Applicable product ranges: Pharmaceuticals, Medical Devices, Supplements, Veterinary
What are the differences between Institutions?
Institutions are a minor distribution channel for AdvaCare Pharma’s products in terms of percentage of total sales, but strategically important and a channel that we must build for several reasons which are explained below. Institutional buyers such as national governments, IGOs (Inter-Governmental Organizations) and NGOs (Non-Governmental Organizations) issue tenders, which is a formal request for suppliers or manufacturers to submit a proposal to provide specific products at a specified price or choose the lowest priced bidder that can conform to the terms and conditions stated in the tender.
Some common Institutions include:
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TYPES OF INSTITUTIONS
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| Government |
- MOH (Ministry of Health), FDA (Food & Drug Administration), DOH (Department of Health) or another name for a country’s health authority that is responsible for public healthcare and/or enforcement.
- On a national level, the health authority of a country could issue tenders for public health initiatives.
- Our distributor’s local relationships are important. However, these tenders can be highly corrupt given lack of oversight.
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| Inter-Governmental Organizations (IGOs) |
- UNICEF, WHO, World Bank and other agencies that are funded by a governmental agency and work internationally.
- Although international organizations, tenders are usually issued on a national level for a specific country.
- IGO tenders can be large and are difficult to win, but could provide significant credibility if won.
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| Non-Governmental Organizations (NGOs) |
- Doctors Without Borders (Médecins Sans Frontières), Save the Children, World Vision and other organizations that mostly rely on donations and charity.
- Health initiatives, and therefore tenders, might be limited due to budget restrictions.
- Least important Institution type for AdvaCare.
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How do Institutions work with suppliers?
Tenders
Many bidders participate in tenders, but only one or a few win. Corruption is commonplace given that the value is usually large and relationships with the decision makers can be highly influential. Most tenders are submitted through our existing distributors, meaning our distributor will submit the tender on our behalf. This is important to understand because tenders usually require a significant amount of time and resources to prepare, therefore we choose to participate on a case-by-case basis. Although we do get many inquiries from unknown prospects asking us to participate in tenders, as a general company policy, unless a special case scenario, we will only participate with established distributors and when we evaluate that we have a good chance of winning.
Direct/Private Orders
Although less common, it is possible that an institution can place a direct order that is not a tender. In such a case, these orders are usually based largely on the relationship of the distributor with the issuing agency. Such orders will almost always go through our distributor as it is unlikely that an Institution will order directly from a supplier which they have never done business.
The Pros and the Cons
Reasons that Institutions are strategically important for AdvaCare include many reasons. Likewise, there are also challenges in working with institutions:
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WORKING WITH INSTITUTIONS
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ADVANTAGES
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DISADVANTAGES
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- Tenders establish our brand in the market and give our brands and AdvaCare credibility.
- Winning the first tender usually opens the door to winning more tenders, therefore expanding the scope of products with the issuing agency.
- Winning a tender for a specific product often leads to reorders of the same product if the issuing agency is satisfied with the product and ordering experience. The next tender can be automatically granted in some cases which provides a multi-year revenue stream.
- Tender quantities could be large quantities and high value orders.
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- Preparing for tenders consumes significant resources. BD Dept. must spend a lot of time to define usually vague product specifications and tender terms, Procurement Dept. must do due diligence to align the most suitable manufacturers, and the Registration Dept. must prepare a lot of documentation.
- Prices submitted for tenders must be very low as there is a lot of competition, especially when competing directly against manufacturers. Therefore, profit margins can be very slim. The end result could be a lot of time, effort and resources for little profit that actually creates a loss.
- Tenders might require submitted products to be registered in the country of importation. In this case, it is in our advantage if our products are already registered, but if not then our scope of eligible products is greatly reduced, thereby also reducing our chances of winning any of the products.
- Tender terms are usually unfavorable in terms of payment terms, production time and penalties for any breach of terms. Risk exists that could result in order not being completed, leaving AdvaCare with stock that is difficult to resale.
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