Every pharmacist knows the DEA biennial inventory is required. Fewer know exactly how auditors judge it. The biggest risk isn’t missing the date—it’s doing the count wrong. One mistake, repeated often, leads to five-figure fines and painful remediation: not counting every controlled substance actually “on hand.” Here’s what that means, why it matters, and how to build a process that stands up to any audit.
What “biennial inventory” really means
“Biennial” means at least every two years from your last inventory date. It doesn’t mean every other calendar year. Your state may require annual inventories; follow the stricter rule.
The inventory must be a physical count and record of all controlled substances you have on hand at a specific moment. It is not a report you print from your system. Auditors test whether your written inventory, your purchase/dispense records, and your actual stock could have existed at the same time. If those can’t reconcile to a single moment, they cite you.
The #1 mistake: Missing drugs that are “on hand”
Pharmacies often count only what is on the shelf or in the safe. The DEA defines “on hand” as everything in your possession and control at that moment—regardless of where it sits or whether it is saleable.
Why this matters: If it’s under your control, it can be diverted. The DEA’s core question is whether you can account for all controlled units from purchase to final disposition. Leaving things out creates unexplainable gaps.
What must be counted
- Main stock and safe — obvious, but verify strengths and forms. Mixing strengths is a top math error.
- Will-call/waiting bin — all labeled prescriptions not yet picked up count as your inventory until delivered to the patient. This is the single most-missed location.
- Automation — any ADS/robot pockets, carousels, or cabinets. Print bin summaries and physically verify critical bins.
- Emergency kits, crash carts, and dispensing cabinets off the main pharmacy — if stocked under your DEA registration, they are yours to count.
- Compounding area — bulk powders, controlled ingredients, and finished compounded preparations not yet dispensed.
- Returns/quarantine — expired, damaged, or recalled controls awaiting reverse distribution are still in your possession until picked up and documented.
- Delivery totes received — shipments accepted before the inventory “as of” time are yours; after that time, they’re not. Document delivery timestamps.
- Backorders and transfers — anything physically on premises counts; items ordered but not received do not.
- Samples and free goods — if you possess them, count them.
Exact vs estimated counts: Don’t mix the rules
- Schedule II: exact physical count. No estimation, even for sealed bottles. Why: CII has the highest diversion risk; auditors look for hard numbers.
- Schedules III–V: estimation for open bottles is acceptable unless the container holds more than 1,000 tablets/capsules; then an exact count is required. Why: large containers magnify small errors.
- Liquids: record in milliliters. Estimate open containers to the nearest practical measure; document your method (e.g., meniscus at 237 mL). Why: consistency lets auditors reproduce your result.
- Unit-dose and blister cards: count remaining units, not theoretical package size. Why: dispensed but unrecorded units are a classic discrepancy source.
Document it the DEA way
Auditors cite missing elements far more than you’d expect. Your written inventory must clearly state:
- Date of the inventory.
- “As of” time and whether it was at the opening or close of business. This line is often missing and it matters because it anchors purchase and dispensing records.
- Name, address, and DEA number of the registrant.
- Drug name, strength, dosage form for each line item.
- Number of containers and container size (e.g., 3 bottles x 100 tabs).
- Total count or volume on hand (e.g., 243 tablets).
- Schedules listed separately — Schedule I and II listed apart from III–V.
Best practice (not strictly required but audit-proof): initial each page, number pages, and have a second person witness counts for Schedule II. Store the inventory at the registered location for at least two years, readily retrievable from other records.
A field-tested inventory workflow
- 1. Freeze your moment: Choose opening or closing. Lock a sign on the door and post the exact time. Halt receiving and dispensing during the count or document any exceptions with timestamps.
- 2. Map every location: Use a floor plan or a simple checklist of all areas where controls live: safe, CII cabinet, main shelves, will-call, robot, kits, quarantine, compounding, ADS, off-site cabinets if under your registration.
- 3. Separate and stage: Pull CII to a dedicated cart or count first; label by NDC and strength. For III–V, flag containers ≥1,000 so counters know those require exact counts.
- 4. Two-person for CII: One counts, one records, then switch. Why: catches transpositions and look-alike/sound-alike mix-ups.
- 5. Record as you touch: Write the count as you hold the bottle, with NDC verification. Don’t rely on memory or later transcription.
- 6. Tame will-call: Pull every control bag and tally by NDC. Common failure: counting “1 prescription” rather than “30 tablets of hydrocodone 10/325.” Record units.
