Introduction
The characteristics of tendering differ tremendously between geographies. Tendering processes can be strict, with no contact allowed between customers and suppliers from the tender publication to the final award, or flexible, with negotiation opportunities at multiple timepoints.2 The key difference between tendering and contracting is the first step of tendering: the publication of the tender. No publication of a tender means contracting.
A short internal survey within Johnson & Johnson (J&J), 20 years ago, found that while tendering was very common in the medical devices and diagnostics business of the corporation, pharmaceutical tendering was rare. Back then it was chiefly restricted to one product, erythropoietin (epoetin), and only created problems in markets such as Bulgaria, Denmark, France, Hungary, Italy, Poland, Portugal, Romania, and the United Kingdom. Note that epoetin was at that time the most important product on the hospital budget, with stiff competition between Roche (epoetin beta, NeoRecormon®) and J&J (epoetin alfa, Eprex®, Erypo®).
Another project involved interviews with twenty ‘tender champions’ within J&J. This formed a solid basis for understanding the issues that are related to tendering.
Workshops with tendering and pricing specialists, active participation in development of tender strategies for strategic customers, and base research into price competition offered further insights. All these elements were combined in a ‘tendering and contracting’ excellence programme that was rolled out within J&J in the first years of this millennium.
When I became a consultant in late 2010, I continued working on tendering and contracting strategies, but this time for other corporations. My ever-evolving tendering and contracting excellence programme has now reached 15 middle- to large-sized pharmaceutical companies, and well over 700 professionals involved in tendering from Asia, Europe, Middle-East, and Latin-America. Working with different companies in multiple geographies lead to in depth insights in pharmaceutical tendering. This white paper describes some of the learnings from these observations.
Tendering is an auction process in which customers issue tenders for contracts and suppliers bid against each other to win that contract. Prices in such markets, which are commonly referred to as bidding markets, are typically individually determined for each contract, and the buyer (i.e. the tendering authority) can compare offers and negotiate with the different competing bidders.
