Drug house management

1. Presentation
PRESENTED BY- MR. AKSHAY M. KASAMBE
N.S.P.M COLLEGE OF PHARMACY DARWHA
Email Id- akshaykasambe@gmail.com
Contact no- 8237956745, 9172432197
DRUG HOUSE
MANAGEMENT

2. CONTENTS
 Introduction
 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

3. INTRODUCTION
After attaining the required qualification i.e. Diploma or Bachelor in pharmacy, if the
pharmacist has aptitude for business and willing to invest money than he or she can start
his own drug store after selecting a suitable location, acquiring license , ideal layout
design, effective purchase procedure & storage in his drug store is called drug house
management.

4. DRUG STORE IN RURAL AREA/ SMALL TOWN
It is possible to run a new drug store in a rural area with limited financial resources.
These days the nationalized and cooperative banks provide incentives in the form of soft
loans for purchasing the inventories for the drug store.
In a rural area, the ideal site for a drug store is in the main market, preferably near about
the clinics of physicians.
Apart from that, the buying capacity of people should also be studied. It is necessary to
find out whither the potential customers will be in a position to pay cash for their
purchases, otherwise the pharmacist should be prepared for extending credit facility to
some of them
In case, the location of a drug store is to be selected near an industrial town, the
financial stability of would be customers should be studied. If a drug store is to be opened
on a highway, close to a rural area proximity to a petrol pump, railway station or bus-stand
is an ideal location.

5. DRUG STORE IN URBAN AREA / BIG CITIES
A lot of investment is required for starting a drug store in big towns. Factors like the nature
of community residing there, probable number of customers, their buying capacity (which
depends on their nature of work and occupation) may be considered while selecting a
suitable site for opening a drug store in big towns.

6. ADVANTAGES & DISADVANTAGES OF RURALAREA
ADVANTAGES
1. Limited finance
2. Low rate of Interest rate
3. Easily availability if space
4. Greater scope for future expansion
5. Lower wages.
DISADVANTAGES
1. Limited supply of skilled labour
2. Difficulties in procurement of material
3. Buying capacity of people is less
4. Luxury goods like cosmetics are less
5. Proprietor has to arrange large finance
6. Illiteracy is more.

7. ADVANTAGES & DISADVANTAGES OF URBAN AREA
ADVANTAGES
1. Procurement of material is easy
2. Better supply of skilled persons
3. Better sales of goods
4. Buying capacity of customers is more
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
1. Higher rate of land
2. Higher municipal taxes and restrictions on the use of lands.
3. Higher wages
4. Over crowding & its evils.

8. Developing area
Hospital
Availability of
finance
Availability of finance is the most important factor. Sufficient finance &
meager financial resources mainly affect on opening of drug store.
Business locality
Thickly
populated
residential area
SITE FOR SELECTION OF DRUG STORE
Large number of people visits the market place to purchase the thing of their
requirement
Such area is more preferable. Because people may buy required medicines
during their evening walk.
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.
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.

9. Near to hotel,
school,
seminar hall:
Flow of traffic
Parking
Drug store
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.
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.
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.
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.
SITE FOR SELECTION OF DRUG STORE

10. In order to establish a new drug store in metropolitan cities following
additional factors also to be considered
3
The essential
services such as,
bank, post office
and warehouse
must be available
near the site.
There should
not be
congestion of
traffic
The site
should be
well
connected
with various
modes of
transport.
The rules and
regulations of
municipal
corporation or any
other local authority
does not come in the
way of expansion of
drug store.
The site has
good
surroundings
1 2 4 5

11. 11 Note down the date of occupancy.
3 Repair the premises of drug store properly.
2 When to pay the installment of the rent.
4
Comply with the local rules and bye-laws
about opening and closing time of shops,
the weekly closing day of the market etc.
Acquisition of premises for a drug store

12. Its location and proper layout design
Its professional management
Sound financial position.
Factors
LAYOUT OF DRUG STORE
Three min factors responsible for the success of a drug store are
1
2
3
The primary function of a drug store is to provide every possible convenience and
aid to the customers to make their shopping easy and less tiring. It is possible only
by designing a proper layout of the drug store.

