Transcript Document

Breakout session
Building a winning commercial
tender organization
Life Science Strategy Forum
Boston, October 26
Joshua Goodman
Boston office
One Canal Park
Cambridge, MA 02141, USA
Tel. +1 617 231 4598
[email protected]
www.simon-kucher.com
What this session is about
Building a winning commercial tender organization:
Provide background on EU tender market and key trends
Developing the right organizational framework for tendering
Ensuring auditable strategy and execution tender processes
Building tender capabilities across headquarters and affiliates
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
2
Tenders have become a key lever in the context of
healthcare cost containment
“Lower budgets for
providers will mean
lower overall
spending for me.”
“In order to reduce
my costs I need to
buy cheaper.”
“If I don't cut down
my prices significantly I will be out of
the market.”
Healthcare procurement trends
Constrained
budgets
Payers
 Procurement is in primary focus of
provider cost reduction
 Pooled purchasing through tenders/
central procurement
Pressure
to cut costs
 Complex buying centers, incl.
professional purchasers
 Standardized customer demands
Providers
 Increasing price transparency and
referencing
Pressure to
cut prices
Suppliers
 Fewer but bigger transactions with
high downside risks
 Shifting power to the customer
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
3
Public tenders are just one specific form of procurement
Deal types
Public tenders
Big deals
Contracting
 Group of private chains (e.g.
hospitals, pharmacies,
wholesalers)
 Single hospitals
 Process designed
individually by centralized
procurement departments
(tender-like framework
agreements)
 Direct procurement
negotiating with suppliers
§
Issuing
body
 Public hospitals
 Regional/national authority
 Public insurance funds
Deal
characteristics
 Formal/structured process
following national and EU
procurement law
 Transparent purchasing
criteria with limited price
negotiations
 National, regional or local
level
Focus
 Purchasing criteria not
transparent with rounds of
price negotiations
 Pharmacies
 Wholesalers
 Purchasing/listing criteria
usually not transparent
 Level of commitment to
volumes varies
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
4
From a healthcare authority perspective, tenders offer
several benefits
Cost containment
Market management
Quality of treatment
 Reduce the cost of
drugs/devices as part of
healthcare cost-containment
measures
 Ensure competitive market
dynamics
 Ensure high quality levels
in patient treatment
 Maximize compliance and
transparency of healthcare
product procurement
 Minimize geographical
differences in patient
treatment
 Use cost reductions to treat
all patients in need and to
be able to afford innovative
drugs/devices
 Manage a stable supply
of drugs
Source: Simon-Kucher & Partners Primary Research 2014
Life Sciences Strategy Forum_ Building a winning commercial tender organization
5
Despite similarities in overall process, tender management
is often complex, due to market-specific variations
Selection of variations
Tender scope
Tender duration
Tender weighting
 National
 3-year contract
 Price driven
 Regional
 2-year contract
 Price-value driven
 Local
 1-year contract
 Service driven
 etc.
 etc.
 etc.
Tendering authority
Tender terms
Tender stakeholder
 Health authority
 One lot, one supplier
 Medical stakeholders
 Hospitals
 By active substance*,
product class,
indication
 Administrative
stakeholders
 Sick funds
 etc.
 etc.
 etc.
