DRUG HOUSE MANAGEMENT

Ms. N. K. Mujawar
M. Pharm
Assistant Professor In
WOMENS COLLEGE OF PHARMACY.
PETH-VADGAON.
Content
 Advantages and disadvantages of rural area
 Advantages and disadvantages of urban area
 The site for a drug store
 Layout of a drug store
 Legal aspects of a drug store
A. Documents required to open a retail drug store
B. Documents required for the renewal of retail sale license
C. Documents required to open a wholasale drug store
D. Documents required for the renewal of wholesale license
 Importance and objectives of Purchasing
 Purchasing procedure
 Methods of purchasing
 Selection of supplier
 Credit information
 Tenders and its types
 Contracts
 Storage
 Codification of various items of drug store
 Pricing of materials
 Legal requirements and price control on bulk drugs formulation
Drug store in Rural Area/Small Town and Urban Area/Big cities
Rural Area Urban Area
Advantages Advantages

1. Limited finance 1. Procurement of material is easy

2. Low rate of Interest rate 2. Better supply of skilled persons
3. Easily availability if space 3. Better sales of goods
4. Greater scope for future expansion 4. Buying capacity of customers is more
5. Lower wages. 5. So sale of luxurious goods is also more
6. Better publicity
7. Better health and medical services
8. Better transport and communication facilities
Disadvantages Disadvantages

1. Limited supply of skilled labour 1. Higher rate of land

2. Difficulties in procurement of material 2. Higher municipal taxes and restrictions on the use of
3. Buying capacity of people is less lands.
4. Luxury goods like cosmetics are less 3. Higher wages
5. Proprietor has to arrange large finance 4. Over crowding & its evils.
6. Illiteracy is more.
Site for selection of Drug Store
1. Availability of finance: Availability of finance is the most important factor. Sufficient finance &
meager financial resources mainly affect on opening of drug store.
2. Business locality: It is preferable to open a drug store in a business locality because the number of
people visiting such locality is quite large. Opening of drug store in such locality required huge
investment because of high rent and land price.
3. Thickly populated residential area: Such area is more preferable. Because people may buy
required medicines during their evening walk.
4. Developing area: Nowadays in big cities new localities are coming up very fast. So ideal place is
their. No problem of competition. Drug store will meet the needs of its customers by extending all
types of facilities.
5. Hospital: Hospital and nursing home does not have its own drug store and physicians have a good
practice, then its ideal one for opening of drug store.
6.Flow of traffic :
Avoid locations near traffic signals because shop in the vicinity of traffic signals has to face parking problems
for cars, scooters and cycles etc. Avoid the one way traffic, road circles.
7.Parking:
While selecting the location drug store in a busy shopping center, it must be enough parking space outside
the drug store. In a big cities there are certain restricted areas where parking is not allowed to prevent
obstruction in smooth traffic. Such areas are not ideal.
8.Drug store:
As far as possible there should not be any competitor or already existing near the location of a new drug store.
If sales potential is good even for another store, then one can consider opening a new one.
9.Near to hotel, school, seminar hall:
These locations are not preferable. If the site is near a restaurant it may create problems of maintaining
cleanliness. In case cold drinks or ice creams facilities also extended, then it is preferable to pen a drug store
near a cinema hall because people buy drugs when they visit for a soft drink.
In order to establish a new drug store in metropolitan cities following additional factors also to
be considered
1. The site should be well connected with various modes of transport.
2. The site has good surroundings
3. There should not be congestion of traffic
4. The essential services such as, bank, post office and warehouse must be available near the site.
5. The rules and regulations of municipal corporation or any other local authority does not come
in the way of expansion of drug store.
Acquisition of premises for a Drug Store
It is desirable, that before the pharmacist occupies a new store premises, he/she should
observe the following precautions:-
1. Note down the date of occupancy.
2. When to pay the instalment of the rent.
3. Repair the premises of drug store properly.
4. Comply with the local rules and bye-laws about opening and closing time of shops, the
weekly closing day of the market etc.
Layout of drug store
Objectives of layout
1. To attract large number of customers
2. To increase sale of drug store
3. To reduce selling expenses to minimum
4. To provide customer satisfaction
5. To create professional image and to improve general image
6. To minimize movements of customers within drug store
7. To provide surveillance in order to reduce chances of pilferage and theft.
8. To have space for reserve stock, office and resting space for the staff.
9. To have proper entrance for incoming goods.
10.To have best utilization of available space.
11.To provide protection to medicines from any type of damage and to
maintain their potency.
Legal Aspects of a Drug Store
A. Wholesale drug store
1. Minimum qualification: Must be Registered Pharmacist with the State Pharmacy
Council.
2. The minimum qualification to get registered with state pharmacy council is Diploma
in Pharmacy from a recognized institutions.
3. For starting a wholesale drug store is matriculation with four year experience in
selling of drugs in a chemist shop on salary basis OR
4. Diploma in pharmacy and also being registered as a Registered Pharmacist.
5. A person who have sufficient capital and is interested to start a drug store, can also
do so by appointing a “Registered Pharmacist” on whole time basis.
B. Minimum space:
Not specified in D &C Act & Rules 1945.
1. For New retail drug store desirable area is 10 sq. meter.
2. Minimum area required to open a new wholesale drug store is 10 sq. meter.
3. However the minimum desirable area to open a new combined wholesale and retail drug
store is 15 sq. meter.
B. Store arrangements:
There should be sufficient number of racks to store drugs and pharmaceutical preparations
For storage of antibiotics, vitamin products, vaccine, sera, enzymatic preparations and other
preparations which are required to be stored at temperature between 2˚ to 8˚C,a refrigerator
is necessary.
 B. Retail drug store :A license required to sell, stock or exhibit for sale or distribute
drugs. Following documents are needed for a new license.
Application In duplicate on form 19* of the D& C rules 1945.One copy is for biological drugs
and the other copy for non-biological drugs.
Fee 1500 rupees per license(Total 3000) to be deposited in state bank of
India/Government treasury under specific head for grant of a retail sale license.
Attested a) Diploma in pharmacy from any institution duly recognized by PCI.
copy b) Registration certificate issued by state pharmacy council.
c) Matriculation certificate
d)Affidavit from the qualified person in case he is an employee of a drug store.
Affidavit On a non-judicial stamp paper,duly attested by a first class magistrate by each
partner in case of partnership concern and by the proprietor himself in case of
proprietorship concern.
Map Retail drug store duly signed by proprietor/partners of firm.
Recent In case of rented premises or an affidivate to that effect if the person limself is
Receipt the owner of premises.

