Economic analysis of drug expenditure in government Medical College hospital, Nagpur

Objective: To conduct the economic analysis of drug expenditure in the Government Medical College Hospital, Nagpur and to identify the categories of drugs needing stringent management control.
Material and Methods: A matrix based on the coupling of cost (ABC) analysis and vital/essential/desirable (VED) criticality analysis was formulated for prioritization, to narrow down the group of drugs requiring greater managerial monitoring. The difference between actual expenditure and the inflation factor-derived expenditure was found. Expenditure for forthcoming years was forecasted by regression analysis using NCSS software.
Results: The annual drug expenditure was found to be only 11.59 % of the total hospital budget. The division of the drug inventory into two priority categories resulted in identifying the priority I drugs (56) for stringent control. The percentage cost of each drug helped in determining the economic order quantity and the schedule of placing the purchase orders for drugs of high value but low criticality. Using the cost inflation index, it was observed that the overtly seen increase in annual drug expenditure was just 2.84% when the inflation factor-based expenditure was derived.
Conclusion: Categorization of drugs by the ABC-VED coupling matrix model helps to narrow down on fewer drugs. The application of the cost inflation index justified the increased annual budget.