Source: Simon-Kucher & Partners *w/ or w/o considering different modes of administrations
Life Sciences Strategy Forum_ Building a winning commercial tender organization
6
Public tendering for drugs is prevalent across countries
and categories but with different focus areas
Country
Germany
Italy
Netherlands
Norway
UK
And…
Tender focus
Frequency
Criteria
Ambulatory care
 Mostly generics, biosimilars, some branded
 Sick funds tender for >90 molecules
 Tenders can be regionalized
 Annually or every 2 years
 Lowest price
 Product portfolio
 Supply
Hospital care
 Regional/Area Vasta negotiations/tenders
 Hospital negotiations
 Annually or every 2 years
 Lowest price
 Highest efficacy/quality
Ambulatory care
 Currently 33 molecules
 Varies by insurer
 Bi-annually/annually,
extension possible
 Lowest price
Hospital care
 Pharmaceuticals
 Outlined in pandemic plans
 Annually
 Lowest price
 Best economic offer
Hospital care
 Vaccines
 Communicable diseases and pandemics
 Determined by tendering
strategy
 Most economically advantageous
tender
Austria
Belgium
Denmark
Finland
France
Ireland
Portugal
Spain
Sweden
Switzerland
Source: Simon-Kucher & Partners; Kanavos/Seeley/Vandoros (2009): Tender systems for outpatient pharmaceuticals in the European Union: Evidence from the Netherlands, Germany and Belgium; London
School of Economics
Life Sciences Strategy Forum_ Building a winning commercial tender organization
7
Common commercial pitfalls in tender management
Greed
 Lack of tender prioritization
 Fighting for every tender to win market share
 Aggressively attacking competitor-owned tenders
Lateness
 Ramping up activities only after the request for a tender is on the table
 Lack of systematic pre-selling to all relevant stakeholders
 Missed opportunities to influence customer requirements/specifications
Activism
 Information overload vs. targeted value messaging for stakeholders
 Opportunistic pricing without considering second-order effects
 Offering the "latest and greatest", not what customers are asking for
Forgetfulness
 Lack of customer knowledge and pricing intelligence
 No systematic monitoring of outcomes
 Insufficient learning from past successes and mistakes
Inefficiency
 Insufficient and unsystematic internal processes
 Too centralized without local know-how or too local without global view
 Poorly established escalation rules to prioritize tenders for management focus
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
8
Opportunistically approaching tenders can have very
negative business implications
Simon Kucher project example
Tender impact on a life science company in Spain
Development index
Volume
index
120
110
Revenue
index
100
Short-term tender impact
 Significant volume growth
 Sharp price drop
 Slight drop in revenues
90
80
Time
 Large deal sizes; small number of customers
 Long sales cycles; infrequent contract renewals
 Tender specifications vary by hospital
Price
index
Long-term tender impact
 Significant drop in
profitability
 Overall market price
erosion
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
9
To manage this complexity, a winning tender organization
excels in three distinct but interdependent areas
Tender set-up
Building the right
internal tender
infrastructure
Tender strategy
Tender prioritization
and market tender
strategies
Tender
excellence
Tender execution
Successful
management of
specific tenders
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
10
Key takeaways

The "good old days" of selling to hospitals through strong clinical relations are history

The prevalence of different forms of tendering is high across Europe – and increasing

Key characteristics of big deals:

‒
Winning or losing with a substantial business impact
‒
Formal, customer-driven process and full transparency on the customer side
‒
Various stakeholder groups involved on the customer side
‒
Limited windows of opportunity to influence outcomes
‒
Clearly specified demands and objective award procedure (in some cases only price)
‒
Often leading to framework agreements without binding volume commitments
Getting these deals right is essential for future commercial success!
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
11
Tender set-up
To manage this complexity, winning tender organization
excels in three distinct but interdependent areas
Tender set-up
Building the right
internal tender
infrastructure
Tender strategy
Tender prioritization
and market tender
strategies
Tender
excellence
Tender execution
Successful
management of
specific tenders
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
12
Tender set-up
Building a winning tender organization requires
consideration of 5 key design principles
1
Make or buy
Decision whether to develop tender capabilities in-house or
to partner with an external company
2
Degree of
centralizations
Agreement on degree of centralization for
tender decision-making and ownership
3
Formalized
processes
A clear formalized tender process defining activities, roles
