Back in 2016, HighPoint’s tendering benchmark study identified joint procurement (or supra-national tenders) as a potential uncertainty in the procurement methodology. At that time, companies were already seeing the risk of countries teaming up to increase purchasing power. However, until recently, this uncertainty was only materializing in Gulf region countries. With a recent development in Europe’s Nordic region, this situation may soon change. A recent initiative there is worth watching.
What exactly is joint procurement?
Simply put, joint procurement is the willingness of two or more countries to enter into an agreement that enables collective negotiation for the procurement of products or services, such as pharmaceuticals and/or medical devices from life sciences companies.
Recent joint procurement initiative in Europe
In Europe, in September 2018, Norway and Denmark signed a letter of intent, which describes an initiative to avoid or fight against recurrent drug shortages, and, of course, to increase the two countries’ purchasing power.
It’s interesting to note that the initiative originates in the most price-aggressive countries. Norway and Denmark each already have fairly high purchasing power within their two national authorities. From that perspective, it’s not a surprise to hear the first signal of joint procurement originating from the north of Europe. To quote a famous TV show, “Winter is coming.”
With this initiative underway, joint procurement has never been so concrete in Europe and may materialize throughout 2019-20. Furthermore, related tender documents have been published on the AMGROS tendering portal, inviting life sciences companies to comment on them.
The initial scope of this joint procurement seems to be limited to a few drugs in the form of a framework agreement, evaluating bidders on the most economically advantageous tender (MEAT) that weights prices and quality scoring. Interestingly, the quality aspect would be fairly new within the Nordic tenders. Eventually, this awarding framework should hopefully guarantee both sustainability and savings for the system.
What does this initiative mean for manufacturers?
Even though this joint procurement initiative is currently in its early stage, the chances to see it materialize in the coming months are high. It will be interesting to evaluate the outcome of this first foray.
Undeniably, such innovative procurement processes are increasing competition and pressure on life sciences manufacturers, which demands an organization capable of succeeding in tenders. A greater concern is that it may strongly impact the sustainability of the market.
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For more insight into tendering and joint procurement trends, contact Ruven Remo Eul.
Co-authored by Yann Chappuis, Life Sciences Consultant