Most pharmacies spend 80% of their drug budget on just 20% of the medications they carry. And guess what? The bulk of that spending isn’t on brand-name drugs-it’s on the high-volume, low-cost generics. If you’re still stocking generics the same way you did five years ago, you’re leaving money on the table-and risking stockouts that cost you sales and patient trust.
Why Generic Stocking Isn’t Just About Saving Money
Generic drugs make up 90% of all prescriptions filled in the U.S., but they account for only 20% of total drug spending. That’s not a typo. It means for every $100 your pharmacy spends on medications, $80 goes to the other 10% of drugs-the brand-name ones. The rest? Generics. That’s your profit engine. But here’s the catch: generics don’t sit quietly on the shelf. New ones hit the market every week. Old ones get discontinued. Prices swing. And if your inventory system doesn’t move with them, you’ll end up with expired stock or empty bins.The Minimum-Maximum Method: Simple, But Only If You Do It Right
The most common system for managing generics is the minimum-maximum method. You set a low point (minimum) and a high point (maximum). When stock hits the minimum, you reorder to bring it back up to the maximum. Sounds easy, right? But here’s where most pharmacies fail: they set these numbers once and forget them. For fast-moving generics like metformin, lisinopril, or atorvastatin, your minimum should never be less than a week’s supply. Why? Because patients won’t wait. If you’re out of metformin for three days, they’ll go to the chain pharmacy next door-and they might not come back. Your maximum? Don’t go beyond six weeks’ supply. Generics have shorter shelf lives than brands because manufacturers cut costs on packaging and preservatives. Overstocking means waste.Reorder Points and Economic Order Quantity: The Math Behind the Stock
You don’t guess when to reorder. You calculate it. The formula is simple:Reorder Point (ROP) = (Average Daily Usage × Lead Time in Days) + Safety Stock
Let’s say your pharmacy sells 12 bottles of generic metformin 500mg per day. Your supplier takes 3 days to deliver. You add a 2-day safety buffer because holidays or weather can delay shipments. That’s:(12 × 3) + 24 = 60 bottles.
So when you hit 60 bottles left, you hit send on the order. Now, how much do you order? That’s where Economic Order Quantity (EOQ) comes in. It balances the cost of ordering too often versus storing too much. For most pharmacies, EOQ for fast-moving generics lands between 100 and 200 units. For slower ones, like rare thyroid meds, you might order just 20 at a time.Tracking What Matters: COGS, Turnover, and Expiry Dates
Your inventory system should track three things for every generic:- Cost of Goods Sold (COGS)-Which generics actually make you money? Some generics have razor-thin margins because suppliers undercut each other. You need to know which ones are worth keeping.
- Turnover rate-How often does a drug sell out in a month? Fast turnover (more than 4 times a month) means you need tighter min-max settings. Slow turnover (less than once a month)? You might want to drop it from your regular stock and offer it as a special order.
- Expiry dates-Generics often expire faster than brands. A 2023 study found 18% of expired generics in independent pharmacies were due to poor tracking. Set alerts for anything expiring in the next 60 days. If it’s a high-turnover drug, offer it early to patients with refills coming up.
What Happens When a New Generic Hits the Market?