and responsibilities
4
Expertise
Necessary expertise and skills to execute the tender
management process
5
Easy to
use support tools
Easy to use tender tools implemented to support key
activities throughout tender management processes
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
14
Tender set-up
2 Agree on degree of centralization and tender office
position for tender decision-making and ownership
Degree of centralization principles
Centralized
Center-led
Tender organizational position
Option 1: Tender office on a country level only
HQ
Marketing
Indirect
markets
HQ tender department
support and final
decision-making
responsibility
Centersupported
HQ tender department
support with veto rights
but no final decisionmaking responsibility
Autonomous
country led
Country
…
Tender office
Option 2: Tender office split
HQ
Marketing
Tender
Office
…
Country
Tender support
Option 3: Tender office as central
Direct
markets
HQ
HQ tender department
with support but no
final decision-making
responsibility
Ad hoc tender support
between HQ tender
office and countries
Marketing
…
Tender
Office
Country
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
15
Tender set-up
3 A clear formalized tender process defining activities,
roles and responsibilities
Selection
Different instruments for documentation observed
Process map
Activity checklist
Definitions
 Training sessions conducted
with all stakeholders
 Knowledge and expertise
fostered
Handbook/guidelines
One master document
 Updates communicated in
timely matter
Institutionalizes knowledge
Reduced dependency on
employees
Common understanding
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
16
Tender set-up
4 Sufficient capabilities and skills to execute
the tender management process
Key tender stakeholders
Local
Central
 Critical positions in the tender process are
the central and local tender coordinators
Central tender
coordinator
Management
 Both require specific capabilities and skillset
to ensure successful tender management
Management
Central tender office
Local tender office
Marketing
…
Sales
Local tender
coordinator
…
Central coordinator: Broad market
understanding and strong intercompetency skills to coordinate across
countries
Local coordinator: Key market insights
with strong quantitative and project
management skills
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
17
Tender set-up
5 Easy to use tender tools to support key activities
throughout tender processes
Project example
Selection of best practice support tools
Preparation
Tender
strategy
process
Tender market factbook
 Gain overview of overall
market and its specificities
Preparation
Tender
execution
specific
process
Tender calendar
 Ease overview of
upcoming tenders and
activities
Strategy
Market simulation tool
 Estimate and forecast
volumes and prices across
tenders
Execution
Tender simulation tool
 Simulate tender-specific
prices and determine strategy
for bid
Monitoring
Tender database
 Track all tender outcomes
to enable meaningful analysis
Kommune
Aabenraa
Aalborg
Aarhus
Ærø
Albertslund
Allerød
Assens
Tender approach
Stand alone
Please choose
Stand alone
Stand alone
Stand alone
Stand alone
Cluster
Cluster
Aabenraa
Aalborg modellen
Aarhus
Ærø
Albertslund
Allerød
Fællesindkøb Fyn
Ballerup
Billund
Bornholm
Brøndby
Brønderslev
Dragør
Egedal
Esbjerg
Faaborg-Midtfyn
Stand alone
Cluster
Stand alone
Cluster
Please choose
Please choose
Cluster
Cluster
Cluster
Ballerup
Sydjysk kommuneindkøb
Bornholm
Vestegnens Indkøbsforum
Aalborg modellen
Dragør
Ind.fællesskabet Nordsjælland
12- byerne
Fællesindkøb Fyn
Fanø
Please choose
??
Favrskov
Faxe
Fredensborg
Fredericia
Frederiksberg
Frederikshavn
Frederikssund
Furesø
Gentofte
Gladsaxe
Glostrup
Greve
Cluster
Cluster
Cluster
Cluster
Cluster
Stand alone
Cluster
Cluster
Cluster
Cluster
Cluster
Cluster
Jysk Fællesindkøb
Fællesudbud Sjælland (tidl K17)
Ind.fællesskabet Nordsjælland
12- byerne
Spar 5
Frederikshavn
Ind.fællesskabet Nordsjælland
Ind.fællesskabet Nordsjælland
Spar 5
Spar 5
Vestegnens Indkøbsforum
Fællesudbud Sjælland (tidl K17)
Tender Start Tender End Extension
Date start
Date end
Extension
01/01/2012 31/12/2014 1 x 12 months
01/03/2009 28/02/2010 2 x 12 months
01/02/2009 01/02/2012 1 x 12 months
Please choose
01/08/2009 31/07/2011 2 x 12 months
01/07/2008 30/06/2011 2 x 12 months
01/03/2012 28/02/2014 2 x 12 months
Tender end MaxExpected expiry Actual expiry
Date max
Date exp
Date actual
31/12/2015
31/12/2015
28/02/2012
28/02/2012
01/02/2012
01/02/2012
Up for renewal Decision date
Renewal
Date
Yes
15/11/2011
Please choose
Please choose
Please choose
Please choose
Please choose
15/12/2011
Yes
31/07/2013
30/06/2013
31/07/2013
30/06/2013
15/03/2010
01/05/2011
01/05/2010
01/03/2009
01/06/2011
01/01/2010
01/01/2010
01/03/2012
14/03/2013
30/04/2014
01/05/2013
28/02/2010
31/05/2013
31/12/2013
31/12/2011
28/02/2014
Please choose
1 x 12 months
1 x 12 months
1 x 12 months
2 x 12 months
2 x 12 months
None
2 x 12 months