13. OBJECTIVE OF LAYOUT DESIGN
07
provide surveillance in order to reduce
chances of pilferage and theft
08 Tohave space for reserve stock,
office and resting space for the staff.
09 Tohave 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.
01 Toattract large number of customers
02 Toincrease sale of drug store
03 Toreduce selling expenses to
minimum
04 Toprovide customer
satisfaction
05 Tocreate professional image and to
improve general image
06 Tominimize movements of
customers within drug store

14. AN IDEAL DRUG STORE DESIGN

15. LEGALASPECTS OF A DRUG STORE
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.
Minimum qualification Must be Registered
Pharmacist with the State Pharmacy Council.
Diploma in pharmacy and also being
registered as a Registered Pharmacist.
For starting a wholesale drug store is matriculation with
four year experience in selling of drugs in a chemist shop
on salary basis OR
The minimum qualification to get registered with state
pharmacy council is Diploma in Pharmacy from a
recognized institutions.
321 4 5
Following are some of the legal requirements to be fulfilled for opening a retail drug store or a wholesale drug store
1. Minimum qualification

16. The store should fulfill all the
requirement of the D & C rules1945.
To start the retail store & wholesale
store minimum of 10 sq. m. (107 sq.
ft) of area is required.
To start the combined store 15sq.m.
of the area is required
2. Minimum space
3. 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.

17. DOCUMENTS REQUIRED TO OPEN A RETAIL DRUG STORE
Licence A license required to sell, stock or exhibit for sale or distribute drugs. Following documents are
needed for a new license.
1 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.
2 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.
3 Attested copy a) Diploma in pharmacy from any institution duly recognized by PCI.
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.
4 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.
5 Map Retail drug store duly signed by proprietor/partners of firm.
6 Recent Receipt In case of rented premises or an affidavit to that effect if the person himself is the owner
of premises.
7 A copy partnership deed in case of partnership concern.

18. DOCUMENTS REQUIRED FOR THE RENEWAL OF RETAIL SALE LICENCE
1 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.
2 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.
3 Late fee 5OO Rupees per license per month or part thereof.
4 Original
License
In case of first renewal and latest renewal certificate in case of subsequent
renewals.
5 Affidavit Given on a non-judicial stamp paper by a partner if any, duly attested by
oath commissioner.

19. DOCUMENTS REQUIRED TO OPEN A WHOLESALE DRUG STORE(FOR
NEW LICENSE)
1 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.
2 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.
3 Attested
copy
a) Diploma in pharmacy from any institution duly recognized by PCI.
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.
4 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.
5 Blue Print Plan of premises.
6 Recent
Receipt
In case of rented premises or an affidavit to that effect if the person himself is
the owner of premises.
A Copy Partnership deed in case of partnership concern.
7 Purchase
receipt
Refrigerator

20. DOCUMENTS REQUIRED FOR THE RENEWAL OF WHOLESALE LICENSE
1 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.
2 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.
3 Late fee 5OO Rupees per license per month or part thereof.
4 Original
License
In case of first renewal and latest renewal certificate in case of
subsequent renewals.
5 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

21. 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.
Separate license are required for the retail sale of-

22. OBJECTIVE OF PURCHASING
The items should be purchased at right price.
The right price does not mean the lowest
price. For determination of the right price,
the cost structure of the product is to be
taken into consideration
Before purchasing the material a sample
should be procured and its quality
determined. After verifying the right quality,
the order may be placed with the supplier for
its purchase
It is an important factor in buying while
deciding the right quantity, factors such as
price structure, discounts and availability of
items are to be taken into consideration
1
2
3
4
5
6
7
The source from where the material is procured,
must be dependable and capable of supplying
items of uniform quality. The buyer has to
decide about the proper source to procure the
material.
Not only to produce the raw material at the lowest price but also to reduce the cost of the final product. The above
points are taken into consideration while purchasing of the material.
Right
source
Right
Quality
Right
Quantity Right
Price
Right
Time
Right place
of delivery
Right Mode of
transportation
For determining the right time of purchase,
the lead time information is taken into
consideration. Lead time means the total
time consumed between the recognition of
the need of an item, till its receipt for use
The supplier should supply the items at
the premises of the business.
The goods may be supplied by road, rail or
air. The mode of transportation is to be
decided between the supplier and
purchaser

