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Background: The basic principle of inventory control is Always Better Control (ABC) based on cost criteria and Vital Essential Desirable (VED) on criticality. Inequity in drug prioritization and expenses directly affects the health of the community. Study design: Based on ABC-VED matrix, inventory analysis was done. Study area: Community health centre (CHC) - Singarva, two primary health centres (PHC) - Kanbha and Sanathal and two urban health centre (UHC) - Amraiwadi and Sabarmati. Study period: December 2012 to December 2013. Methods: The drugs were first categorized by ABC method and then by VED method. On coupling the two techniques, ABC-VED matrix was made and drugs were classified in to Category I (AV + BV +CV + AE + AD), Category II (BE + CE + BD) and Category III (CD). Results: According to VED analysis large amount of money was spent on D category that is; 35% of annual drug expenditure (ADE) from CHC, 7.6% and 23.4% from both the PHC respectively, 20.1% and 24.7% from both the UHCs. On considering the ABC-VED matrix analysis the ADE spent on Class III was 6.6% among CHC, 1.2% and 1.5% among PHC, 2.6% and 7.2% among the UHC. Conclusion: The ADE used among the ABC-VED Class III should be avoided and the ADE on Class II drugs should be controlled and used judiciously.