2 x 12 months
14/03/2014
30/04/2015
30/04/2014
28/02/2012
31/05/2015
31/12/2013
31/12/2013
14/03/2014
30/04/2015
30/04/2014
28/02/2012
31/05/2015
31/12/2013
31/12/2013
Please choose
Please choose
Please choose
Please choose
Please choose
Please choose
31/12/2013 Please choose
Please choose
Yes
01/11/2011
01/07/2010
01/01/2010
01/01/2010
01/09/2009
01/01/2008
01/01/2010
01/01/2010
01/09/2009
01/09/2009
01/05/2010
01/07/2010
31/10/2014
30/03/2013
31/12/2013
31/12/2011
31/08/2011
01/01/2010
31/12/2013
31/12/2013
31/08/2011
31/08/2011
30/04/2013
30/03/2013
1 x 12 months
2 x 12 months
None
2 x 12 months
2 x 12 months
1 x 12 months
None
None
2 x 12 months
2 x 12 months
1 x 12 months
2 x 12 months
31/10/2015
30/03/2015
31/12/2013
31/12/2013
31/08/2013
31/12/2011
31/12/2013
31/12/2013
31/08/2013
31/08/2013
30/04/2014
30/03/2015
31/10/2015
30/03/2015
31/12/2013
31/12/2013
31/08/2013
31/12/2011
31/12/2013
31/12/2013
31/08/2013
31/08/2013
30/04/2014
30/03/2015
Please choose
Please choose
31/12/2013 Please choose
Please choose
Please choose
31/12/2011 Yes
31/12/2013 Please choose
31/12/2013 Please choose
Please choose
Please choose
Please choose
Please choose
15/12/2011
Please choose
01/04/2012
Monitoring
Tender-specific reporting
 Ensure understanding of
common KPIs and targets
MANY OTHER SUPPORT TOOLS
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
18
Tender set-up
There is no one-size-fits-all model; designing a winning
tender set-up requires customizing to company’s needs
Key principles
Generic tender set-up model
 Consideration of portfoliospecific tendering patterns
Global tender committee
Internal support
functions
 Reality of the current
organizational structure
 Transparency on the overall
process and roles and
responsibilities
 Standardization across the
organization (reports, tools etc.)
 Simplicity of processes steps and
support tools
 Automatization and links to the
existing approaches and systems
External support
providers
Third-party model
Central
model
Global
supervisory
Outsourced
tender support
Responsibility
in countries
 Screening
 Translation
 Legal
Regional model
Responsibility
in regions
Local model
Country
responsibility
 etc.
 …
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
19
Tender strategy
To manage this complexity, winning tender organization
excels in three distinct but interdependent areas
Tender set-up
Building the right
internal tender
infrastructure
Tender strategy
Tender prioritization
and market tender
strategies
Tender
excellence
Tender execution
Successful
management of
specific tenders
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
20
Tender strategy
A structured overarching tender strategy process is vital to
improving prioritization & resource planning across tenders
Tender strategy process
Landscape
Obtain overview of
market-specific tender
situation and
competitive landscape
Prioritize
Score and prioritize
tenders into
categories to ensure
focus
(e.g. must win)
Plan
Define marketspecific tender
strategy and tender
resources for
upcoming year
Monitor
Monitor, control and
adapt (when required)
market tender strategy
and required focus
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
21
Tender strategy
Understand and classify tenders according
to tender archetypes
Project example
Price winner takes all
Type of deal
Range of outcomes
Negotiation opportunity
Scope of deal
Market
exclusivity Value winner takes all
Price only
Price and product quality/service
Winner has market exclusivity
Winner has market exclusivity
No
Variable
More then one molecule
Single molecules
Opportunity to influence
Variable
Yes
Type of agreement
Variable
Variable
Price driven
Type of deal
Range of outcomes
Negotiation opportunity
Scope of deal
Opportunity to influence
Type of agreement
Value driven
Price only
Price and product quality/service
Multiple winners/
no market exclusivity
Multiple winners/
no market exclusivity
Variable
Yes
More then one molecule
Single molecule
Variable
Yes
Price agreement only
Variable
Price reference only
No
Balanced negotiations
customer
exclusivity
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
22
Tender strategy
Map the tenders based on their attractiveness and include
the competitive portfolio fit to determine prioritization
Project example
Tender types
Product segments
Price winner
takes all
Value winner
takes all
Balanced
negotiations
Price
reference only
Scale of attractiveness
Leading
product
innovation
B
High clinical
performance
B
B
B
B
= least attractive
= attractive
B
B/C
B/C
= most attractive
Company portfolio fit
Reasonable
standard quality
C
C
A/C
A
A = Company A
B = Company B
C = Company C
 Avoid unnecessary account and price wars with competitors
 Focus on where your success chances are high and aligned with overall commercial strategy
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
23
Tender strategy
When prioritizing, be aware of second order effects
So you decided to do this one
special tender deal…
But what if…?