A Copy Partnership deed in case of partnership concern.

Purchase Refrigerator
receipt

 PCI is planning to make it mandatory to wear the white coat bearing the name of registered

pharmacist who is running the retail pharmacy.

 The license is valid for a period of five years.

 It is required to be renewed before its expiry.

 Documents required for the renewal of retail sale licence

Application In duplicate on form 19* of the D& C rules 1945.One copy is for biological drugs
and the other copy for non-biological drugs.
Fee 1500 rupees per license(Total 3000) to be deposited in state bank of
India/Government treasury on challen form in the specific head for grant of a
retail sale license.
Late fee 5OO Rupees per license per month or part thereof.

Original In case of first renewal and latest renewal certificate in case of subsequent
License renewals.
Affidavit Given on a non-judicial stamp paper by a partner if any, duly attested by oath
commissioner.
Documents required to open a wholesale drug store(For New License)

Application In duplicate on form 19* of the D& C rules 1945.One copy is for biological drugs
and the other copy for non-biological drugs.
Fee 1500 rupees per license(Total 3000) to be deposited in state bank of
India/Government treasury under specific head for grant of a retail sale license.
Attested a) Diploma in pharmacy from any institution duly recognized by PCI.
copy b) Registration certificate issued by state pharmacy council.
c) Matriculation certificate
d)Affidavit from the qualified person in case he is an employee of a drug store.
e)Affidavit of the qualified person if the qualified person is an employee of firm.
Affidavit On a non-judicial stamp paper,duly attested by a first class magistrate by each
partner in case of partnership concern and by the proprietor himself in case of
proprietorship concern.
Blue Print Plan of premises.
 Recent In case of rented premises or an affidavit to that effect if the person
Receipt himself is the owner of premises.
A Copy Partnership deed in case of partnership concern.
Purchase Refrigerator
receipt

 The original license or a renewal license to sell drugs on wholesale basis is valid for Five

years.