This is where most pharmacies break. A new generic for a brand-name drug like Lipitor comes out. You get a call from your wholesaler: “We’ve got it for 40% less.” You order a big batch. Then what? You’re still selling the brand-name version for another two weeks. Suddenly, you’ve got $15,000 in brand-name inventory sitting there, gathering dust. The fix? Don’t wait for the new generic to arrive. As soon as you hear about an upcoming generic approval, start reducing your brand-name order by 25% per week. By the time the generic lands, you’ve already cut your brand-name stock by 75%. Then, ramp up the generic order slowly-start with 50 units, not 500. Monitor sales for two weeks. Adjust. Don’t go all-in until you see real demand.Automation Isn’t Magic-It’s a Tool
Yes, software can auto-reorder generics. But only if it’s set up right. Most pharmacy systems let you input lead times, safety stock, and turnover rates. If you don’t update those numbers every quarter, your system is just guessing. The best systems now use AI to detect shifts. For example, if sales of a certain generic spike 30% over two weeks, the system flags it and suggests increasing your max stock. If a drug hasn’t sold in 45 days, it recommends removing it from automatic replenishment. But here’s the catch: AI doesn’t know if your patient population is aging, or if a local clinic just started prescribing a new combo drug. You still need to review the reports. Every Monday morning, spend 15 minutes looking at your top 10 best-selling generics and your top 5 slow-movers. That’s it. But do it every week.Staff Training: The Missing Piece
No software fixes bad habits. If your techs aren’t entering received stock correctly, your inventory numbers are garbage. If they’re not returning unclaimed prescriptions to stock within 24 hours, your counts are off by 10-15%. Training isn’t a one-time thing. It’s weekly. Create a 10-minute checklist for every shift:- Did we log all incoming generic shipments?
- Are any generics expiring in the next 30 days?
- Did we check the refill queue for any generics that are running low?
- Did we update the system after a therapeutic substitution?
Real Problems, Real Fixes
One pharmacy in Ohio kept running out of generic albuterol inhalers. They blamed suppliers. Turns out, they were ordering 100 units every month. But after checking sales data, they saw demand jumped to 180 units in winter months. They adjusted their max to 200 and added a seasonal bump. No more stockouts. Another pharmacy in Texas had $3,200 in expired brand-name atorvastatin after a new generic launched. They didn’t adjust their orders fast enough. Now, they use a simple rule: when a new generic is approved, reduce the brand-name order by 20% per week for five weeks. Done.What Happens If You Do Nothing?
The market is moving fast. Big chains use AI to auto-add a generic to their inventory after just four patient requests. Independent pharmacies that stick to old methods are losing 8-12% in margins every year. They’re overstocking slow-movers. They’re missing out on rebates. And patients are walking out because they can’t get their meds. You don’t need a fancy system. You don’t need to spend $10,000 on software. You just need to track your numbers, adjust your limits, and train your team. Start with your top 5 generics. Set min-max levels. Watch them for 30 days. Adjust. Then move to the next five. In three months, you’ll have a lean, efficient, profitable inventory system that actually works.Key Takeaways
- Generics make up 90% of prescriptions but only 20% of drug spending-optimize them, and you save big.
- Use the minimum-maximum method, but update your numbers every quarter, not once a year.
- Calculate reorder points using real usage data, not guesses.
- Track COGS, turnover, and expiry dates for every generic-your software can do it, but only if you feed it accurate info.
- When a new generic launches, phase out the brand-name version slowly, not all at once.
- Train your staff daily. Inventory accuracy starts with the person entering the data.
- Don’t wait for automation to fix your problems. Use tech as a tool, not a crutch.
How often should I update my generic inventory limits?
Update your min-max levels every quarter, or sooner if you notice a big change in sales-like a new generic hitting the market or a seasonal spike. Waiting longer than three months risks overstocking or running out.
What’s the ideal inventory level for fast-moving generics?
Aim for one to two weeks’ worth of supply. For drugs like metformin or lisinopril, that’s usually 70-120 units, depending on your daily volume. More than that increases the risk of expiration; less than that invites stockouts.
Should I stock every generic my wholesaler offers?
No. Only stock generics that have real demand. Track turnover. If a generic hasn’t sold in 45 days, remove it from automatic replenishment and offer it as a special order. Keeping too many slow-movers ties up cash and space.
How do I handle a new generic that’s cheaper than the brand?
Don’t rush. Reduce your brand-name order by 20% per week for four to five weeks. Start with a small order of the generic-50 to 100 units-and watch sales. Only increase volume once you see consistent demand. This prevents $10,000 in expired brand-name inventory.
Can I use my pharmacy software to automate generic stocking?
Yes-but only if you’ve set it up correctly. Make sure your software has fields for lead time, safety stock, and turnover rate, and that you update them regularly. Automation works best when it’s guided by real data, not just default settings.