1
You
2
Customer A
Product 1
3
Your customer now
views you as a
pushover and expects
continual price cuts
Your customer now
views you as a
pushover and expects
price cuts on all of
the products you sell
Your customer starts
telling other
customers about the
huge discounts and
they demand equal
treatment
You
2012
2013
2014
2
3
2015
Year
You
1
Products
You
B
Customer A
C
D
Customer
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
24
Tender strategy
Derive market-specific tender strategies and be sure to
maintain and update them on a continuous basis
Project example
Tender strategy
Tenders to bid for
Strategy review meeting
Timings
Resources required
….
Allocate the right resources and
ensure adequate capabilities based on
the defined tender strategy
(importance and likely success)
Timing:
once a year,
regular revision
Set-up:
per country
on local site
Scope:
tenders with
significant
volume impact
Local function
 Arrange meeting and venue
 Conduct preparation analysis
 Compile relevant account
information
 Decide on prices for
tender market simulation
Central function
 Prepare cross-country market
intelligence
 Attend local meeting in person
 Challenge local tender market
simulation
 Enhance local sensitivity
for tenders
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
25
Tender strategy
Build a consistent fact base to understand next year’s
tender flow
Project example
2014
Objectives for upcoming tender bids
Tender sales
Number
Value
Expected
tenders
30
100
Objective
20
80
66%
80%
Ongoing
in 2014
Number
Value
Tender sales
Expected
tenders
…
…
Objective
…
…
Hit rate
…
…
Hit rate
2015
Yearly commercial impact (€k)
Ongoing
in 2015
Expiring
tenders in
2014
Expected
wins/
renewals
Expiring
tenders in
2015
Expected
wins/
renewals
Total
Total
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
26
Tender strategy
Continuously adjust tender strategy by monitoring and
evaluating outcomes and competitive behavior
Project example
Won-lost tender deal analysis
Structured and systematic
investigation on the reasons for
losing (or winning) tender
<
Deal and profitability
monitoring
Database to monitor key tender
related KPIs for compliance and
tender reviews
<
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
27
Tender execution
To manage this complexity, winning tender organization
excels in three distinct but interdependent areas
Tender set-up
Building the right
internal tender
infrastructure
Tender strategy
Tender prioritization
and market tender
strategies
Tender
excellence
Tender execution
Successful
management of
specific tenders
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
28
Tender execution
A common process to manage the lifecycle of each tender
will ensure that every tender is executed appropriately
Tender execution process
Prepare
Identify opportunities
and collect all tenderspecific information
Influence
Proactively engage
with authorities for
tender shaping
Execute
Understand decision
criteria and simulate
impact of price to gain
award
Monitor
Monitor, control and
drive tender outcome
and compliance
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
29
Tender execution
Identify & engage with all relev. stakeholders before their
call for bids, to sell your value proposition & influence specs
Project example
Stakeholder mapping
Differentiating factors
Identify relevant decision-making
stakeholders for the tender
Company-specific
Product -specific
Differentiate based on…
Quality
...exclusive products and technical
specifications; develop unique positions
Breadth
…wide product portfolio; bid on multiple
positions
Price models
…different types of price model (e.g. price
per patient etc.)
Evidence
…clinical evidence to prove cost
efficiency/effectiveness and safety
…
…
Services
…clinical services to users, nurses and
clinicians
CSR
…corporate responsibility to prove
company wide responsibility
ER
…environmental responsibility (e.g. no use
of dangerous materials…)
Logistics
…supply capacity to ensure fast and
accurate deliveries and small orders
…
…
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
30
Tender execution
Define your shaping strategy among key influencing levers
Project example
A
B
Pre-tender
1. Ability to influence tender
lot definition
Change tender lot towards
being more product
friendly/exclusive
2. Ability to influence decision
criteria
Increase importance of nonprice decision/evaluation
criteria
3. Ability to differentiate within
tender lot
Differentiate product compared
to competitors
C
Tender bidding
5. Ability to obtain price
premium in submission
Justify higher price bid
through differentiation
6. Ability to influence tender
scoring
Change evaluation of tender
once it is published
Post-tender
8. Ability to activate tender
Secure product switch and
demand
9. Ability to win back/change
a lost tender
Change tender outcome (early
cancellation/indirect sales)
7. Ability to negotiate after
submission
Second round negotiations on
price and volume agreement
4. Ability to impact competitors
Signal price positions and
tender priorities for peaceful
competition
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
31
Tender execution
Adjust value communication according to stakeholders and
ensure targeted engagement models
Project example
Stakeholder communication
Channel
manager




Engagement model
Evaluation
Inflation adjustment
Category breadth
…
Public procurement office
Country
manager
Politicians
Marketing
manager
HCP’s




Innovation
Environment
Corporate resp.
