Pharmacy Management and Health Economics
Core concepts
Understand pharmacy management functions: planning, organising, staffing, directing, and controlling. Know inventory management - ABC analysis, VED analysis, economic order quantity, reorder level, lead time, and stock turnover. Familiarise yourself with financial concepts: fixed versus variable costs, break-even analysis, gross and net profit, and budgeting. In health economics, understand cost-minimisation, cost-effectiveness (cost per outcome), cost-utility (QALY), and cost-benefit analysis. Recognise pharmacoeconomic perspectives (patient, provider, payer, society) and the role of generic substitution and formulary management.
Traps
Cost-effectiveness versus cost-utility versus cost-benefit: only cost-benefit expresses outcomes in monetary terms; cost-utility uses QALYs. Break-even is where total revenue equals total cost - do not confuse with profit maximisation. ABC analysis classifies by value, VED by criticality - they are different axes. Reorder level accounts for lead time and usage; ignoring lead time is a common error. Perspective changes which costs count.
Worked example
Break-even quantity = fixed costs / (unit price − variable cost per unit). If fixed costs are 10,000, price 20, variable cost 12, break-even = 10,000 / 8 = 1,250 units. A question may ask how many units to sell to profit - add desired profit to fixed costs before dividing.
Exam strategy
Identify the analysis type (cost-effectiveness, cost-utility, cost-benefit), the perspective, and the formula before calculating.