Pharmaceutical Procurement: Definition, Process + Best Practices

What is Pharmaceutical Procurement?

Pharmaceutical procurement involves purchasing and managing medicines, vaccines, and medical supplies to ensure they reach patients on time, safely, and at the best possible cost. It is one of the most important parts of any healthcare system because, without it, hospitals and pharmacies cannot function properly.

Unlike general procurement, pharmaceutical procurement must balance many sensitive factors: price, quality, safety, and compliance with national and international laws. Every purchase has a direct impact on human health, so mistakes are costly not only for organizations but also for patients.

A good procurement system makes sure that the right products are bought from approved suppliers, stored correctly, and distributed without interruption. It also ensures transparency in every step, from tendering to delivery, to prevent corruption, waste, and shortages.

The Pharmaceutical Procurement Process

Pharmaceutical procurement follows a structured seven-step process that ensures medicines and medical products are purchased safely, cost-effectively, and in compliance with health regulations. Since every decision impacts patient safety, transparency and quality control are important at every stage.

Here’s how the pharmaceutical procurement process works:

1. Sourcing Methodology

Every successful procurement begins with a clear sourcing plan. In the pharmaceutical industry, this involves defining the necessary products (such as antibiotics, vaccines, or medical devices), securing management and regulatory approval, and establishing a qualified sourcing team. This team includes pharmacists, procurement officers, and quality assurance specialists who review consumption data, stock levels, and treatment guidelines.

The sourcing methodology sets the foundation for the rest of the process. It ensures that procurement goals, such as uninterrupted medicine supply, cost control, and regulatory compliance, are clear from the outset.

2. Market Research

Market research in pharmaceutical procurement involves studying suppliers, availability, and pricing, but also verifying product registration, certifications, and global shortages. Procurement teams check national essential medicines lists, WHO prequalified suppliers, and current market trends to understand what’s available and at what price.

For example, before ordering insulin, teams must know which manufacturers are approved by health authorities and whether cold chain transport is feasible. Thorough research helps prevent shortages, stockouts, and purchases of substandard or counterfeit medicines.

3. Request for Information (RFI)

The request for information (RFI) stage gathers detailed data from suppliers and internal stakeholders to clarify needs. Hospitals or public agencies send RFIs to understand suppliers’ capacity, lead times, and compliance with Good Manufacturing Practices (GMP).

This step ensures that specifications are realistic and aligned with treatment demands and budget limits. For example, if several suppliers produce the same generic antibiotic, the RFI helps determine which one offers the best balance of quality, delivery time, and regulatory reliability.

4. Request for Quotation (RFQ)

Once requirements are clear, procurement teams issue a request for quotation (RFQ) to prequalified suppliers. This formal request asks for pricing, delivery schedules, and payment terms for each medicine or product. In public health systems, RFQs are often published as open tenders to ensure fairness and transparency.

Evaluations focus not only on price but also on supplier reliability, storage conditions, and logistics capabilities. A supplier offering lower prices but poor cold chain control, for example, would be disqualified to protect patient safety.

5. Negotiation Phase

Negotiations in pharmaceutical procurement go beyond price discussions. Teams must secure stable supply agreements, ensure consistent quality, and protect against future shortages. Negotiation topics often include delivery frequency, packaging standards, and penalties for late shipments.

Data-driven negotiation helps both sides reach fair terms. For instance, a hospital may agree to longer contracts in exchange for volume discounts or prioritize suppliers who guarantee stock availability during public health emergencies.

6. Contracting Phase

Once terms are agreed upon, all details are formalized in a written contract. Pharmaceutical contracts must specify not just pricing but also product registration numbers, batch tracking, shelf life, and cold chain requirements. Clear documentation ensures accountability and compliance with both local and international regulations.

Many organizations use digital Contract Lifecycle Management (CLM) tools to store agreements securely and monitor renewals. Accurate record-keeping is especially important in health systems that rely on donor funding or national audits.

7. Supplier Relationship Management (SRM)

After signing, the focus shifts to managing and monitoring supplier performance. This includes regular delivery reviews, quality inspections, and audits of Good Distribution Practices (GDP). If a supplier fails to meet standards, for example, delayed vaccine delivery or temperature excursions, corrective actions are triggered immediately.

Building long-term, trust-based relationships with reliable suppliers is crucial in the pharmaceutical industry. Strong supplier relationship management ensures continuous access to safe, effective, and affordable medicines for all patients.

When these seven steps are followed carefully, pharmaceutical procurement becomes more than a purchasing task; it becomes a life-saving system that ensures quality, transparency, and reliability across the entire healthcare supply chain.

Examples of Successful Pharmaceutical Procurement Models

Pharmaceutical procurement can be complex, from ensuring quality to maintaining supply during crises. To see what works in practice, let’s look at how three organizations: UNICEF, WHO, and Novartis, built effective, transparent, and scalable procurement models.

1. UNICEF Supply Division: Pooled Procurement for Vaccines

UNICEF manages one of the world’s largest pharmaceutical procurement programs, supplying vaccines and essential medicines to over 100 countries each year. Their model is based on pooled procurement, where multiple countries combine their vaccine orders into one large purchase.

This approach increases buying power, reduces prices, and improves supply security. By aggregating demand, UNICEF can negotiate long-term contracts with manufacturers and ensure predictable delivery schedules for public health programs.

