PETALING JAYA: The transition towards value-based procurement (VBP) and managed entry agreements (MEAs) can create significant structural advantages for domestic manufacturers, concessionaires and patients across Malaysia’s public healthcare ecosystem.
According to MBSB Research, these frameworks could secure demand for locally produced medicines while enabling earlier patient access to expensive treatments without overwhelming government finances.
“Local generic and biosimilar producers gain high-volume demand security by anchoring Tier 1 tenders, which generates essential budget savings that the Health Ministry (MoH) reallocates to fund Tier 3 novel therapies,” it said.
MBSB Research maintained its positive recommendation on the healthcare sector in its latest report. Under VBP, procurement decisions consider treatment outcomes, supply reliability and longer-term benefits rather than purchase prices alone.
“By shifting to VBP, MoH could prioritise a drug’s total lifetime value, such as reducing hospitalisations and ensuring supply security, over initial cost alone,” the research house said.
“MEAs, meanwhile, establish risk-sharing arrangements between the MoH and pharmaceutical manufacturers to manage the financial and clinical uncertainties associated with specialised medicines,” it said.
“These can involve spending caps, discounts, free doses or refunds when treatments fail to achieve agreed outcomes.”
“Under performance-linked MEAs, clinical and financial risks shift heavily to suppliers, requiring mandatory rebates or refunds if novel drugs fail to hit real-world endpoint targets,” MBSB Research said.
The reforms come amid rising expenditure on medicines for non-communicable diseases, particularly cancer, diabetes and cardiovascular conditions, alongside an ageing population and increasing demand at public facilities.
The research house said generic procurement helped preserve government funding for essential patented medicines.
It noted MoH allocated approximately 78% of its drug spending to generics and 22% to patented and novel treatments.
“A strong emphasis on domestic manufacturing and data-driven logistics strengthens national drug security, optimises inventory forecasting and fortifies supply chain resilience against global disruptions,” it said.
MBSB Research identified Pharmaniaga Bhd
and Duopharma Biotech Bhd as its preferred pharmaceutical names.
It maintained its “buy” recommendation and RM1.44 target price for Pharmaniaga while Duopharma remained non-rated stock with a RM1.36 fair value.
“Pharmaniaga benefits from these frameworks by its ability to anchor long-term MoH procurement tenders for chronic disease medications, securing predictable supply volumes and profitability.
“The group also operates as a primary logistics concessionaire and major supplier, giving it a strong foothold in the area.”
“Duopharma could similarly benefit from recurring public-sector demand for locally manufactured generics, while both companies were positioned to support efforts to reduce reliance on imported finished pharmaceutical products,” it added.
However, MBSB Research cautioned that regulatory approval alone would not guarantee public reimbursement, with expensive medicines also subject to cost-effectiveness assessments and budget constraints.
