Consultation on proposed 2020/21 Invitation to Tender: For Suppliers

• A proposal to tender certain pharmaceuticals for principal supply;
• The implications of awarding Principal Supply Status; and
• Commercial proposals as an alternative to tendering.

PHARMAC welcomes all feedback on the draft 2020/21 Tender. Feedback received by the deadline may be considered by the Tender Medical Evaluation Subcommittee of PTAC and would be considered by the PHARMAC Board (or its Delegate, where applicable) prior to making a decision on this proposal.

Feedback should be provided by submitting an email or letter to the Tender Analysts:

Email: tender@pharmac.govt.nz

Letter: Tender Analysts
PHARMAC
PO Box 10-254
Wellington 6143

Feedback we receive is subject to the Official Information Act 1982 (OIA) and we will consider any request to have information withheld in accordance with our obligations under the OIA. Anyone providing feedback, whether on their own account or on behalf of an organisation, and whether in a personal or professional capacity, should be aware that the content of their feedback and their identity may need to be disclosed in response to an OIA request.

We are not able to treat any part of your feedback as confidential unless you specifically request that we do, and then only to the extent permissible under the OIA and other relevant laws and requirements. If you would like us to withhold any commercially sensitive, confidential proprietary, or personal information included in your submission, please clearly state this in your submission and identify the relevant sections of your submission that you would like it withheld. PHARMAC will give due consideration to any such request.

Details of the proposed 2020/21 Tender

In general, the proposed 2020/21 Tender process would be similar to the 2019/20 Tender. However, the 2020/21 Tender would result in awarding Principal Supply Status (PSS) (previously Sole Supply Status and/or Hospital Supply Status).

In essence, this change would mean that a Discretionary Variance provision (renamed Alternative Brand Allowance) would apply across both the community and hospital markets, rather than just the hospital market.

Principal Supply Status was subject to an initial consultation in July 2020. In addition to Alternative Commercial Proposals (discussed below), we seek comments on all sections of the draft 2020/21 Tender, in particular on:

• The proposed changes in the draft 2020/21 Tender;
• An indication of any pharmaceuticals, whether or not they are included in Schedule Two of the draft 2020/21 Tender, that you consider should be tendered, and the reasons for that view. If you wish, you may provide a non-binding confidential indication of the price or price range that you might be able to offer for a line item or group of line items you wish to have tendered;
• An indication of any pharmaceuticals, whether or not they are included in Schedule Two of the draft 2020/21 Tender, that you consider would be inappropriate to tender, and the reasons for that view, including any contractual constraints or patent protection that could restrict PHARMAC from awarding a tender on a particular pharmaceutical;
• Your views on whether any product included in Schedule Two might have more than 5% of patients needing to access an alternative brand;
• Feedback on any unresolved Tender Bid(s) from previous tenders that you consider should remain open for acceptance. Please note that some currently unresolved Tender Bids may be resolved prior to the consultation deadline and the final 2020/21 Tender being issued.

Draft Invitation to Tender

We are seeking feedback on the composition of the draft 2020/21 Tender. This is still under development and may change before it is taken to the Board (or its Delegate) for approval and subsequently issued. At this stage, but depending on the extent of any changes, PHARMAC does not intend to send out further drafts for consultation.

A complete copy of the draft 2020/21 Tender, including the proposed terms and conditions which successful tender bids would be subject to, is available on our website.

> Download the draft 2020/21 Invitation to Tender [PDF, 597 KB]

The draft 2020/21 Tender comprises the following sections:

Schedule 1: Definitions and interpretation

Schedule 2: The list of pharmaceuticals proposed for tender* ^#

> Download Schedule 2: Products to be tendered [XLSX, 54 KB]

> Download Supplement to Schedule 2: Includes pharmacodes [XLSX, 39 KB]

Schedule 3: The tender process (for both hospital and community tender bids)

Schedule 4: Contract terms for Principal Supply Status for both community and hospital supply

Schedule 5: Additional contract terms for Principal Supply Status for community supply

Schedule 6: Additional contract terms for Principal Supply Status for hospital supply

Schedule 7: Additional special terms for particular pharmaceuticals

*The units provided in Schedule Two consist of market data for the year ended 30 June 2020. The figures included are indicative only and are provided on the basis set out in clause 1.3 of Schedule 2 of the draft 2020/21 Tender.

