Background: Approximately 35.0% of annual hospitals budget is spent on buying materials and supplies, including medicines. We can bring about substantial improvement in the hospital inventory and expenditures by the inventory control techniques. The health care in modern days has become more complex sophisticated and more expensive in terms of cost of drugs. Objective: To study the drugs stored in pharmacy department according to their assessed criticality. Materials and Methods: This study was conducted retrospectively in pharmacy department for a period of 6 months. Data were collected by checking the stock records and the bills of the supplies of main drug store. The study analyzed the annual consumption; the expenditure incurred for the drugs and developed a matrix based on ABC and VED analysis to narrow down the group of the drugs for managerial monitoring. Results: The total number of the drugs at the pharmacy was 886 drugs. The total annual drug expenditure (ADE) on these drug items was Rs.101595164.24. ABC analysis revealed 21.22%, 27.65% and 51.13% items as A, B and C category items, respectively, accounting for 68.50%, 21.91% and 9.59% of ADE of the pharmacy. VED analysis showed 12.30%, 15.80% and 71.90% items as V, E, and D category items, respectively, accounting for 19.49%, 17.55% and 62.99% of ADE of the medical store. On ABC-VED matrix analysis, 25.40%, 30.36% and 44.24% items were found to be category I, II and III items, respectively, accounting for 70.38%, 19.36% and 10.26% of ADE of the pharmacy. Conclusion: Our study revealed that there is a need for conducting such analysis regularly, and applying the inventory management tools for effective and efficient management of the pharmacy, along with close supervision on items belonging to important categories.