their drug inventory and preparation decisions. We compare this policy to a simpler stationary base stock policy. The policies are evaluated on the basis of (1) shortage cost, (2) outdating cost (expirations), and (3) holding cost through a range of cost scenarios.