2. World Health Organization (WHO): Quality Assurance System for Procurement Agencies

The WHO developed the Model Quality Assurance System (MQAS) to help public and private agencies buy safe, effective, and high-quality medicines. It provides clear guidance on supplier pre-qualification, manufacturing inspections, and product testing before purchase.

Procurement agencies using this model follow strict quality control procedures, including supplier audits, Good Manufacturing Practice (GMP) checks, and performance monitoring. This ensures that every medicine purchased meets international standards before reaching patients.

3. Novartis: Global Procurement Transformation

Novartis, one of the world’s largest pharmaceutical companies, transformed its procurement function to become a strategic business driver rather than a cost center. Through a global initiative, the company unified its procurement across divisions, aiming to save USD 4 billion over four years.

They introduced data analytics to track spending, supplier performance, and sustainability metrics in real time. By standardizing sourcing processes worldwide, Novartis gained better visibility, reduced duplication, and increased efficiency. Sustainability also became a priority: the company began measuring the environmental impact of suppliers and promoting greener practices throughout the supply chain.

7 Best Practices in Pharmaceutical Procurement

Effective pharmaceutical procurement is not just about securing the lowest price. It’s about ensuring every product is safe, reliable, and readily available when patients need it. Below are seven best practices that help procurement teams achieve these goals.

1. Ensure Transparent and Competitive Tendering

Transparency builds trust. Every tender should follow clear, open procedures where all qualified suppliers have an equal chance to compete. This means publishing tender notices publicly, using standardized evaluation criteria, and documenting every step of the decision process. For example, a public hospital can use an e-procurement platform to receive bids online, which reduces manual errors and prevents corruption.

2. Focus on Quality, Not Just Price

Low prices mean nothing if the medicine doesn’t work. Procurement teams should always prioritize quality and safety before cost. Suppliers must provide certificates of analysis, regulatory approvals, and proof of compliance with international standards like GMP. By focusing on verified quality, organizations reduce the risk of counterfeit or substandard medicines entering the supply chain.

3. Build Long-Term Supplier Relationships

Pharmaceutical procurement works best when buyers and suppliers trust each other. Instead of changing suppliers frequently, focus on building long-term partnerships based on performance and transparency. For instance, agreeing on multi-year contracts with reliable suppliers ensures stable pricing, predictable deliveries, and shared responsibility for quality.

4. Use Data for Better Decision-Making

Data helps procurement professionals make smarter choices. By tracking consumption patterns, delivery performance, and market prices, teams can forecast needs more accurately and prevent stockouts. Modern digital tools and dashboards can show trends in real time, helping organizations adjust their plans before problems occur.

5. Strengthen Risk Management and Supply Resilience

Global medicine supply chains are complex and vulnerable to disruptions, from transport delays to raw material shortages. To stay resilient, procurement teams should diversify suppliers, keep safety stock for critical medicines, and plan alternative sourcing routes. For example, during a global shortage of antibiotics, having two or more approved suppliers can prevent treatment interruptions.

6. Integrate Sustainability and Ethics

Pharmaceutical procurement also carries a social responsibility. Choosing suppliers that use ethical labor practices, reduce waste, and minimize carbon emissions supports both people and the planet. Some health systems now include sustainability criteria in tenders, for example, giving higher scores to suppliers with green packaging or energy-efficient production.

7. Invest in Capacity Building

People make the process work. Training procurement staff in topics like market analysis, contract management, and regulatory compliance strengthens the entire system. Regular workshops or e-learning programs ensure teams stay updated on new laws, digital tools, and global procurement standards.

Major Challenges and How to Solve Them in Pharmaceutical Procurement

Pharmaceutical procurement is one of the most complex and high-stakes parts of healthcare supply chains. Getting the right medicine to the right place at the right time sounds simple, but in practice, it requires managing risks, regulations, and logistics under constant pressure.

Below are the biggest challenges procurement professionals face, along with practical solutions to overcome them.

1. Supply Shortages and Delays

The challenge:

Medicine shortages can happen for many reasons, from production problems and raw material shortages to transport disruptions or export bans. Even a short delay can affect patient treatment and hospital operations.

2. Quality and Counterfeit Medicines

The challenge:

Fake or substandard medicines can enter the market when quality control is weak or when suppliers are not properly verified. This threatens patient safety and damages trust in healthcare institutions.

3. Price Fluctuations and Budget Limits

The challenge:

Medicine prices can rise suddenly because of global inflation, currency changes, or raw-material shortages. Public hospitals and health agencies with fixed budgets struggle to respond quickly.

4. Complex Regulations and Compliance Requirements

The challenge:

Pharmaceutical procurement must comply with strict national and international rules, covering everything from drug registration to patent protection and import licenses. Missing one regulation can lead to shipment delays or legal penalties.

5. Lack of Data and Digital Tools

The challenge:

Many procurement teams still depend on manual tracking or spreadsheets. This limits visibility across the supply chain and delays decision-making.

6. Corruption and Lack of Transparency

The challenge:

Pharmaceutical procurement often involves large budgets, which can attract unethical practices like favoritism or bribery. These actions waste resources and reduce trust.

7. Environmental and Sustainability Pressures

The challenge:

Pharmaceutical production and logistics generate waste, emissions, and packaging pollution. Many organizations are now expected to consider sustainability in purchasing decisions.