Recently, a couple of us from the Second Opinion team sat down with Nico Bacharidis, Chief Commercial Officer at Cube RM, to explore the field of tendering and how this can be accelerated by technology/AI to improve pricing and visibility for the healthcare market.
Below are the key takeaways you need to know about healthcare tenders, but make sure you head over to our website to listen to the full podcast episode for more.
Tenders – A Competitive Process
To put it simply, tendering is a procurement procedure to purchase medications using a competitive “bidding” process for a particular contract, typically used by large, institutional buyers such as public health or healthcare organisations.
Tenders exist in many forms, but the main types are open, restricted and negotiated tenders:
- Open tenders: The most common type of tender that is open for all interested suppliers and are usually highly competitive.
- Restricted tenders: Restricted to pre-registered or pre-qualified suppliers and are commonly used for complex contracts.
- Negotiated tenders: Involves the buyer approaching a single supplier to acquire the product, where the two parties engage exclusively to negotiate the contract terms. These types of tenders are typically used for highly specialised contracts with a high set price.
Tenders can also vary by duration and may be awarded to one or multiple bidders, depending on the nature of the contract/tender. A specific set of criteria are used to determine which bidder to award the contract to and these can vary depending on the specific context and country’s regulations. However, some common award criteria used in healthcare tenders include:
- Technical Suitability
- Financial Stability
- Quality of Product
- Capacity and Resources
- Sustainability and Environmental Impact
Alongside these criteria, the MEAT (Most Economically Advantageous Tender) principle is a method of assessment that aids the selection process. Although it is not used universally across the globe, MEAT tenders focus on value for money and consider quality, technical competence and cost-effectiveness to ensure better patient outcomes and efficient healthcare delivery.
Importance of Tenders in Healthcare
According to an IQVIA report, ~40% of drug purchases in Europe are acquired through tenders and more than half of the pharma companies surveyed by IQVIA indicated that more than 80% of their business comes from tendering. From these figures alone, is it clear that tenders are becoming increasingly common in the healthcare space and are here to stay.
The challenges associated with ageing populations, chronic diseases and skyrocketing healthcare costs mean that additional pressure is being placed on the sustainability of healthcare systems. Tenders could be a feasible and long-term strategy to relieve some of these pressures by reducing the costs of medications for patients around the world.
If you consider tenders as channels, to optimally manage a channel, contribution from different departments is essential. With this lens, it makes sense that tenders should touch the entire value chain in pharma – for example, input from medical and marketing are instrumental in building the value proposition along with the involvement of legal to finalise the offer.
Among pharma companies, there seems to be a growing understanding that cross-functional collaboration to manage and execute these tenders is key, but a tender lead should be established to coordinate these efforts. Make sure you tune into the podcast to hear Nico talk about what constitutes the ‘perfect’ approach to tenders!
Key Challenges and how AI can Help
According to a survey conducted by Cube RM in 2022, the top 3 challenges that healthcare companies face when it comes to tendering include:
• Tender discovery and planning
• Data and intelligence
• Price finding
There is a clear need to improve these areas and make the end-to-end tender process more sustainable for healthcare organisations. Cube RM’s AI-driven platform can address these challenges.
With Cube RM’s platform, healthcare organisations can streamline and automate the tendering process to improve tender discovery and visibility, gather market intelligence and generate predictive insights. These enhanced capabilities allow for data-driven decision-making, helping organisations optimise their procurement outcomes and ultimately deliver the best service for their patients.
Key Trends and Future Outlook
As the tendering field expands, several key trends have emerged and are predicted to rise:
- Sustainable criteria: The use of more sustainable criteria is being observed in some markets, but not all. It is important to note that award criteria are more country-driven than portfolio-driven, which may be the reason for this slow uptake.
- Cross-national tenders: Countries are partnering to increase their buying and negotiating power when bidding for tenders.
- Geographical patterns: The use of tenders appears to be more advanced in Northwest Europe compared to Southeast Europe where they are less advanced and have limited experience. Likewise, MEAT tenders are more commonplace in Northwest Europe compared to Southeast Europe, where tenders are more price-focussed.
Nevertheless, when carefully managed, tenders serve as an essential tool for healthcare organisations to make informed decisions and achieve efficient and effective service delivery. Future trends in healthcare tendering are expected to revolve around increased digitalisation and technology adoption to streamline processes and enhance transparency for all stakeholders involved.