Pharmaniaga confident of securing govt contracts based on past performance

In September, Finance Minister Lim Guan Eng(pic) had announced that Putrajaya would review its existing contract with Pharmaniaga, and expressed concerns about the effects of an alleged drug provision monopoly on public healthcare cost. Analysts said investors had sold down the stock because they did not like uncertainty, even though there are chances that the company may win a contract even in an open tender system

PETALING JAYA: Pharmaniaga Bhd has voiced its confidence in securing contracts from the Health Ministry even as its share price tanked 11.6% following the termination of its concession to distribute medicine in the country.

The company will see its exclusive concession to distribute drugs and medical supplies for the Health Ministry ending from Nov 30, with an open tender system being introduced.

“Pharmaniaga is optimistic about its capabilities to continue serving the nation.

“As the government believes in meritocracy, the company is confident that its performance will be the key factor to continue its services, ” it said in a statement.

“Pending the Cabinet’s decision, it is business as usual and we will continue to provide our best services for the rakyat, ” it added.

There will also be no concessionaire for the logistics and distribution services, according to Health Minister Datuk Seri Dr Dzulkefly Ahmad.

Pharmaniaga’s shares fell 11.60% or 29 sen to RM2.21 per share with some 1.24 million shares changing hands yesterday.

They are at the lowest level since mid-May 2019.

Analysts said the development was expected given that the issue had already been highlighted by top government officials recently.

“I believe the Pakatan Harapan manifesto had also mentioned that it would break the monopoly by businesses. The manifesto mentioned specifically Astro Malaysia Holdings Bhd and Bernas for the broadcast and rice sector, ” an analyst said.

In September, Finance Minister Lim Guan Eng had announced that Putrajaya would review its existing contract with Pharmaniaga, and expressed concerns about the effects of an alleged drug provision monopoly on public healthcare cost. Analysts said investors had sold down the stock because they did not like uncertainty, even though there are chances that the company may win a contract even in an open tender system.

Analysts assumed things would remain status quo for Pharmaniaga in its forecasts despite a possibility of its concession being reviewed.

Pharmaniaga has been the sole concessionaire providing the services since 1994.

The agreement was last renewed in 2009 for a period of 10 years.

However, to ensure that medical supplies and health services are not disrupted, Pharmaniaga’s services will be extended until the Cabinet decides on the mechanism to manage the open tender, according to Dzulkefly.

“There will be no concessionaires, ” he said after launching the SNOMED CT Expo 2019 yesterday.

Dzulkefly said the matter would be presented to the Cabinet for a decision on the mechanism for open tender expected to be ready by the first quarter of next year.

Pharmaniaga has held exclusive rights to purchase a list of medical products under the Health Ministry’s approved product purchase list (APPL) from suppliers selected by the ministry.

However, it procures the products at prices which have been predetermined by the ministry with its suppliers.

Under the concession agreement, it is only responsible for the logistics of supplying APPL drugs to government health facilities, which includes collection, storage and distribution based on a standard criteria or key performance indicator, and earns a fixed percentage mark-up over the purchase price.In June last year, Dzulkefly had refuted that Pharmaniaga was monopolising the supply of medicine to the ministry.

He said the ministry had spent RM3.3bil on medicine and consumable items in 2017 and only 33.4% or RM1.1bil of the ministry’s pharmaceutical spending was from Pharmaniaga, while 66.6% (RM2.2bil) was purchases by the facilities through central contracts or quotations.

Nevertheless, he had said such a huge portion of supply coming through an opaque direct-negotiation mechanism of concession agreements and other similar concessions for hospital services was a cause for concern for the public.

While Pharmaniaga had previously been accused of monopolising the APPL products, the role of the middleman, the bumiputra tendering agents, had been blamed for being in cahoots with big pharmaceutical companies for the high price of non-APPL products, which foreign pharmaceutical companies could participate in the open tender process by using a local bumiputra tendering agent.