^#The final list of products, which may change following consultation, would be released as part of the 2020/21 Tender, following Board (or its Delegate) approval. You may provide feedback on the inclusion of any additional pharmaceuticals after the 2020/21 Tender has been issued, and any such feedback would be considered by the Board (or its Delegate) before making a final decision on any product, provided that any feedback is given prior to the tender close date in late 2020.

Proposed inclusion of the following provisions in the 2020/21 Invitation to Tender

Principal Supply Status

As outlined in the “Proposal to modify PHARMAC’s approach to competitive procurement” consultation dated 10 July 2020, we are proposing that the 2020/21 Invitation to Tender replaces Sole Supply Status and Hospital Supply Status with Principal Supply Status.

The purpose of the change is to extend the DV provisions (renamed Alternative Brand Allowance) across both markets.

• PHARMAC would have flexibility regarding if and how to fund alternative brands in the community:
  • In some cases, this could be through listing (or maintaining the listing of) other brands under Special Authority criteria, and in others it may be through our exceptional circumstances framework.
  • Regardless of the mechanism used, we are intending to develop and communicate clear clinical criteria for the funding of alternative brands.
• Our preliminary view is that alternative brand funding might be needed in three different circumstances:
  • If a patient has experienced adverse clinical outcomes as a result of a brand change,
  • If a patient has unique clinical circumstances that would put them at heightened risk of adverse clinical outcomes, and wishes to avoid a brand change, or
  • If a patient’s circumstances mean that they require a temporary delay to the brand switch.
• This may not be all the circumstances in which we need to consider funding of an alternative brand. We are interested in receiving feedback on what the criteria for those circumstances should be, and whether there are other circumstances that we need to consider as well.
• We note that brand changes are generally well-tolerated, and so we do not expect to fund alternative brands for all products. However, by implementing this change across all products, we would be able to respond to issues as they arise.
  • We are interested in receiving feedback on which chemicals (or indications for a chemical) might have a particular need for funding of an alternative brand (and why). In addition, for those situations, whether you consider that clinical destabilisation can be objectively determined, and if so, how.
• We expect that the Alternative Brand Allowance would, in DHB hospitals, operate much as DV limits have in the past. However, PHARMAC would have the ability to manage this more closely if needed, such as setting clinical criteria.
• The tender relates to supply of the principal brand only. Any commercial arrangements for the supply of other brands would be managed separately and may (as in the case of DV purchases) be managed outside of a supply agreement.
• The proposed Alternative Brand Allowance limit is not a cap on the number of patients who could access an alternative brand, nor is it a prediction of that need. It is, as in the case of the DV limit, a threshold (indicated by the “ABA Limit” in Schedule Two) over which PHARMAC/DHBs would compensate the principal supplier. However, we are interested to understand if you consider that there are any products that we are proposing to tender where more than 5% of patients might need access an alternative brand.

The new provisions resulting from this change are as follows:

1.6 Principal Supplier

(a) You shall have Principal Supply Status during the Principal Supply Period, which shall be subject to the Alternative Brand Allowance, where other supplier brands of the Pharmaceutical may be subsidised in the community and/or purchased by DHB Hospitals.

(b) The Alternative Brand Allowance referred to in paragraph (a) above is specified as a percentage of the Total Pharmaceutical Volume for the Pharmaceutical, that percentage being as set out in Schedule Two.

(c) You acknowledge and agree that any other supplier brands of the Pharmaceutical may be concurrently listed on the Pharmaceutical Schedule at any time during the First Transition Period, the Principal Supply Period and the Final Transition Period and your rights under this Agreement do not extend to an exclusive listing of the Pharmaceutical on the Pharmaceutical Schedule.

