1 Background
2 Objective
3 Methods
4 Results
4.1 Characteristics of Pharmaceutical Tendering
4.1.1 Developed Healthcare Systems
4.1.1.1 Reward Criteria
4.1.2 Pharmaceutical Tenders in Countries with Expanding Healthcare Coverage
Country | Tender regulation | Scope | Institutions involved | Legal basis |
---|---|---|---|---|
Algeria | Yes | Hospital market and military health needs | Central pharmacy of hospitals | PCH: price and quality (CE, ISO, FDA) Military: quality of product and investment in continuous training and prices |
China | Yes | All pharmaceuticals | Provincial tender authorities | NA |
Egypt | Yes | All pharmaceuticals in public sectors | All governmental sectors (e.g., MOH, university hospitals, educational institutes) | Financial threshold |
Lebanon | No | – | Military entities, MOH, hospitals | Financial threshold |
Malaysia | Yes | All pharmaceuticals | MOH | NA |
Pakistan | No | – | Public hospitals, army | Price |
Philippines | Yes | Vaccines | Private, Department of Health, and government hospitals | General Appropriations Act of current year |
Russian Federation | Yes | All pharmaceuticals | Hospitals, national tender agency, MOH | Financial threshold, government program |
South Africa | Yes | All pharmaceuticals in public sectors | National Ministry of Health | Any registered product can be submitted for tender |
Thailand | Yes | Pharmaceuticals and vaccines | GPO (for NHSO), DDC | NA |
Turkey | Yes | All pharmaceuticals but only 1–2% of total sales | Hospitals and pharmacies | NA |
Ukraine | Yes | Pharmaceutical (mostly hospital segment) and vaccines | MOH (for vaccines) and hospitals | For some medicines, government program |
UAE | Yes | Pharmaceuticals and vaccines | MOH, DHA, and Seha healthcare | NA |
Vietnam | Yes | Pharmaceuticals, vaccines, and medical devices | Hospital or service of health depending on the assigned list of products | NA |
Country | Criteria considered for winner | Criteria differences between single source (SS)/multi-source (MS) products | Criteria differences for patented (P)/off-patent pharmaceuticals (OPP) | MCDA or differentiated categories beside tender | Tender frequency | Tender duration | Upcoming changes |
---|---|---|---|---|---|---|---|
Algeria | Best price (price and quality and some investment and notoriety of suppliers) | SS: importance of the product for the patient as anesthesia, oncology, hematology, psychiatry, respiratory, diabetology, and cardiovascular | OPP: advantages for local products | No | Annual for some and every 3 years for PCH | 1–3 years | No changes |
China | Differentiated categories and lowest price | No | Yes (not further specified) | No | 2–3 years | Not fixed time | More frequent with internal reference price cut |
Egypt | Lowest price | No | No | In some sectors (e.g., air hospital) | Once per year but purchasing based on demand | 1 or 2 years; may extend longer | MCDA included in the new tender law |
Lebanon | Lowest price | No | No | No | Two to three times per year depending on need | Yearly | No changes |
Malaysia | Lowest price and locally manufactured products preferred | MS: Lowest price and locally manufactured products preferred | Where possible, OPP (Gx) are favored | No | Tender called upon products achieving at least US$250 million per hospital | 2 years | Increased procurement of Gx. They will be favored over patented products. Price negotiation is expected to intensify |
Pakistan | Lowest price | No | No | No | Variable | NA | – |
Philippines | Lowest price | No | No | No | Annual | 1 years | Evolving mechanisms for drug price reference index for government health facilities; potential Drug Price Board that will put price ceiling on drugs |
Russian Federation | Lowest price | No | No | No | Daily | 1 years | Stricter limitation to INN and price |
South Africa | Lowest price and ability to supply quantities | No | No | No | 2 years | 2 years | Online tender submission |
Thailand | Lowest price or price performance | MS: suppliers have to offer for e-bidding | No | Engineer model, IT | Mostly annual | 1 years | New CGD Procurement Act will be forced around June 2017 |
Turkey | Lowest price | No | No | No | – | – | – |
Ukraine | Lowest price | No | No | No | Many middle and small tenders during the year | 1 years | Implementation limited prices by IRP regulation |
UAE | Lowest price, but innovative molecules and some brands may be considered | SS: negotiation is possible MS: lowest price | P: negotiation is possible OPP: lowest price principle | Brand name and patient preference may be considered in specific tenders | MOH (GHC each year), DHA (every 3 years), Seha (every 2 years) | – | New molecules and innovative technologies have a great chance in tender winning |
Vietnam | Lowest price | No | No | Differentiated categories | Annual | 1 years | Expansion of centralized procured list, MCDA application, simple scoring |
4.1.2.1 Reward Criteria
4.1.2.2 Frequency of Calls for Tenders
4.2 Analysis of Impact of Tender Systems
4.2.1 Tendering Policies in Developed Healthcare Systems
Source | Geography | Benefit | Risk |
---|---|---|---|