 It is required to be renewed before its expiry.

 Documents required for the renewal of wholesale license
Application In duplicate on form 19* of the D& C rules 1945.One copy is for biological drugs
and the other copy for non-biological drugs.
Fee 1500 rupees per license(Total 3000) to be deposited in state bank of
India/Government treasury on challen form in the specific head for grant of a
retail sale license.
Late fee 5OO Rupees per license per month or part thereof.

Original In case of first renewal and latest renewal certificate in case of subsequent
License renewals.
Affidavit Given on a non-judicial stamp paper by a partner if any,duly attested by oath
commissioner.
 The original license or a renewal license to sell drugs is valid upto 31st December of the year
following the year in which it is granted or renewed
Separate license are required for the retail sale of:
1. Schedule C and C1 drugs.
2. Schedule X drugs.
3. All drugs other than those specified in Schedule C and C1 and X.
• In order to get a license to sell, stock or exhibit for sale or distribute by retail drugs specified in
schedule C and C1 an application is filled Form No.21* and Form No.21B* is filled to apply for
license to sell Schedule C and C1,drugs by wholesale.
• The drugs which are covered under schedule X cannot be sold on retail except on the prescription of
a registered medical practitioner.
• Similarly, to get a license to sell, stock or exhibit for sale or distribute drugs by retail other than
those specified in schedule C and C1,an application is required in Form 20 and in Form 20B,if the
license is to sell drugs other than those specified in schedule C and C1 by wholesale.
Importance of Purchasing

1. Important function of material management

2. A proper purchase of materials and merchandise and control of stock are of great

importance in any business i.e. manufacturer, wholesale, or retail trade.

3. In trading business, merchandise purchased must be of proper quality at an appropriate

price, in proper quantities and at the proper time.

Objectives of Purchasing:
Not only to produce the raw material at the lowest price but also to reduce the cost of the final product.
The following points are taken into consideration while purchasing of the material.

1.Source
7. Mode
Transport 2. Quality
ation

Right
6. Place
of 3.Quantity
Delivery

5. Time 4. Price
Purchasing Purchasing requisition
Procedure
Selection of the suppliers

Placing the order

Receiving and Checking of Material

Checking of Invoice OR Bill

Releasing the payment to the supplier

Recording of bills in books

Releasing the payment to the supplier

Methods of purchasing
Sr. Method Explanations
No
1 Buy inspection • Oldest method
• Goods are thoroughly examined with regard to their quality
and price structure
• Method is still used in wholesale and retail.
2 By sample • Very Common method
• The sample of goods is supplied by the supplier for its
approval from the buyer.
• Buyer examines the sample and place the order for the supply
of goods as per the quality of the sample approved.

