Key Procurement Methods for Pharmaceutical Drugs and Devices

Written by Calvin Khoo Eng Chye, DPSM

by Calvin Khoo Eng Chye, DPSM

Key Procurement Methods for Pharmaceutical Drugs and Devices

Written by Calvin Khoo Eng Chye, DPSM

by Calvin Khoo Eng Chye, DPSM

by Calvin Khoo Eng Chye, DPSM

The procurement department is responsible to acquire goods and services for a business. This may involve buying goods at competitive prices, handling all legal procedures required to place a contract, budgeting costs for the goods and monitoring financial trends to ensure that money is being spent wisely by the company

The pharmaceutical sector encompasses a variety of inherent issues from the view point of procurement. This includes long supply chains that starts in developing countries, specific legislation with regard to procurement. There is also the lack of transparency and access of information due to the marketing and proprietary nature of pharmaceuticals.

One of the key prerequisites for sustainable procurement of pharmaceuticals is to understand the way supply chains operates to enable risk assessments to be carried out prior to a specific procurement to allow for tenders to specify relevant requirements. The lack of transparency and the high degree of complexity in the pharmaceutical sector may jeopardize proper risk assessments to be carried out.

There must be clarity of requirements that include details about the rationale of requirements and where in the supply chain specific requirements have to be fulfilled. These are usually requested for from bidders, and thus puts demands on the pharmaceutical industry to provide more transparent information about its supply chains and its production processes.

Two-Stage Tendering

In the two-stage process, the contractor becomes involved in the planning of the project at an earlier stage. The tenders are submitted on the basis of minimal information. In the second stage the employer’s team will develop the precise specification in conjunction with the preferred tenderer. This method is favored in more complex projects, where the contractor may have significant design input.

Open Tendering

Open tendering allows anyone to submit a tender to supply the goods or services that are required. Generally, an advert will be placed giving notice that the contract is being tendered, offering an equal opportunity to any organization to submit a tender. On larger projects, there may then be a pre-qualification process that produces a short-list of suitable suppliers from the respondents expressing interest in the contract. This short list will then be invited to prepare tenders. The selection of a short list can include pre-qualification questionnaires and interviews.

Open tendering is a slow and costly process, because the method attracts tenders or expressions of interest from large numbers of suppliers. Some suppliers may be entirely unsuitable for the contract and as a result it can waste a great deal of time, effort and money. However, open tendering offers the greatest competition and has the advantage of allowing new or emerging suppliers to try to secure work and so can facilitate greater innovation.

The number of firms tendering can be reduced (ideally to a maximum of six) by a pre-qualification process, and if this uses a standard pre-qualification questionnaire, then the time wasted by unsuccessful applicants can be minimized.

Restricted Tendering

The restricted tendering method only places a limit on the amount of request for tenders that can be sent by a supplier or service provider. Due to this selective process, restricted tendering is sometimes referred to as selective tendering. Like open tendering, restricted tendering is considered a competitive procurement method, however, the competition is limited to agencies that are invited by the procuring team. The procuring entity should establish a set of guidelines to use when selecting the suppliers and service providers that will be on the invitation list. Randomized selections will not bode well for procuring. This method is selective to find the best-suited and most qualified agencies to procure goods and services from. This method also enables the procuring team to save time and money during the selection process.

Request for Proposals (RFP)

Request for Proposal is a term that is used all across the business world. Social media managers receive RFP’s from potential clients all the time when a client is seeking a new manager of their venture. This kind of proposal is a compelling and unique document stating why the business is the best fit for the type of project at and. Similarly, in the procurement world, a RFP is a method used when suppliers or service providers are proposing their good or service to a procurement team for review. If you’re a supplier, understanding the ins and outs of quality service management is key to winning your bid. Read more about this in service quality management.

Procurement teams are often on the hunt for the best valued, most marketable items to bring into circulation. A client may feel they have all of the qualifications to fit the needs of fulfilling a specific requirement of a procurement team – but they have to prove it. The agencies writing the RFP’s should submit a two-envelope proposal to the procurement manager. The two-envelope process allows the procurers to review the proposal through and through without knowing the financial component. The financial proposal is sealed in the second envelope and should only be opened after the content of the first-envelope proposal is approved or rejected. This eliminates any persuasion by cost and allows an objective lens to look through when analyzing a good fit. The proposal with the best fit qualifications and best price will be selected. If a lesser qualified selection has a lesser price, no contract should be negotiated. The most qualified and appropriate proposal, regardless of price, should be selected.

Request for Quotations

This procurement method is used for small-valued goods or services. Request for quotation is by far the least complex procurement method available. If you have the option, use this method to ensure a fast procurement process and not a lot of paperwork. There is no formal proposal drafted from either party in this method. Essentially, the procurement entity selects a minimum of three suppliers or service providers that they wish to get quotes from. A comparison of quotes is analyzed and the best selection determined by requirement compliance is chosen.

Single-Source

Single source procurement is a non-competitive method. Thus, it should only be used under specific circumstances. This occurs when the procuring entity intends to acquire goods or services from a sole provider. This method should undergo a strict approval process from management before being used.

The circumstances which can call for this method are emergencies, if only one supplier is available and qualified to fulfill the requirements. It could be that the advantages of using a certain supplier are abundantly clear, and that the buyer requires a certain product or service that is only available from one supplier or the continuation of work that cannot be reproduced by another supplier.

Conclusion

To have sustainable practices for the procurement of drugs and devices, the essential guidelines are to adhere to. In the end, the type of procurement method you choose to use is highly relative to the conditions of the procurement effort and the type of good or service being acquired. All procurement methods follow tight legal frameworks to ensure all standards are being met and quality in the selection process exists. The involvement of suppliers towards partnership and the use of integrated technologies into an effective procurement needs to be adopt.


References

Avinash Geerjammundo. (2012). “Industrial Buying in Pharmaceutical industry”. Retrieved from: https://www.slideshare.net/geerjamundo/industrial-buying-in-pharmaceutical-industry, accessed on 14/09/2019.

Brittani Sponaugle. (2014). ”6 Procurement Methods Obtaining Quality Goods and Services”. Retrieved from: https://blog.udemy.com/procurement-methods/, accessed on 14/09/2019.

Fabian Lee, DPSMM. (2017). “Effective Procurement Practices for Mass Consumption Products”. Retrieved from SIPMM: https://sipmm.edu.sg/effective-procurement-practices-for-mass-consumption-products/, accessed on 14/09/2019.

Goh Chun Siang, DPSM. (2018). “Tendering Techniques for the Hotel Industry”. Retrieved from SIPMM: https://sipmm.edu.sg/tendering-techniques-hotel-industry/, accessed on 14/09/2019.

Report 6735. (2016). “Procurement of pharmaceuticals in an environmental context and its inclusion into the CSR Compass”. Retrieved from: http://www.swedishepa.se/upload/miljoarbete-i-samhallet/miljoarbete-i-eu/Procurement-of-pharmaceuticals-in-an-environmental-context-and-its-inclusion-into-the-CSR-Compass-2016.pdf, accessed on 14/09/2019.

Siti Noridah Supaat, DPSM. (2019). “Essential Sustainable Practices for Procurement of Mineral Products”. Retrieved from SIPMM: https://sipmm.edu.sg/essential-sustainable-practices-procurement-mineral-products/, accessed on 14/09/2019.

About the Author: Calvin Khoo has substantive years of experience in the field of procurement, warehousing and inventory control, specifically in the pharmaceutical and oil & gas industry. Calvin is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). He completed the Diploma in Procurement and Supply Management (DPSM) on September 2019 at SIPMM Institute.

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