…
 Innovation
 …
Sales reps
 Innovation
 Product selection
 …
Adopt value communication and internal
counterpart depending on external stakeholder
Key Account
Manager
Ensure the tender-specific engagement
model focuses on the right stakeholders
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
32
Tender execution
Actively participate in industry lobbying
for good purchasing practices
Example
Eucomed
Example
Assobiomedica
Example
EGMA
…need for a sustainable pricing
system for generic medicines to
address unfair competition caused
by large-scale government tenders
for the products
…large-scale tenders for medicines
introduced by Germany and the
Netherlands were undermining
competition because many
manufacturers refuse to participate
…if only those suppliers willing to
bid for tenders at the lowest
possible price remained, the
practice could create pressure for
reduced quality
…by implementing these
powerful procurement
entities there are a number
of potential draw-backs that
should be mentioned
…(pooled purchasing) has
a negative impact on the
quality of products and care
which should be adapted to
local provider needs
Position paper 2010 by
the European Generic
Medicines Association
Source: Simon-Kucher & Partners, www.gabionline.net
Life Sciences Strategy Forum_ Building a winning commercial tender organization
33
Tender execution
Make conscious pricing decisions by using tender tools
to simulate outcomes and support price decisions
Project example
Tender management tool
Tender simulator
<
Price guidance based on:
Price recommendation based on:
 Product mix/deal size
 Outcome simulations
 Competitive position
 Competitive behavior
 Previous prices
 Decision criteria
 Minimum margin requirements
 Price strategy
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
34
Tender execution
Ensure price strategy implementation by
establishing clear pricing guidelines and thresholds
Project example
No escalation
Escalated due
to value
Tender price approval process
Deal price (€)
Deal price (€)
Tender distribution on price and value
Minimum
price
Minimum
price
Escalated due
to minimum
price
Escalated due
to minimum
price and value
Value threshold
Escalated due to value
Deal value (€)
Account
manager
Head of
sales
Regional
sales mgr.
Country
GM
Head of
sales
Business
unit head
Value threshold
Deal value (€)
Escalated due price
Implement escalation criteria to control
tender prices and minimize second-order
effects within and across markets
Design a transparent ownership model for
tender pricing once escalation criteria are
in place
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
35
Tender execution
Capture all relevant data in a centrally-managed tender
database for analysis and successful tender execution
Project example
Tender database
Central database
Tender database will:
Open opportunities
Upcoming
Ongoing
Closed opportunities
Won
Lost
Not pursued
 Facilitate data monitoring:
The central tender database
captures data and tracks
opportunities in five stages:
– Upcoming
– Ongoing
– Won
– Lost
– Not pursued
 Provide support for
the tender process:
Serves as a reference and
supports suppliers
throughout the tender
process
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
36
Tender execution
Implement a tender dashboard to track your performance
and feed information back into the tender strategy process
Project example
Tender dashboard
1
2
3
Volume
compliance
Sales and
margins vs.
targets
Price levels
and target
fulfillment
Tender dashboard will:
 Help you retain value:
Ensure you are getting the
value you expected from
each of your tenders
 Identify deviations: that
quickly cause damage
5
4
Net price &
volume
developments
Overview
of deals
 Correct problems:
Counteract to correct
situations when needed
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
37
Key takeaways
 Best-in-class companies conduct the following when it comes to tender execution:
– …defining methodology to identify tender specific opportunities and collect deal
intelligence
– …outlining approach to proactively engage with and influence stakeholders for tender
shaping
– ….educating organizations in optimal price setting and price simulation to gain award
– …developing processes and tools for monitoring, controlling and driving tender award
compliance
Source: Simon-Kucher & Partners
Life Sciences Strategy Forum_ Building a winning commercial tender organization
38
Amsterdam
Beijing
Bonn
Boston
Thank you!
Template_Letter_Boston_2014-03-28.potm
One Canal Park
Cambridge, MA
Brussels 02141, USA
Cologne Tel. +1 617 231 4500
Copenhagen
Dubai
Frankfurt
Istanbul
London
Luxembourg
Madrid
Milan
Munich
New York
Paris
San Francisco
Santiago
de Chile
São Paulo
Singapore
Sydney
Tokyo
Toronto
Vienna
Warsaw
Zurich
www.simon-kucher.com