[7] | EU Member States and EEA countries | Positive experiences with tendering in hospital settings Lower prices for the medicines Increased transparency relating to the use of public funds | Forecasting the necessary quantity of the products to be tendered is difficult High level of expertise and resources required for an effective tendering process |
[12] | The Netherlands, Germany | Appointing preferred providers through a tender process in combination with rebate policies led to significant cost savings Short-term benefits to health insurance were identified | Risk of monopsony formation across insurers Lack of evidence about the long-term implications of such policies on overall economic and health outcomes for the patients |
The Netherlands, Germany | Significant reduction in prices | Markets are very challenging for manufacturers: (1) Prices were reduced to marginal cost; (2) Price reductions and the increased implementation of rebate contracts provoked changes in business models and overall market structure; (3) Several manufacturers have diversified their portfolio to stay on the market | |
[31] | Germany | Preferred supplier contracts are a powerful strategic instrument for Gx manufacturers | Manufacturers of branded products appear to be more vulnerable to tendering |
[24] | New Zealand | Achieved major savings and cost control Among lowest pharmaceutical prices worldwide | Anti-competitive sole-supply monopoly for selected supplier Grouping of patented medicines with Gx within therapeutic subgroups eroded intellectual property Restricted access to effective medicines owing to the strong financial imperatives, increased occurrence of drug supply issues Compromised quality of care as a result of extensive substitution and switching policies Compromised quality of the products because of lowest-price prioritization |
[25] | New Zealand | After 3 years, the annual savings were NZ$7.84 million to NZ$13.45 million (2003–2004 to 2005–2006) Growth in in-patient hospital pharmaceutical expenditure slowed in the first year | Growth in in-patient hospital pharmaceutical expenditure was higher than the growth in total hospital pharmaceutical expenditure Availability problems with new contract items (‘out-of-stocks’; products perceived as inferior) |
[26] | Serbia | Tender achieved 4.6%= and 17.2% cost savings vs. the minimal tender price and the free-market price | Drug tender was resource consuming, laborious, and risky Did not provide a fair balance between domestic and foreign manufacturers |
[8] | EU | May lead to short-term price reductions | Negative impact on patient healthcare quality, government budgets, Gx industry sustainability, and the capacity to continue to supply affordable prices |
[32] | Europe | Gx pricing policies supported effect | Offset of savings by prescribing of medicines with a similar therapeutic indication that did not fall under the tendering procedure (‘re-allocation of demand’) Short-term absences of some medicines because of logistic shortages in Germany Reduction in pharmaceutical investments (negative impact on employment and income taxes) |
[6] | Europe | Potential for savings | Variety of shortcomings |
[33] | Europe | For Gx, internal or external reference pricing, tendering as well as price capping may affect drug shortages | |
[27] | Canada | May lead to major savings for off-patent drugs | Reduced redundancy abetted shortages Less patent litigation by Gx companies delayed availability of lower cost Gx Less manufacturing of Gx drugs in Canada (closure of some Gx manufacturing Less competition in Gx markets in Canada Less pharmacy service by Gx suppliers Lower profitability and closure of pharmacies |
[30] | Italy | The higher the competition, the higher was the price reduction (about 10% per additional competitor) | |
[28] | Cyprus | 60.6% value reduction and 39.39% mean price reduction were achieved with tendering systems Gx saw the greatest reduction both in value (94.8%) and in mean price (62.97%) | |
Cyprus | Statistically significant long-term price reduction, superior to reduction reached with official external price referencing scheme | ||
[13] | Belgium, Denmark, The Netherlands | Tendering can contribute to cost containment for off-patent medicines | Possibly leading to availability limitations (drug shortages) |
[29] | Europe (Germany, The Netherlands) | Tendering works in the short term to reduce prices for off-patent pharmaceuticals in the European in-patient and ambulant sector | Long-term impact and low-price sustainability have not yet been analyzed Potential risk: reduced competition owing to market withdrawal of manufacturers |
4.2.2 Tender Policies in Countries with Expanding Healthcare Coverage
Source | Geography | Benefit | Risk |
---|---|---|---|
[38] | Middle- and low-income countries | Originator and generic prices reduced by 42.4 and 35% Reduced quality uncertainty (if quality standards imposed) Even manufacturers of originators displayed a comparably high price flexibility | |
[37] | Jordan | Joint procurement in Jordan, which resulted in estimated savings of 2.4–8.9% in the first year | |
[34] | Chile | Reduced corruption and less supplier collusion Greater aggregation of purchases lead to 2.8% lower prices (volume effect) Electronic tendering overall lead to a greater than 8% reduction in prices | |