3 By description • It refers to the purchases of goods made on the basis of

description of goods in the catalogue or price list of the
supplier.
4 By grade • The Goods which are standardized and graded are purchased
in required quantity simply by mentioning their grades,e. g. ISI
agmark, I.P., B.P., U. S.P. etc.
Selection of suppliers
• In gov. departments, public sector undertaking and large business houses, the supply of all types of
items of daily use are received through the suppliers who are in their approved list
• Prepare approved list of suppliers questionnaire is send to various supplier.
• After receiving these questionnaires, the approved list of suppliers is prepared.
The following points should be generally taken into consideration while preparing approved list.
1. Reputation of the supplier in the market.
2. Financial condition of the supplier
3. Manufacturing capabilities of the supplier
4. Capability of the supplier to supply at a short notice
5. After sales service facilities provided by the supplier
6. Terms and conditions of payment
Credit Information
Definition of Credit: Through which the items can be brought or sold without making cash payment.
• Whenever any sale deed is done between buyer and seller, the terms of payment is also finalized in
order to avoid any misunderstanding at the later stage.
• The sale of merchandise is done either on cash payment or on credit.
• In pharmaceutical marketing ,45 days credit facility is provided by many manufacturer to the
wholesalers.
• This facility is not for new wholesaler in initial stage.
• A wholesaler, usually gives 21 days credit facility to its retailers in business.
• Now days a substantial amount of trading involves credit.
• It is advantageous to both buyer and seller.
• When the sale is done on credit, it will certainly increase the sale but it involves the risk of bad debts
and delayed payments.
This problem can be avoided by many business organisations have accredit department
which investigates the credit worthiness of each prospective customer.
The following information may be obtained about the buyer before selling the goods on
credit.
1. The character of buyer:
He should be honest, reliable, trustworthy and having reputation for fairness and justice.
1. Financial position of the buyer:
This is done to know the financial position of the buyer, in order to find its capacity to pay
debt etc.
3. Assets and liability of the firm:
The information helps to judge its state of business.
These information can be obtained by going through the financial statements of the firm,
bank reference and salesmans report.
 Tenders
Definition: A tender or a quotation is a written offer to do a work or to provide a material at a
given price
Sr.No. Typeswithin
of a prescribed period and under specified condition.
Explanation
Tender
1 Open tenders: • Used when the value of purchase is high. & when supply sources are not known.
• Open tenders are very expensive.
• These tenders are given in leading newspaper.
• It gives wide publicity & is open to any vendor. The vendor has to deposit an
earnest money with the tender information & tender number.
• The purpose is for fixing & finalizing prices of materials, terms & conditions.
2 Limited tender • The system is used only in those cases where the value of tender is moderate.
• The tenders are invited only from those firms which are on the approved list of
supplier.
Advantages:
1. The suppliers are well conversant with the itmes to be supplied.
2. The suppliers generally submit realistic quotations because the are regular
supplier of those items.
3. These are less chances of any error in supplying the items of required
specifications.
4. There are chances of progressing reduction in price.
3 Single tender • When the items to be purchased are proprietary in
nature or the order is to be repeated within a short
period.
• The tender is send only to a single supplier who is
dealing with the items of specific specifications.

4 Oral tender • In case the supplies are of minor character and are
urgently required, a person or a committee is deputed to
purchase the specified items from the market.
• After collecting the information regarding the price
charged and quality of product to be supplied from three
to four suppliers.
• The items are purchased from the supplier which has
quoted the minimum price of the specified items.
5 Global • The tenders are invited from all parts of the world.
Tender • These are for large contracts for supplies from foreign countries or when foreign
collaboration is required in proposed project
• The notice containing the following information is issued to call the tender:
a) Name and detailed specification of material to be purchased.
b) Quantity to be purchased
c) Period of delivery.
d) Earnest money to be deposited
e) Terms and conditions of purchase
f) Date, time and place for receiving and opening of the tenders.
The tender are sent by supplier in sealed envelope before the due date ______The word
‘Tender’ or quotation and its date of opening must be written on the top of the
envelope____ After opening the tender is on due date and time in the presence of the
representatives of the supplier, the purchase officer write on each tender,the serial
number of tender, total number of tenders received and number of page in a particular
tender____any correction or over writing is also attested during that period in order to
avoid any dispute at a later stage-a comparative statement is prepared from the tenders
or quotations which are received______generally, the order is placed with the firm which
has quoted the lowest rate-The factors like sample specification, make guarantee
period,period of supply,other expenses like freight,sale tax,packing and forwording
charges are also considered.
Contracts
Definition: It is also called as purchase order or supply order. After the selection of
supplier. A mutual agreement is done between the supplier and the buyer. This
agreement is called contract.
1. Suppliers name and address.
2. Order number, date and the reference number.
3. The detailed specifications of the items and quantity ordered.
4. Rate and the amount.
5. Mode and date of delivery
6. Packing and forwarding instructions.
7. Mode of payment and the terms of payment
8. Signature of the official authorized to place order.
Storage:
The drugs are stored in a drug store must be arranged in such a way that they are easily
traceable as and when required. For this purpose following methods are used
1. According to manufacturers:
The drugs are arranged in a drug store manufacturer wise. For example the drugs manufactured by
Glaxo(India) Ltd. are placed at one place i.e.in one cupboard.
2.According to pharmacological action:
In this method medicines are divided according to their pharmacological actions and drugs of one
group are placed at on placed in one cupboard likewise drugs of other groups are stored.
3.Alphabetically:
In this method drugs are placed alphabetically. The drugs with letter ‘A’ are placed in another
cupboard. Out of above methods, storing of drugs manufacturer wise is most popular and
convenient method.
Codification of Various Items of Drug Store
Codification is the process of assigning of code symbol or a number to a particular
material for easy identification.

