The Annual Tender

When a medicine is no longer under patent, other suppliers are able to sell a generic version of that medicine, which allows for competition and can lead to significant price reductions.

This competition can take place in PHARMAC’s annual Invitation to Tender (ITT). The annual Tender is key in helping PHARMAC keep up with increasing demand for medicines we fund, and for new and innovative medicines.

This process creates savings of $30-50 million every year.

This money is reinvested to get more medicines for more people through new investments or making existing medicines available to even more people.

The video below explains why the Tender is an important part of PHARMAC’s toolkit to help New Zealanders live well, get well and stay well.

Animation explaining how the tender helps us fund more medicines.

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PHARMAC helps New Zealanders live healthier and better lives, every day.

Last year PHARMAC funded nearly 46 million prescription items for 3.6 million New Zealanders.

Demand for medicines we fund, and for new and innovative medicines is always increasing. PHARMAC’s annual tender is key in making sure we’re able to keep up with that demand.

Every year PHARMAC drives competition for medicines that are currently funded through an annual tender. This process creates savings of $30-50 million every year. This money is reinvested to get more medicines for more people through new investments or making existing medicines available to even more people.

Many of the medicines and vaccines that PHARMAC is able to make more widely available, thanks to the work of the tender, are vital to the ongoing wellbeing of many New Zealanders.

Statins are one such medicine.

Statins are used by 1 in 6 New Zealanders to help manage their cholesterol and heart health.

In the early days of funding, the price of statins meant we had to target these important medicines to the people with the highest clinical need.

Through competition introduced by the tender, we were able to lower the price and increase access to all people who needed them not just the most critical patients.

Thanks to the work of the tender, New Zealand pays some of the lowest prices for medicines in the world.

This gives us more opportunities to invest in other medicines like those for cancer, multiple sclerosis, hepatitis and vaccines.

It’s not all about the savings though – it’s also about making sure the medicines we fund through the tender are of, are MedSafe approved, suitable for people to use, and will work.

Because there’s no point funding a medicine that people won’t use, even if it saves us money.

The tender is an important part of PHARMAC’s toolkit to New Zealanders live well, get well and stay well.

PHARMAC – helping New Zealanders live healthier and better lives, everyday.

How does the annual Tender work?

The Tender follows the same cycle every year:

Diagram showing the circular process of the tendering process. — The tender process

Text of the tender process image

Drafting (May – July): PHARMAC considers the types of products that could be included in the Tender and compiles a list of these products for consultation.
Consultation on draft Tender (July – August): Once the draft Tender has been put together, PHARMAC seeks feedback from suppliers, clinicians, health care professionals, the wider health sector and patients. They’ll provide feedback on whether it’s appropriate to include an item in the tender, and what things PHARMAC should consider during evaluation.
Consideration of consultation feedback (August – October): Following consultation, PHARMAC will consider the feedback, and seek additional information from the PTAC Tender Medical Evaluation Sub Committee if required before finalising the Tender.
Finalising the Tender (October): PHARMAC finalises the products to be included in the Tender for that year, after considering any consultation feedback.
Invitation to Tender (early-November): PHARMAC issues the tender and invites suppliers to provide bids on the products included in the Tender and alternative commercial proposals (ACPs).
Bids due from suppliers (mid-December): Suppliers have approximately 6 to 7 weeks to provide a bid for a product in the Tender. Suppliers can do this on our secure electronic portal.
Samples requested (January – February): As a part of the evaluation process, PHARMAC may request samples of products from suppliers. PHARMAC will seek advice from clinical experts, including the Tender Medical Evaluation Subcommittee (TMESC), to see if the product is clinically and practically suitable to be included. Some of the things we’re looking at includes:
1. the packaging - is it easy to store, is it easy to get into
2. the labelling - is it easy to read and understand and follows the PHARMAC labelling guidelines
3. the tablets – is it easy to break along the score lines, are they easy to swallow
4. the taste – will the taste of the medicine stop some people taking the medicine
Awarding bids (February onwards): PHARMAC will evaluate the bids and make recommendations to the Board or delegate for listing The results of these are published in a monthly Tender notification on the PHARMAC website. The winning bidder gets to be the sole supplier of the medicine for a fixed term (usually three years)

Expert clinical and technical advice

Clinical and technical advice is an important part of the review of the tenders that are received. PHARMAC gets this advice from the Tender Medical Evaluation Subcommittee (TMESC) – made up of a range of health professionals including community and hospital pharmacists, GP, nurse, hospital doctors. Their role is to evaluate:

the packaging - is it easy to store, is it easy to get into
the labelling - is it easy to read and understand and follows the PHARMAC labelling guidelines
the tablets – is it easy to break along the score lines, are they easy to swallow
the taste – will the taste of the medicine stop some people taking the medicine
risk – is it okay having a medicine on sole supply
other clinical and technical details of the bids

Watch the video below for more information on the TMESC and what they do:

Members of the TMES explain their role.

View transcript

Melissa Copeland: The tender medical subcommittee is made up of quite a number of different people, from different backgrounds, some of those people are involved in acting as the health professional that actual administer the medicines to patients and some of those are pharmacists. So we have different aspects that we're interested in when it comes to medicines and the way that they're used and those view points are represented all around the table. There are a number of pharmacists on the committee some of whom are hospital pharmacists, some are community pharmacists who own their own business; so we're intimately involved in the actual issues that are at play here. And those view points are robustly expressed and we come to some agreement around the benefits and costs of various decisions that we make. But at the end of it all it's the consumer, the patient, that's actually pivotal to the whole decision making. None of this has any value unless we can actually get the right medicine to the right patient in a way that they can actually deal with it.

Geoff Savell: Being able to provide a pharmacy perspective to PHARMAC, it's our expertise of what happens at the coal face, at the counter, that I bring to PHARMAC so that I can say this particular thing that we're looking at, will or won't work. No amount of savings of money will be of any value if the customer takes it off me at the counter, walks out the door and literally throws it in the rubbish.

Melissa Copeland: Medsafe deals with the actual regulatory aspects of medicines and whether they are of equivalent quality from the medicines perspective. What we're looking at in the Tender Committee is the actual aspects of these medicines. We're looking at the packaging, we're looking at how readable the labels are; we're thinking about how easy it is to get into that packaging for someone who might have limited abilities, limited dexterity; we're consider all sorts of things about breakability of tablets; we also consider palatability of medicines. I'd admit that not all them taste fantastic but sometimes that's unavoidable; it is a factor that we consider that we do take seriously and we sit there with our teaspoons and try things, just to make sure we do have a good understanding of what the implications are of these decisions that we're making.

Geoff Savell: Amongst that of course is also the ramifications for pharmacy of things like pack sizes, repackaging costs, and the knock-on effects of having to count and pour verses just putting a label on the box. And that's discussed literally every time we have a new medicine, every time without fail, to ensure this is a practicable step that reasonably can be expected for pharmacy to deal with. Sometimes there's some wins and sometimes there's some losses, and it's a bit of an averaging, but at the end of the day we try to ensure that pharmacy not inconvenienced or financially impacted by the use of various pack sizes.