Insight Type: Whitepapers

Evolution of Pharmaceutical Procurement: Embracing Modern Tendering Practices

Since the 1980s, tendering has been used in healthcare procurement. By the end of the 20th century, organizations like the WHO and World Bank had endorsed tendering as the preferred procurement process for pharmaceutical products.

In 2014, the European Union adopted three public procurement directives to modernize public procurement rules and enable governments to manage the operational requirements of efficient procurement.

More recently, in 2022, the European Commission (EC) published a study on the Best Practices in the Public Procurement of Medicines (PPM). This study mapped and analysed current PPM practices across 32 European countries and included a set of best practices for optimising PPM in Europe¹.

The EC analysis confirmed that the importance and characteristics of tendering differ significantly between geographies. Tendering processes can range from very strict, where no contact is allowed between customers and suppliers from the tender publication to the final award, to very flexible, with negotiation opportunities at multiple points.

Between these extremes, there are numerous variations. For instance, some processes allow limited communication for clarifications but no negotiations on terms or prices until the final award. Others might start strictly but permit negotiations once a shortlist of suppliers is made. In some cases, the process includes multiple rounds of negotiations at predefined stages, allowing for adjustments based on feedback.

Additionally, flexibility might be granted based on the type of product or service being tendered, such as high-value or complex items having more negotiation points. In some countries, authorities require tendering for all hospital products, while in others, it is only necessary for specific items.

A: The role of patientcentricity in HTA and the upcoming JCA framework

HTA is a multidisciplinary process that evaluates the medical, economic, social, and ethical properties of health technologies and interventions to inform decision making about their adoption, funding, and use within healthcare settings. This includes pharmaceuticals, medical devices, and procedures.

It is a systematic and transparent process that aims to bridge the gap between research and policy-making. The process provides evidence-based assessments of the value and impact of health technologies on patient outcomes, healthcare costs, and society as a whole.

Currently, there is a disparity in patient involvement in HTAs across Europe, with some countries having transparent frameworks and others lacking any information. To address this the JCA framework, a new process for HTAs, will be implemented in 2025. This aims to standardise patient and patient organisation involvement in assessing the clinical effectiveness and added therapeutic value of new medicines in the EU.

Executive summary

The tendering process, where suppliers bid amongst themselves to win contracts, is becoming increasingly important in pharmaceutical procurement. It’s estimated to make up around 25% of total global pharmaceutical turnover, and is market and product dependent. The biggest impact of tendering is price erosion.

While tendering is an efficient tool for cost reduction, it can lead to supply issues and shortages, as well as price increases where competitors are driven out of the market. Payers splitting contracts can reduce the risk of shortages, and companies can use product differentiation to maintain their position in the market. However, aggressive bidding still continues and remains a risk to the industry.