Tender management is becoming increasingly important these days. Twenty five percent (25%) of the pharmaceutical market is now considered to be traded through some form of tender, and this percentage is expected to grow even further. The prevalence of tendering is nowadays expanding from generic to specialized drugs, forcing even specialized manufacturers to become participants in tender.
Tenders are a specific form of centralized procurement. It’s a process where government or any level of health authorities (referred to as the issuing bodies) are enforcing competition for a product or set of products. The percentage of tender in the pharmaceutical market is increasing because the process offers several benefits for the issuing bodies:
The obvious result of the tender process is a reduction of the price of the drug. In fact, most of the tenders still have price as the sole award criteria. In an effort to limit market share erosion, life sciences companies will reduce prices dramatically to win the tender.
Accessibility of innovative drugs is a second benefit. By encompassing specialized drugs in the tendering process, payers increase not only the affordability of drugs, but also their accessibility. This is achieved through supply commitment by the winning companies. Often associated with the offer to the tender, fines and penalties are imposed to ensure that manufacturers will respect their commitment. The drug supply is thus more guaranteed for the payer and therefore the patients.
Tenders also create an artificial competitive environment which is beneficial for the issuing bodies in many ways. The price factor is obvious, but in an effort to win the tender, participants will also compete on other aspects of the contract. Services may be a strong differentiator, as well as quality or supply. With the tender landscape gaining in maturity more and more, tenders have multiple criterion which force companies to compete on multiple aspects.
Finally, tenders are increasing compliance and transparency. Tenders are made public and the process is detailed. This aspect forces manufacturers to stick to their procedure. Compliance to the process is mandatory to be eligible for and ultimately win the tender. Linked to the process, also, in some countries, is the fact that the winning offer is made public. All the conditions may then be known by the public which creates an extremely transparent environment.
Because tenders are becoming so prevalent, it has become key for companies to master the tendering process and make it sustainable in the long run.
Insights Through Practical Experience and Benchmarks from the Industry
The ability to strategically and operationally address tendering in global markets continues to be of critical importance given increasing competitive factors in the industry. We surveyed the life science industry on their tendering practices, and these are the results!