23. PURCHASING PROCEDURE
Inviting Quotations or Tenders- Quotations are invited from
suppliers with the list of requirements. If the Quantum of
goods is large, tenders can be invited by giving list of
requirements in leading newspapers A last date is given for the
tenders to reach the purchase department.
Purchase Requisition- When the existing stocks are depleted
and come to a minimum, the stores in charge fills in the
replenishment form and sends it to the purchase department.
The purchase requisition indicates the type, quantity and
quality of items to be purchased.
Selection of the Suppliers- A list of suppliers is collected
from market survey journals newspapers and trade guide's.
The suppliers are selected based on their credibility and who
can provide timely service and in required quantity. Their past
experience and their nature of service etc. is assessed.
Placing the Order- After selection of the supplier, the order is
placed in the standard purchase order from called 'Supply
Order'. The supply order contains the detailed order contains
the specifications of the items, quantity required, the price and
other terms and conditions of the supply.
1
2
3
4
Recording of the Bills in Books-The bills are sent to
Accounts Section where the bills are entered into
Account books. Any errors in bills are immediately
informed to higher authorities for necessary action.
Receiving and Checking the Material- The material sent
by the supplier is received by the store. Quantity verified
and specifications are cross checked with the invoice or
bill sent by the supplier. If the goods required doesn't
confirm with any specifications or any damage is noticed,
the supplier must be informed immediately.
Checking the Invoice or Bill- If the goods are received
in satisfactory condition the invoice checked before it is
approved for payment. The rates of various items charged
in the bill and the other terms and conditions are
thoroughly - checked and compared with the supply
order.
Releasing the Payment to the Supplier:
According to terms and conditions of the supply order,
the payment done by Accounts Section to the supplier
5
6
7
8

24. Methods of purchasing
Sr.
No
Method Explanations
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.

25. SELECTION OF SUPPLIERS
2. Financial condition of the supplier
The following points should be generally taken into
consideration while preparing approved list.
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
• 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.
6. Terms and conditions of payment
1. Reputation of the supplier in the market.

26. CREDIT INFORMATION
11
3
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.
2
4
5
7
6
8
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.
Definition of Credit- Through which the items can be brought or sold without making cash payment.
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.

27. The following information may be obtained about the buyer before selling the goods on credit.
He should be honest, reliable,
trustworthy and having reputation for
fairness and justice.
This is done to know the financial
position of the buyer, in order to find its
capacity to pay debt etc.
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.
1. The character
of buyer
2. Financial
position of the
buyer
3. Assets and
liability of the
firm:

28. •TENDERS
Definition: A tender or a quotation is a written offer to do a work or to provide a material at a given price within a
prescribed period and under specified condition.
SR.N
O.
TYPES OF
TENDERS
EXPLANATION
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.

29. SR.NO. TYPES OF
TENDERS
EXPLANATION
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.

30. SR.NO. TYPES OF
TENDERS
EXPLANATION
5 Global Tender • The tenders are invited from all parts of the world.
• 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

31. CONTRACTS
1
2
3
4
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.
Modern PowerPoint Presentation
1.Suppliers name and address. 15
6
7
8
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.

32. STORAGE
01
02
03
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
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.
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.
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.

33. 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.
05 It standardizes the purchasing
as well as storage.
06 It reduces the varieties.
07
It makes purchasing, recording,
accounting, computerizing pricing,
costing location, indexing and
inspection efficient and result-
producing.
08 It assures planned and
quality production.
04It prevents duplication.
03The codes ensures secrecy of
items lying in the store.
02The length in description
is minimized.
01Ambiguity in description is
avoided.
Advantages of
codification

34. METHODS OF CODIFICATION
1. Alphabetically method/Letter Code Method
In this system, letters are chosen 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.

35. 2. 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.
A. 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.
B. 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.

36. 4. Combination method
In this method both mnemonic & numerical method are combined to give code to different items.
e.g. Code AT 300 representsAspirin tablet 300mg and AT 301 is allotted to Aspirin tablet 600mg.
5.Location coding method
 In big organizations 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 into 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.

37. • PRICING OF MATERIALS
2016
2015
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
April 5
April10
2000 unit purchased @ Rs 50 per unit.
500 unit purchased @ Rs 60 per unit.
300 units sold.
The issue of 300 units will be priced as under:
From the first lot 200 units @ Rs 50
Remaining 100 from 2nd lot @ Rs60
Rs
10,000.00
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

38. 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
April 6
April 10
500 units are purchased @ 5/unit
300 units are purchased @ 6/unit
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 50i.e.Rs
2000.

39. 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
The weighted average cost =28000/6000=4.67
Unit Cost Rs Weight Weighted Cost Rs
3 1000 3000
5 5000 25000
Total 6000 28000

40. 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=600
0Rs 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 arekept physically separate in the store room.

41. 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.)

42. Step2. Thereafter, the ceiling price of the scheduled formulation i.e.
P(c) shall be calculated as below:
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.
P(c) = P(s).(1+M/100)
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

43. 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.

44. THANK YOU !