[36] | Brazil | The requirement for bioequivalence and/or bioavailability tests increased costs by more than 100% for the basic pharmaceutical services component | |
[35] | China, Ghana, Indonesia, Mexico | Formularies, bulk procurement, standard treatment guidelines, and separation of prescribing and dispensing are broadly applied Increased transparency through publication of tender agreements and procurement prices | Few strategies targeting quality improvement were identified Lack of performance monitoring strategies was observed in all schemes |
[54] | China, Guangdong province | High competition level and more winning experiences induced more aggressive bidding behavior of manufacturers | Bidders in low competition were less sensitive to other potential bidders and the experience of past wins |
5 Discussion and Recommendations
5.1 Process and Prerequisites
5.2 Using Multiple Criteria for the Tender Decision
Criteria (requirements) | Importance factora | Weight W (%)a | Product A | Product B | |||
---|---|---|---|---|---|---|---|
Rating C (0–2)b | Score (W × C) | Rating C (0–2)b | Score (W × C) | ||||
Cost | Acquisition cost | 12 | 24 | ||||
Additional cost (e.g., transport, import duties) | 3 | 6 | |||||
Outcomes | Effectiveness | 6 | 12 | ||||
Patient-reported outcomes | 2 | 4 | |||||
Other benefits | Quality | 5 | 10 | ||||
User preference | 2 | 4 | |||||
Application form | 3 | 6 | |||||
Support service | 3 | 6 | |||||
Broader societal benefit | Local investment | 4 | 8 | ||||
Distribution and accessibility | 5 | 10 | |||||
Risk management | 5 | 10 | |||||
50 | 100 | Total score A | Total score B |
Criteria (requirements) | Importance factora | Weighta W (%) | Product A | Product B | |||
---|---|---|---|---|---|---|---|
Rating C (0–4)b | Score (W × C) | Rating C (0–4)b | Score (W × C) | ||||
Product | Equivalence with reference | 10 | 12 | ||||
Pharmaceutical technology | 2 | 2 | |||||
Manufacturer | Quality assurance | 10 | 12 | ||||
Supply track record | 8 | 9 | |||||
Local investment | 5 | 6 | |||||
Service | Pharmacovigilance | 8 | 9 | ||||
Product-related value-added services | 2 | 2 | |||||
Value assessment | Pharmaceutical acquisition cost | 35 | 41 | ||||
Real-world patient outcomes and cost | 5 | 6 | |||||
85 | 100 | Total score A | Total score B |
Recommendation | Why | |
---|---|---|
Tender preparation
| ||
Tender is part of an integrated strategy | Take a comprehensive approach to controlling cost and volume. Use a mix of policies aimed at the same objectives (e.g., reimbursement policies, prescription control policies, substitution policies, claw back, pay backs, rebates, and managed risk agreements) | A wholistic approach eliminates loopholes that may counter the goals of cost-control policies such as shifting prescriptions to non-tendered products |
Legal framework | National legislation and regulations provide the necessary legal foundation for procurement procedures, contract enforcement, financial authority, staff accountability, and other critical aspects of procurement of pharmaceuticals | Relevant legal and financial authorities recognize and apply the special requirements for pharmaceutical procurement |
Capacity building | Prudent tender practices require well-trained and capable personnel. Capabilities may be built through national or international qualification programs, apprenticeships, or exchange programs with leading supply agencies in other countries, or through support from experienced external technical advisers | Better educated personnel will help to avoid simplistic and badly organized tender practices as well as reduce ambiguousness and the risk for corruption |
Reasonable tender size | Pooling of purchasing needs across organizations and over the time horizon to achieve higher tender volumes | Larger procurement volumes increase suppliers’ interest in bidding and thus, competition |
Reasonable time horizon | The tender duration should be at least 1 years | Stability of supply processes, improved stock management, consistent therapy |
Tender conduct, evaluation and contract award
| ||
Clear specifications and quality standards | Pre-qualification: the supplier capacity, manufacturing standard, and reputation are evaluated before bids are solicited for specific products. Post-qualification: verify the adherence of manufacturer and products to the bid specifications | Pre- and post-qualification procedures help to eliminate substandard suppliers and confirm that the goods are received as defined in the specifications |
Total cost | Consider total cost rather than price only. There may be hidden cost (consumables, side effects, monitoring, distribution) | Fair comparison of the total expenditure related to each offer |
Multiple winners | Award contracts to the two to three best scoring suppliers | Avoid shortages and monopolies |
Tender follow-up
| ||
Purchasing and inventory control | Continuous inventory control processes are established and will tightly manage the stock and restocking | Ensures that products are available in the right amounts at all points of usage throughout the entire contract duration |
Monitoring | Tenders should be monitored for performance vs. all requirements and non-compliance should be penalized | Increased supplier responsibility, learning for future tenders |