- 7. Validate automation: For high-risk pockets (top movers, CIIs), do a blind bin count against a printed report. Differences must be explained immediately.
- 8. Liquids and partials: Note mL remaining and your estimation method. For controlled cough syrups and concentrates, auditors often re-measure.
- 9. Reconcile exceptions: If counts don’t match the perpetual or system, investigate before closing the inventory. Document reasons (e.g., reverse distributor pickup scheduled tomorrow; dispensed at 8:57 am after “as of” 8:00 am).
- 10. Finalize and secure: Add the required header info, sign/witness, number pages, and file. Update your next due date.
Pre-inventory prep: Fix discrepancies before you count
- Clean up will-call: Return-to-stock anything expired or outside policy. Why: stale bags inflate counts and mask diversion.
- Post all receipts: Ensure wholesaler invoices and CSOS/222 orders are fully posted. Why: the “as of” time must reconcile with purchasing history.
- Close out reversals: Move documented reverse-distributor pickups off your inventory and keep the paperwork handy. Why: auditors verify chain-of-custody.
- Standardize NDCs: Consolidate same drug/strength across manufacturers where possible. Why: different NDCs with the same strength are a frequent double-count or miss.
Special situations that trip pharmacies
- Deliveries during inventory: If the driver arrives before your “as of” time and you sign for it, it’s yours to count. If after, it’s not. Stamp the invoice with time received.
- Compounded controls: Count both bulk powders and finished preps. Example: morphine powder 100 g jar with 72 g remaining, plus three 30 mL syringes at 10 mg/mL not yet dispensed.
- Remote ADS in LTCFs: If stocked under your pharmacy’s DEA registration, take or maintain a separate inventory for that device as of the same moment. Coordinate with facility staff.
- Emergency kits: Record kit IDs and contents. Don’t assume “par levels” equal reality—open and verify.
- Zero inventory: Even if you have no controls on hand, you must document an inventory indicating “zero.” Why: proves compliance with timing rules.
How auditors spot problems
- Missing “opening/closing” statement: Without a clear “as of” moment, they can’t reconcile, and they’ll cite it.
- Round numbers everywhere: Too many counts ending in 0 or 5 suggest estimating CIIs or skipping physical verification.
- Not listing will-call: When dispensing records show fills awaiting pickup but the inventory omits them, auditors assume undercounting.
- Mixed schedules on one list: Schedules not separated is a technical violation and a red flag about overall controls.
- Perpetuals mismatched to physical: Persistent variances without documented investigations point to diversion risk.
Keep the fine away: Practical controls year-round
- Weekly mini-audits for CIIs: Blind count top 20 movers. Why: small, frequent checks detect trends before they’re big problems.
- Chain-of-custody on every CII move: Two-person verification for receiving, stocking, and wasting.
- Lock will-call for controls: Separate bin or locked drawer; sign-out at pickup. Why: reduces internal shrink.
- Document every exception: Broken tablets, spills, returns to stock, and kit exchanges get same-day notes.
- Train to the rule of 1,000: Make the “exact count if ≥1,000” rule a label on shelves and on your inventory forms.
Quick reference checklist
- Set “as of” date and opening/closing time. Post it.
- List all locations: safe, shelves, will-call, automation, kits, quarantine, compounding, ADS.
- Separate Schedule II from III–V lists.
- Exact counts for all CII; exact for III–V if container ≥1,000; otherwise estimate open containers.
- Record drug name, strength, form, container size/count, and total on hand.
- Include waiting-for-pickup, expired/quarantined, and received-but-not-yet-stocked items.
- Two-person verification for CII; initial each page and number them.
- File inventory at the registered location; retain for at least two years.
If you remember nothing else: the DEA measures your control by whether you counted everything you actually possess at a precise moment and documented it clearly. The fastest way to fail an audit is to miss will-call, automation pockets, or quarantined goods. Build your process around those blind spots, and your biennial inventory will be both accurate and audit-proof.
I am a Registered Pharmacist under the Pharmacy Act, 1948, and the founder of PharmacyFreak.com. I hold a Bachelor of Pharmacy degree from Rungta College of Pharmaceutical Science and Research. With a strong academic foundation and practical knowledge, I am committed to providing accurate, easy-to-understand content to support pharmacy students and professionals. My aim is to make complex pharmaceutical concepts accessible and useful for real-world application.
Mail- Sachin@pharmacyfreak.com