Procurement and Purchasing
Procurement and Purchasing
Procurement begins with an internal requisition - a request from a department or pharmacist - which, once approved, becomes a purchase order (PO) sent to a vendor. A requisition is not a contract; a PO accepted by a supplier is. Know who may approve purchases and at what dollar threshold, and the difference between contract items (negotiated through a prime vendor agreement or a group purchasing organization, GPO) and non-contract or non-formulary items purchased outside the agreement, usually at higher cost.
Every trading partner must be authorized: wholesalers should be VAWD-accredited (Verified-Accredited Wholesale Distributors), state-licensed, and able to supply DSCSA documentation - Transaction Information, Transaction History, and a Transaction Statement (the "T3"). Buying from an unverified internet source is the classic wrong answer.
Replenishment methods include par levels, min/max systems, and economic order quantity (EOQ), which balances ordering cost against holding cost. Lead time and backorders must be tracked; a backordered item is not permission to substitute a different strength or product - substitution is a clinical decision, not a purchasing one.
Worked example (EOQ): annual demand 2,400 units, cost per order $50, annual holding cost $2 per unit. EOQ = square root of (2 × 2,400 × 50 ÷ 2) = square root of 120,000 ≈ 346 units per order.
Traps: confusing a requisition with a PO; assuming a GPO is a wholesaler (it negotiates contracts, it does not ship); assuming the pharmacy may buy from any source if the price is lower.