Advantages of codification
1. Ambiguity in description is avoided.
2. The length in description is minimized.
3. The codes ensures secrecy of items lying in the store.
4. It prevents duplication.
5. It standardizes the purchasing as well as storage.
6. It reduces the varieties.
7. It makes purchasing, recording, accounting, computerizing pricing, costing location,
indexing and inspection efficient and result-producing.
8. It assures planned and quality production.
Methods of Codification
1. Alphabetically method/Letter Code Method :
• In this system, letters are choosen to represents particular classification.
• Alphabet consist of 26 letter.
• So each position in the code has 26 possible letters.
• This method is useful when store contains few items.
• e. g. ’T’ represents Tablet, ’C’ represents Capsule.
• This method is simple but if lacks flexibility and expansion.
1. Mnemonic method:
Main disadvantages of this method is that material can not be identified without making reference to
code index. When we use letters to help memory, we call such a system a mnemonic system.
In this method, letters of the alphabet are used to describe an item.
e. g. ’AT’ represents Aspirin tablet, ‘ATP’ represents Aspirin Tablet of Paracetamol
3.Numerical method/Sequence Method: In this method separate number are given to different
classification of store items. This involves use of following method.
1. Decimal system:
• In this system number are given In such a way that each digit represents subgroups of previous gift.
e.g. Code no.16.1,16.11,16.111 are assigned to three different tablets belonging analgesic group i.e.16.1
represents tablet Analgin,16.11 represent tablet Dispirin and 16.111 represent tablet paracetamol.
• Main advantage is its capacity to expand to accommodate new items.
• Disadvantage is being cumbersome in use.
2. Block System:
In this method no. are reserved for specified classification.
e.g.101-300 are reserved for tablet,301-500 are reserved for capsule.
4. Combination method:
In this method both mnemonic & numerical method are combined to give code to different items.
e.g. Code AT 300 represents Aspirin tablet 300mg and AT 301 is allotted to Aspirin tablet 600mg.
5.Location coding method:
• In big organisations there are large number of stores and each store may be quite large in size.
• So the store rooms are divided in blocks.
• Each block is identified by lateral block letter and a longitudinal letter.
• Within each block every row is divided vertically inti two column and horizontally into shelves.
• Each and every shelf is given a particular number.
• The location of item can be identified from warehouse number, block number, row number,
column number, rack number and shelf number etc.
Pricing of materials:
The price which is going to be charged from customers can be calculated by using one of the following method.
1. First in first out method (FIFO):In this method ,the material which is received 1st are issued 1st .The issues
are priced at cost price of oldest consignments till it get exhausted. As soon as the oldest lot is exhausted,
the issues are priced at the cost price of the next of oldest lot in the sequence. The closing stock is valued at
cost price of latest consignment.
e.g. April 1 2000 unit purchased @ Rs 50 per unit.
April 5 500 unit purchased @ Rs 60 per unit.
April 10 300 units sold.
The issue of 300 units will be priced as under:
From the first lot 200 units @ Rs 50 Rs 10,000.00
Remaining 100 from 2nd lot @ Rs 60 Rs 6000.00
________________
Rs 16,000.00
==================
The issue of 300 units will be price as under-
From 1st lot 200 unit @ 5 = Rs 1000
Remaining 100 units from 2nd lot @ 6 = Rs.600
________________________________________
Rs 1600
The value of closing stock of 400 units will be closed @ 6 i.e.400×6=2400 Rs
2.Last in first out method (LIFO):
In this method price of latest consignment is used for calculating value of issue until that
consignment is exhausted.
e. g. April 1 500 units are purchased @ 5/unit
April 6 300 units are purchased @ 6/unit
April 10 400 unit sold
The issue of 400 units on April 15,will be priced under:
300 units @ 6 =1800
100 units @ 5=500
________________
2300 Rs
=================
The closing stock of 400 units will be price @ Rs 50 i.e.Rs 2000.
3.Average Cost Method: In this method when new stock of goods is received, the total value of goods in stock.
Divided by total quantity in hand will give average price until new stock is received.
Instead of simple average, where only unit cost is considered, weighted average cost can also be use where
along with unit cost, quantity of units is also considered.
e.g. Following two lots where purchased during April 2005.
1000 units @ Rs 3
5000 units @Rs 5
By simple average cost =5+3/2=4
While the weighed average cost could be as under