1.7 Exceptions to Principal Supply Status

(a) PHARMAC may, from time to time during the Principal Supply Period or the First Transition Period, amend the Alternative Brand Allowance for the Pharmaceutical after consultation with a relevant medical adviser (being either the Ministry of Health, PTAC or its sub-committees), provided that PHARMAC may only increase the Alternative Brand Allowance without your prior agreement if it has a direction to that effect from Medsafe or its successor, or a recommendation that it do so from PTAC or its sub-committees, based on a significant clinical issue.

(b) Subject to clause 1.8 of this Schedule, you acknowledge and agree that while you have Principal Supply Status:

(i) other supplier brands of the Pharmaceutical may be subsidised in the community and/or purchased by DHB Hospitals, subject to the Alternative Brand Allowance; and

(ii) without derogating from any other rights available to PHARMAC, the Funder or DHB Hospitals under this Agreement or otherwise, if you fail to supply the Pharmaceutical in accordance with this Agreement (other than for a reason that PHARMAC reasonably considers, following discussion with you, to be wholly outside your control) at any time during the Principal Supply Period, then the Alternative Brand Allowance shall not apply and other supplier brands of the Pharmaceutical may be subsidised in the community and/or purchased by DHB Hospitals without limitation during that period of non-supply and any calculation performed in accordance with clause 1.8 below shall exclude that period of non-supply.

1.8 Principal Supply Status Monitoring

(a) If you reasonably believe that the percentage usage of other supplier brands of the Pharmaceutical subsidised in the community and/or purchased by DHB Hospitals exceeds the Alternative Brand Allowance for a particular Pharmaceutical during the Principal Supply Period, you may at any date after a three (3) month period following the end of any Relevant Period, request that PHARMAC carry out calculations for that Relevant Period in accordance with the procedure set out in this clause 1.8, and PHARMAC may, in its discretion, agree to carry out such calculations, provided that if PHARMAC refuses to carry out such calculations, it will provide you with the reasons for refusing to do so. For the avoidance of doubt, where you have Principal Supply Status for both community and hospital supply of a Pharmaceutical, PHARMAC will carry out any calculations for those markets in combination, with a single, combined figure to be used for each of Total Pharmaceutical Volume and Total Brand Allowance Pharmaceuticals when carrying out the calculations below.

(b) Within 30 business days of PHARMAC accepting your request to carry out calculations in accordance with paragraph (a) above, PHARMAC shall carry out the following calculations for the Relevant Period in question:

(i) (Total Brand Allowance Pharmaceuticals / Total Pharmaceutical Volume) x 100 = Brand Allowance Indicator;

(ii) Brand Allowance Indicator – Alternative Brand Allowance = Brand Differential

(c) In the event the Brand Differential is a number greater than zero i.e. a positive amount, PHARMAC shall carry out the following calculations for the Relevant Period in question:

(i) Total Pharmaceutical Volume / 100 = Volume Multiplier;

(ii) Volume Multiplier x Brand Differential = Eligible Volume;

(iii) (Eligible Volume x Unit Price and/or Unit Subsidy) / 2 = Brand Compensation

(d) PHARMAC will notify you in writing of any Brand Compensation payable in accordance with paragraph (c) above and will provide you with the details of the relevant party or parties to be invoiced, for example the relevant DHB(s). Following such notification to you from PHARMAC, you may invoice the relevant party or parties for the Brand Compensation.

(e) PHARMAC’s calculation for the purposes of this clause 1.8, shall not be subject to audit by you and you acknowledge and agree that the data extracted from the records used by PHARMAC are the best data and those records are the best records, for the purposes of carrying out the calculations.

New definitions associated with the proposed definitions have also been added. Provisions regarding DV Pharmaceuticals, DV Limit and DV Limit Compliance have been removed from the tender document.