Neoma Geoghegan
November 24, 2025 AT 14:31Min-max set it and forget it is the death of independent pharmacies
Update quarterly or you're just guessing
Metformin at 60 bottles? Perfect
Stop overstocking and start optimizing
Bartholemy Tuite
November 26, 2025 AT 02:03bro i was just talking to my buddy who runs a pharmacy in dublin and he said they used to stock 300 units of lisinopril and now they do 90 cause they realized half of it was expiring
turnover rate is everything
also i think you meant 24 safety stock not 2
but still 100% right on the math
why do we still do this manually in 2025
Sam Jepsen
November 27, 2025 AT 16:12This is gold. Seriously. I run a small pharmacy in Vancouver and we just switched to this system last month. We cut our expired stock by 70%. Our techs actually look forward to Monday morning reviews now. It’s not about the software-it’s about the habit. Do the 15 minutes. Every. Single. Week.
Yvonne Franklin
November 28, 2025 AT 13:13COGS is the real metric nobody tracks
Most pharmacies think profit is revenue minus cost
It’s revenue minus cost minus waste
Track expiry dates like your license depends on it
Because it does
David Cunningham
November 29, 2025 AT 02:19Been doing this for 12 years in Melbourne. New generics? Start with 50. Watch for two weeks. Then scale. Never go all in. Saw a guy lose $22k on a single brand-name switch. Sad.
luke young
November 30, 2025 AT 20:24Love this breakdown. I’m a pharmacist in Ohio and we had the exact albuterol issue you mentioned. We went from 100 to 200 in winter and never looked back. Patients notice when you’re reliable. It builds trust.
james lucas
December 1, 2025 AT 21:54so like i was reading this and i was like wow this is so true but then i remembered my cousin who works at a big chain and they use this ai system that just auto-orders based on weather and flu season and like it predicts when people are gonna need more insulin because of holiday eating or something
and i was like maybe we’re all just behind
but then again my shop doesn’t have a $10k software budget so i guess we do the manual thing
still though the 15 min monday thing is genius
why didn’t i think of that
Jessica Correa
December 2, 2025 AT 12:24When a new generic hits the market phase out the brand slowly
Not all at once
And never trust the wholesaler’s ‘limited time offer’
They’re clearing inventory
Not helping you
Trust the data not the pitch
manish chaturvedi
December 3, 2025 AT 02:21In India, we face the opposite challenge. Many generics are underutilized due to physician preference and patient perception. Training staff is critical, but so is patient education. We use simple pamphlets in local languages to explain that generics are bioequivalent. It takes time, but trust grows. This framework is universally applicable, even in resource-limited settings.
Nikhil Chaurasia
December 3, 2025 AT 16:07My grandfather used to say ‘stock like you’re feeding a family, not filling a warehouse’
And he was right
Every expired pill is a missed opportunity
Every stockout is a broken promise
Don’t let your pride in having ‘everything’ cost you your soul
Or your profit margin
Holly Schumacher
December 4, 2025 AT 00:48You mention ‘AI detects shifts’ but you don’t define what a ‘shift’ is. Is it 10%? 20%? Over 7 days? 14? You cite a 2023 study but don’t link it. You say ‘collaborative practice agreements are legal in 17 states’-but which ones? You give formulas but no example inputs beyond metformin. This reads like a sales pitch dressed as advice. Where’s the data? Where’s the source? This isn’t guidance-it’s performative expertise.
Shawn Daughhetee
December 4, 2025 AT 17:42the 10 min checklist thing changed everything for us
we started doing it and suddenly we weren’t missing refills anymore
and the techs actually started talking to each other about it
like they cared
weird right?
small thing but it matters
Miruna Alexandru
December 5, 2025 AT 02:29Let’s be honest-this entire model assumes perfect data entry, consistent staff, and zero human error. But in reality, pharmacies are understaffed, overworked, and underpaid. The ‘15-minute Monday review’ is a luxury. The ‘weekly training’ is a fantasy. You’re prescribing idealism to a system collapsing under austerity. The real problem isn’t inventory management-it’s that pharmacists are being treated as glorified clerks. Fix that first. Then the math will work.