Unit Cost Rs Weight Weighted Cost Rs

3 1000 3000
5 5000 25000
Total 6000 28000

The weighted average cost =28000/6000=4.67

4.Replacement price method
• Also known as Market price method.
• In this method the material issues are charged at predetermined price. The standard price is fixed
after careful examination of current market price, trend of price and market conditions etc.
• This price is applicable only for particular period.
• This price include acquisition cost, invoice price and transport charges.
5.Inflated price method:
This method is used for those goods which are subject to some wastage. The total divided by the
quantity expected to be finally available for use and that rate is used for sale of goods.
There are some types of normal wastage during material usage.
e.g. Loss of breaking the bulk, evaporation etc.100 Packets of menthol where purchased at the rate of
Rs.60 per packet.
There is wastage of 10% menthol during its storage.
The total cost of 100 packets @60 per packet =100×60=6000Rs
Material left after wastage = 100-10=90 packets
Therefore, cost per packet =6000/90=66.66 Rs.
6.Standard price method:
In this method,the material issues are priced as actual acquisition cost.
This method is applicable,where purchase are made for specific job and are kept
physically separate in the store room.
Legal requirement and price control on bulk drugs and formulations
The retail price is the price fixed by the Government for a new drug under paragraph 5 of Drugs
(Prices Control) Order, 2013. It came into force on 15.05.2013.It regulates price of 348 drugs.The
ceiling price of a scheduled formulation of specified strengths and dosages as specified under the
first schedule shall be calculated as under:
Step1: First the Average Price to Retailer of the scheduled formulation i.e. P(s) shall be calculated
as below: Average Price to Retailer,
(Sum of prices to retailer of all the brands and generic versions of the medicine having
market share more than or equal to one percent of the total market turnover)
P(s) = _________________________________________________________________________
(Total number of such brands and generic versions of the medicine having market share more
than or equal to one percent of total market turnover on the basis of moving annual turnover
for that medicine.)
Step2. Thereafter, the ceiling price of the scheduled formulation i.e.
P(c) shall be calculated as below:

P(c) = P(s).(1+M/100)

Where,
P(s) = Average Price to Retailer for the same strength and dosage of the medicine as
calculated in step1 above.
M = % Margin to retailer and its value =16 Margin to retailer: While fixing a ceiling price
of scheduled formulations and retail prices of new drugs, sixteen percent of price to
retailer as a margin to retailer shall be allowed.
Maximum retail price:
• The maximum retail price of scheduled formulations shall be fixed by the manufacturers on
the basis of ceiling price notified by the Government plus local taxes wherever applicable, as
under:

Maximum Retail Price = Ceiling price + Local Taxes as applicable

• The maximum retail price of a new drug shall be fixed by the manufacturers on the basis of
retail price determined by the Government plus local taxes wherever applicable, as under:

Maximum Retail Price = Retail Price + Local Taxes as applicable

Calculation of retail price of formulation
The retail price of a formulation shall be calculated by the Government in accordance with
the following formula namely:
R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED.

Where,
"R.P." means retail price;
"M.C." means material cost and includes the cost of drugs and other pharmaceutical aids
used.
"C.C." means conversion cost worked out in accordance with established procedures
"P.M." means cost of the packing material used in the packing of formulation, including
process loss.
"P.C." means packing charges worked out in accordance with established procedures of
costing.
"MAPE" Maximum Allowable Post-manufacturing Expenses
"E.D." means excise duty: Provided that in the case of an imported formulation.
Reference
1. Remington’s Pharmaceutical Sciences.
2. Drug store & Business management by Mohammed Ali & Jyoti.
3. Drug Store and Business Management by R. M. Mheta.