Additional Special Terms

1. Somatropin

You shall provide the following resources and related products at no cost for the Pharmaceutical somatropin:

• The provision of education, training and support Resources to endocrinologists, paediatric endocrinologists, pharmacies and patients in respect of the use of somatropin.
• The Resources shall be provided to all endocrinologists, paediatric endocrinologists, pharmacies and patients in New Zealand or upon request by any relevant party.
• The Resources shall be provided to patients when their prescription is filled and directly to all endocrinologists, paediatric endocrinologists and pharmacies before the commencement of the Principal Supply Period.
• The provision of Related Products for your proposed brand of somatropin for the benefit of patients, in respect of the use of somatropin. The Related Products shall be delivered to the nominated delivery address of the prescribed patient.

For the purposes of this clause:

“Resources” shall include but not be limited to the:

• provision of patient training and medical education and support for endocrinologists, paediatric endocrinologists and pharmacies on the use of somatropin devices, including a requirement for clinical educators to talk specifically with patients and for an 0800 number to be available for patients to contact with any further queries;
• provision of training materials (DVDs, pamphlets, leaflets, brochures) to new patients; and
• provision of presentations and/or demonstrations on the use of somatropin devices to patients and/or healthcare professionals.

“Related Products”, which shall be inclusive of the replacement of any defective Related Product, shall include but not be limited to devices, needles, needle clippers, sharps bins, and other products which are required for the safe treatment of your brand of somatropin.

Key Dates and Timeframes for the 2020/21 Tender:

The timelines for the 2020/21 Tender are envisaged to be similar to the 2019/20 Tender; we propose to release the final 2020/21 Invitation to Tender in early November 2020 and consequently the closing date for tender submissions would be late December 2020. The proposed timeline is outlined in the following table: 

Unresolved Tender Bids

We intend to review any unresolved Tender Bids from the 2018/19 Tender and the 2019/20 Tender prior to issuing the 2020/21 Tender. The following Tender Bids remain unresolved: 

2018/19 Invitation to Tender 

2019/20 Invitation to Tender 

Should any unresolved Tender Bids be declined prior to the release of the 2020/21 Tender, PHARMAC would consider re-tendering those pharmaceuticals when the 2020/21 Tender is issued. Unresolved Tender Bids have not been included in the draft pharmaceutical list (Schedule Two). 

Products not currently listed in Section B of the Pharmaceutical Schedule 

The following products included in Schedule Two of the draft 2020/21 Tender are not currently listed in Section B of the Pharmaceutical Schedule: 

Electronic Tender (eTender) system

The 2020/21 Tender will be distributed via PHARMAC’s electronic tendering portal. The portal requires companies to register for a user account and details of how to register will be distributed prior to the release of the final 2020/21 Invitation to Tender. Please let us know if the contact details for the person responsible for submitting tender bids have changed for your company by sending an email to the Tender Analysts at tender@pharmac.govt.nz by 4 pm (New Zealand time), Friday 25 September 2020.

Alternative Commercial Proposals 

PHARMAC seeks any Alternative Commercial Proposals (ACPs) to tendering that you may wish to submit. An ACP may, for example, offer price reductions on one set of pharmaceuticals in return for PHARMAC agreeing to defer tendering on another group of pharmaceuticals for a period. 

Please note the following points apply to ACPs for both the community and DHB hospital markets: 

• ACPs may include more than one line item and may include pharmaceuticals not listed in Schedule Two of the draft 2020/21 Tender;
• ACPs may seek PHARMAC’s agreement to defer tendering or application of reference pricing for a period of time for any pharmaceutical, whether or not it is listed in Schedule Two of the draft 2020/21 Tender;
• ACPs may not propose awarding Principal Supply Status in the community or DHB Hospitals;
• PHARMAC reserves the right:
  • not to accept any ACPs; and/or
  • not to provide reasons for the acceptance or non-acceptance of any ACP; and/or
  • to enter into an agreement or arrangement that differs in a material respect from that envisaged in this letter.

ACPs are due by 4 pm (New Zealand Time), Monday 24 August 2020. PHARMAC may not consider any ACPs that are submitted after this date.

Usage data for ‘PCT only’ injectable products

 The table below contains ‘PCT only’ usage data for items included in the 2020/21 Tender. These volumes are approximate and indicative only. PHARMAC makes no representation as to the accuracy of these figures or as to the level of sales or likely sales of any tender item.