OBJECTIVES: Taipei Medical University Shuang-Ho Hospital officially opened on July 1, 2008. Due to limited revenue during the initial period, hospital emphasized more on cost control. With the great demand of medication from the growing numbers of outpatients visits and inpatients, pharmacy aim to establish an optimal purchase model to minimize drug inventory management cost. METHODS: Economic Order Quantity (EOQ) model were applied to find out the best quantity and frequency on medication purchase order. We analyzed the high-cost medications in which the top 50% of cumulative drug cost in year 2010, and intravenous antineoplastic drugs were excluded. RESULTS: The study evaluate drug cost, labor cost and inventory cost. Forty-six high-cost medications were selected to determine EOQ model in this study. The optimal frequency to order each drug estimated by EOQ model was three to ten times per month. The estimated cost of inventory management reduced substantially when order more frequently within 10 times a month. However, after considering the practicability in real practice, the order frequency was adjusted to one to four times per month. The best estimated quantity for each drug was also adjusted by previous fluctuation of purchase orders during 2010. Therefore, the estimated inventory management cost in year 2011 could reduce 500,000 to 700,000 NTD CONCLUSIONS: Our inventory management currently purchase drug twice a month. In order to optimize inventory turnover rate, without increasing pharmacists work loading and management cost, we recommend adjusting quantity and frequency of ordering medication based on our finding to achieve the minimal and rational cost on inventory management.