DECONSTRUCTING PHARMACEUTICAL TENDERING: UNDERSTANDING THE UNDERLYING ELEMENTS

Latsia, Cyprus – Tendering is an aggressive pricing and reimbursement tool with proven potency in the pharmaceutical sector.  The pharmaceutical sector is exhibiting high annual sales-increase rates; therefore, the need for optimized, potent, and sustainable pricing and reimbursement tools is imperative.  The wider adoption of tendering has been hindered by several obstacles and tendering is perceived to be a short-term policy. Consequently, only scarce data exist with regards to its dynamics, especially regarding the impact of several determinants of the output that is the effect of tendering on the price.

In a recently published article, “Price Determinants of the Tendering Process for Pharmaceuticals in the Cyprus Market,” published in Value in Health Regional Issues, Volume 7 (September/October 2015), researchers from the Health Care Management Program, Open University of Cyprus, concluded that generic status, tendering by alternative, outpatient products, high sales volume, and high wholesale prices, are significantly correlated to greater price reduction. In addition, high sales value is negatively correlated, while innovation status of the products does not appear to exert any impact.

Panagiotis Petrou, MBA, PhD(c) and Michael A. Talias used a stratified sample of 178 products, which were procured by tendering, in the Cyprus public health care sector, with corresponding sales of 49 million Euros. The total sample represents around half of the annual Public Pharmaceutical Expenditure in Cyprus, and will enable us to assess the impact of seven price determinants (tender type, sales volume, sales value, wholesale prices, patent status, hospital/outpatient status, innovation level) on the tender’s outcome.

The potency of tendering is enhanced by some variables; nevertheless, it is insensitive to the innovation status. By capitalizing on the findings, health agencies can further augment the impact of tendering, thus reducing waste of resources in the form of utility foregone.

Lead author, Panagiotis Petrou, states, “It is crucial to reach a stand-off between efficient and potent pricing and reimbursement tools, and dynamic and static efficiency of the pharmaceutical industry. This requires a deep understanding of the dynamics of the pricing and reimbursement process, and we are confident that we managed to strip down tendering to its primary elements. We can now set off to explore adjuvant policies to address gaps highlighted by our study.”

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