“Medicine is a science of uncertainty and an art of probability.” William Osler. 

Tendering within the pharmaceutical world can often be a complex procedure. It’s a competitive and structured procurement process in which offers are invited, submitted and evaluated to acquire products such as drugs, medical devices or vaccines. The process is based on predefined criteria, which may include price, product quality, country of production and overall value for money.

When discussing the role of negotiation in the tendering process, there are differing perspectives. Some may argue that negotiation begins post-award, but the World Health Organization says, "Negotiation refers to discussions aimed at reaching an agreement with potential suppliers.” [1]

Negotiation in tendering can therefore be categorized into two phases: pre-tender negotiation, which occurs before the awarding of a contract and is part of the evaluation process to select the best offer, and post-tender negotiation, which takes place after a tender is accepted in order to finalize or enhance the contract terms. In this article, we will focus on negotiation strategies that can increase the likelihood of a successful outcome during the pre-tendering phase, from a bidder's perspective.

The significance of tendering in healthcare

Tendering within the pharma world has become an increasingly critical component of the healthcare industry, accounting for 30% of the global revenue in the pharma market [2] and a substantial 70% of the MedTech sector [3]. In Europe, nearly 40% of drugs are purchased through tendering [4], and in many countries, particularly within the hospital channel, it covers virtually the entire spectrum of drug procurement.

The landscape of tenders can take many forms and is subject to different regulatory frameworks of countries and regions [5], making them complex processes for both the entities issuing tenders and the entities bidding on them. Demographic dynamics, economic growth and distribution of public bodies are some of the factors that contribute to these differences.

Tendering dynamics

Understanding how each country operates and what they prioritize is essential to crafting effective bid strategies. Whilst some countries focus on value [6], others concentrate solely on price [7]. Regardless of the weight assigned to it, and whether it is public contracting or private tenders, price is always a criterion in the tendering process, and deciding what is the right one is a big challenge for bidders. For example, if you bid too low in one country and the price is published, it may affect other markets.

Navigating the challenge of getting the right price requires a combination of market knowledge, competitive landscape, regulatory expertise, negotiation skills and the ability to balance price competitiveness with maintaining profitability.

The key to success

Early preparation can significantly enhance the chances of a successful tender outcome. The time between the announcement of a tender and the submission deadline is often limited, leaving little room for appropriate preparation. Being able to predict upcoming tenders by understanding the tendering cycle and the economic landscape of each country allows companies to shape their value proposition well in advance of the official tender release, giving them a competitive advantage. As with any negotiation, 90% of the success is determined by thorough preparation. Below are some suggested steps for pre-tender preparation.

Prospect

In a competitive market, identifying and capitalizing on relevant tenders and market insights is crucial.Traditionally, tender management processes have been manual, but the integration of AI technologies is increasingly being used to streamline and optimize these workflows. Leveraging AI can help organizations quickly identify, assess and act on the most relevant tenders, providing a significant competitive advantage by positioning the business as a proactive and agile market player.

Predict

Evaluating the risks associated with each tender can be time-consuming, but it is essential. A comprehensive risk assessment that considers factors such as supply chain complexities, regulatory challenges and market competition is crucial for avoiding costly pitfalls and ensuring that the bid is both viable and strategically sound.

Plan

Effective planning is a critical element in preparing a successful tender proposal. Much of the information needed for a tender can be gathered well in advance of its opening. Analyzing previous submissions to the same tender issuer can provide valuable insights into lessons learned, information typically requested and potential challenges and opportunities.

Internal alignment. Developing a successful tender proposal requires effective coordination across multiple departments, including manufacturing, demand planning, pricing, market access, marketing and legal teams. Ensuring that supply availability is aligned with procurement requirements is critical to avoid disruptions and meet contractual obligations.

Pricing. Setting the optimal bidding price for a pharma product is a complex process that involves navigating various market factors, such as fluctuations, regulatory constraints and diverse customer needs. Optimal pricing requires a detailed understanding of these elements and careful calculation to remain competitive while still ensuring profitability. This involves creating value-based pricing and differentiation that reflects the current market conditions and aligns with the financial goals of the company.

Positioning

In their article, ‘Positioning and negotiations: The case of pharmaceutical pricing’ Grepperud and Pedersen [8] describe positioning as a strategic game that occurs prior to negotiations, where each party engages in influential activities aimed at gathering support from key stakeholders to strengthen their bargaining position and achieve their desired outcome.

When executed early and appropriately, the practice of positioning can be highly effective in increasing the chances of a successful outcome in the tendering process. Once the tender is published, the opportunity for positioning is significantly diminished. Ideally, positioning should occur while the tender is still in the development stage. Engaging in positioning during this phase enables a party to potentially influence the design of the tender, thereby controlling negotiation variables in a way that may favor their product.

It is often impossible to engage directly with the payer or decision-maker to influence their decisions. In such cases, the focus shifts to engaging with key influencers. This highlights the importance of being proactive in shaping outcomes.

Nevertheless, it is important to consider that certain methods of influencing stakeholder decisions or engaging with key influencers may be effective or acceptable in one jurisdiction or for a specific product but might not be suitable or even legal in another country. Thus, careful consideration must be given to the legal and ethical frameworks governing each market.

Common pitfalls

Navigating the tendering process in pharma and medtech can be complex, with common pitfalls including ineffective pre-tender negotiations that may lead to missed opportunities for influencing tender design and requirements. Inadequate engagement with key stakeholders and poor negotiation tactics can result in misunderstandings or unfavorable contract terms. To address these challenges, bidders must ensure thorough preparation, comprehend regulatory constraints and apply strategic negotiation techniques suited to the unique needs and dynamics of the pharma and medtech sectors.

To download a PDF of this article please fill in the form below.

About the author

Jane Simon has over ten years of international experience in consulting and commercial roles. She brings a track record of managing and delivering complex projects across multiple sectors, helping clients to make strategy and investment decisions while identifying efficiency and development opportunities. Jane is fascinated by culture and communication and delivers negotiation solutions in English, Portuguese, French and Spanish.