KUALA LUMPUR: The inclusion of Pharmaniaga Berhad in Bursa Malaysia’s Practice Note 17 classification of financially distressed companies represents a wake-up call for the pharmaceutical sector.
It highlights the need for reforms to be introduced, particularly in the public sector’s practices on procurement of medicines.
“The situation affecting Pharmaniaga is very worrying and has potentially severe implications across the entire Malaysian pharmaceutical landscape, especially the public health sector,” said Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib.
“If the company deteriorates further, there could be a massive disruption to the supply of medicines and drugs to the public healthcare system.”
He said the situation affecting Pharmaniaga exposes vulnerabilities in the public healthcare sector’s pharmaceutical procurement processes and highlights the need to undertake urgent reforms.
Azrul added that there was a need to emphasise the importance of competition and diversity of suppliers, removal of tender agents as middlemen and reduce government interference (in the acquisition of medicines).
“Pharmaniaga previously enjoyed an exclusive concession for more than a quarter of a century to purchase, store, supply and distribute at least 700 pharmaceutical products under the Approved Products Purchase List. This represents more than a third of the government’s branded and generic drug and medicine supply. Pharmaniaga also has the logistics and distribution contract for these medicines.
“The government’s practice of (awarding) exclusive concessions that grant individual companies, such as Pharmaniaga and other GLCs major influence and dominance over large portions of our healthcare system, including hospital services, creates an unhealthy dependence.
“These companies will be considered indispensable and become ‘too big to fail’. Our public healthcare system will be at risk of massive disruption should these GLCs run into difficulties.”
He said in 2019, the government committed to moving away from concession agreements and adopting open tenders. However, this was disrupted by the Covid-19 crisis, causing Pharmaniaga to be given multiple extensions. Hence, reducing the reliance on such arrangements was not achieved.
“Reforms should also include removing dependence on tender agents who act as middlemen in the procurement process. They charge a commission for their services and increase the cost of medicines.
“Allowing suppliers to negotiate and bid directly with the government could potentially save millions of ringgit in public funds, lower prices, increase
cost-effectiveness and allow newer therapies to be made available for patients. It will introduce improved diversity of suppliers and reduce vulnerability.”
However, Azrul does not think that Pharmaniaga’s PN17 classification would cause any disruption of public healthcare sector services.
But the situation could change rapidly if its financial situation does not improve within the next year, he added.
“It is unlikely that Pharmaniaga will be able to offload the majority of its Sinovac Covid-19 vaccines worth RM552.3 million, which reportedly expire in June 2024. A better understanding of the performance of the vaccines and the disease has resulted in significantly decreased demand (for this vaccine) from countries in the region.
“Pharmaniaga’s stock must also compete with the new generation of bivalent Covid-19 vaccines, which are starting to become available, promising improved coverage of new variants of the coronavirus.
“The government, if it chooses to intervene, has several options. It could provide a significant cash infusion, guarantee or bailout for the GLC, which will likely be in the range of RM700 million to RM900 million.
“It could also provide a government guarantee, which Pharmaniaga could rely on to facilitate financial arrangements or obtain credit from banks or other financial institutions,” he said.
