The Vicious Circle Of Pharmaceutical Tendering

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.