Tender Mechanisms: The Gulf Cooperation Council Case Study

Co-authored by Yann Chappuis

Have you read any of our other tendering blogs? Are you eager to learn more about tendering in the Gulf Cooperation Council (GCC)? Fasten your seat belt and keep reading.

Seven countries make up the GCC, including the Kingdom of Saudi Arabia (KSA), United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, and Yemen. As experienced by other regions, GCC countries’ population is increasing, which in turn correlates to additional healthcare needs and therefore, expenses. Together, these countries will spend around $71 billion on healthcare by 2020[1]. In comparison, this amount would represent the healthcare expenditures of Norway and Denmark in 2016[2]. KSA has the largest pharmaceutical market in the Middle East and Africa, with sales of over $7 billion[3].

The countries are grouped in a joint procurement program responsible for issuing tenders. This Gulf Joint Procurement initiative applies to pharmaceuticals, devices, and medical supplies. For Life Sciences companies, it represents a market potential of a certain importance. Looking at KSA, tenders could be estimated at 40% of the healthcare sales. However, those countries have also shown volatility and complexity in the past.

Let’s look at the GCC organization and what are the different tender mechanisms for setting, improving, or fine tuning your company’s tendering process in the Middle East region.

Four hints about GCC tender mechanisms:

BEFORE ANYTHING, PLAN

On the Gulf Health Council’s website[4], it says the GCC seeks to achieve high quality, fair prices, timely delivery, and adequate after-sales services – among others. The main stakeholders within the organization are the countries Ministries of Health and the 19 government hospitals. To support

Figure 1 GCC Tender Calendar

its mission of providing high quality medicine to the right location, at the right time, and at a fair price, the GCC publishes a tender calendar (Figure 1, read from right to left).

In addition to knowing the exact timeline for each tender, the list of requested drugs, medical devices, etc. is available in distinct directories. The lists are comprehensive and are certain to have one of your company’s drug on it. More than 1,400 different (or SKUs) are listed for the pharmaceutical drugs in 2019. Together with the tender calendar, it is the first thing to be aware of in order to spread a workload and adjust bid responses.

INSIGHTS ON THE TENDER PROCESS

Before being able to submit the tender package, a life sciences company must follow the six-step process as outlined below (Figure 2). Interestingly, the first step prior to participating, is to buy the tender documents. Prices range between 5,000 SAR (1,200 EUR) for basic chemical tenders to 15,000 SAR (3,500 EUR) for vaccines or drugs tenders. Afterwards, your company must complete the application. Once the application is submitted, checks are performed in order to assess whether you are eligible to submit your tender package.

In this case, your company would need to register in the central registry and establish financial guarantees. Central registration defines a product that is “registered in two countries with reference laboratories, provided that one of them is Saudi Arabia (SFDA – Saudi Food and Drug Administration), where the products are marketed and centrally registered.”

 

Figure 2 GCC tender process

If you successfully pass this process, then your tender package is submitted. Based on the GCC general terms and conditions for the 2019 tenders, the analysis of the bids follows a strict and exclusive process. As an illustration and to quote the paper, “bids shall be made on the original letterhead paper extracted from the CD, along with original copy of the Cover Letter. Bids and Cover Letter shall bear the bidder’s official seal, and must be signed in either blue or red ink, but not black.”

This sets the tone for the remaining conditions and not being in compliance means you are excluded from the process. As a bidder, you must make sure all your documents are up-to-date, signed, and follow all GCC rules.

AWARD FRAMEWORK

The general principle guiding the GCC award process is the cheapest offer, which meets the tender conditions and specifications. Below are some characteristics to consider:

  • Quality is included as product samples and packaging checks are requested. Another important condition, is the product market authorization and registration. If no offer matches the full registration condition, the award committee could select multiple bids and the final drug selection would lie in the hands of the Member States and Participating Parties. This gives the tender authority some level of flexibility.
  • Tenders are following a single awardees rule. However, for complex drugs such as blood derivatives, it could mean the selection of multiple awardees. The reason being the current global shortage, the GCC wants to avoid lack of supply for such therapeutic area.
  • In the case of a price difference of 10% (before support rate) between a generic and originator brand, the award may go to both companies. In this situation, member states would be able to choose which drugs they would like to get. As an originator, you want to maximize the discount difference with a generic, but at maximum 10%. As a generic, you want to make sure the discount difference with the originator is just above 10%, so to be awarded the full tender volume.
  • The GCC favors national products by giving pricing preferences over foreign companies. As specified in the award framework, the price difference may range between 3-10%.

Similar to the tender package submission, the award framework applied by the GCC is strict, but transparent. In addition, even though focused on the cheapest offer, it seems that some qualitative necessary conditions respective of the tender (e.g., central registration and samples). However, you must know who your competitors are as local manufacturers are granted pricing preferences. This would affect your discount strategy.

AWARD AND COMPETITIVE DATA

Once awarded, the details are published on the GCC website around three weeks after the awarding decision. The information is published as a PDF, including item codes, company name, and the warehouse delivery price (WW). Not much is available directly from the authority, but additional tender data points, especially prices, are retrieved using a request for purchase price of tenders. This information is not free and prices depend on the tender product type, but at maximum 350 EUR.

From experience, life sciences usually lack monitoring of competitive data when it comes to tenders. Even though costly, this option is still considered an advantage for your company compared to other markets where limited, or no, competitive data is publicly available. You may benefit from it at least at the beginning when you’re not sure how your competitors are playing in terms of pricing and product positioning.

A one-time effort to access opportunities

Truly strict and exclusive, the tender mechanism depicted above is transparent. It may sound difficult to get into it at first, but once your company is aware of and is knowledgeable about it, this mechanism is cyclically each year. Therefore, you might become better and faster in accomplishing it, with additional business opportunities captured. Given the healthcare expenses and tender importance, is the game worth it? The answer is, yes.

[1] https://www.supplychaindigital.com/company/gulf-joint-procurement-programme-helps-standardise-medicine-supply-gcc#

[2] https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20181129-2

[3] https://www.gulf-times.com/story/603664/Pharma-sector-warns-Saudi-on-German-drug-curbs

[4] http://ghc.sa/en-us/Pages/gpintro.aspx

 

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