THE decision to extend the concession agreement with Pharmaniaga Bhd for another 10 years represents a major blow to much needed healthcare reforms, Galen Centre for Health and Social Policy said. 

Its chief executive officer Azrul Mohd Khalib stated that while the decision represented a big win for the company and good news for its shareholders, it confirmed that the Malaysian health system was vulnerable and heavily dependent on a single company. 

“It also contradicts and refutes the previous denials that there is no such dependency. The government’s practice of exclusive concessions – which grants individual companies such as Pharmaniaga and other GLCs a dominant grip and major influence over large portions of our healthcare system, including hospital services – has created an unhealthy over-dependence in the belief that these companies will be considered indispensable and become ‘too big to fail’. This decision confirms that perception,” Azrul said. 

He added that the government’s decision would also send a signal to all pharmaceutical players that there was no point in building, investing, and growing their businesses here to compete for the provision of medicines under the concession arrangement as Pharmaniaga has practically locked it up for another decade.  

“This is poor business practice, deprives the Malaysian public healthcare system and the people of this country from the benefits of healthy competition, reduces the diversity of providers, and maintains the existence of tender agents as middlemen, which unnecessarily increases the costs of medicines,” he said. 

Azrul highlighted the fact that allowing suppliers to negotiate and bid directly with the government could potentially ensure savings of millions in public funds as well as lower prices, increase cost-effectiveness and provide for newer therapies to be made available for patients.  

He stressed that the practice would introduce improved diversity of suppliers, reduce vulnerability, and increase resiliency.  

“It will force companies like Pharmaniaga to improve and not take their business for granted. A renewal of a concession agreement lasting for a decade will unlikely have that effect,” he added. 

Yesterday, Health Minister Dr Zaliha Mustafa said the concession agreement for Pharmaniaga Bhd to provide medicine and medical supplies to health ministry facilities had been extended. 

Pharmaniaga was given a conditional agreement to continue supplying medical supplies to the government for 10 years in January 2022 subject to agreement on terms, which were supposed to be finalised before December 31, 2022. 

The pharmaceutical company was then given a six-month extension to continue its supply until the end of June pending finalisation of the new concession deal. 

In February, Pharmaniaga fell under the Practice Note 17 (PN17) classification for financially distressed companies after posting its largest ever quarterly net loss of RM664.39 million in the fourth quarter ended December 31, 2022. 

It said it had taken a RM552.3 million impairment on unsold Covid-19 vaccines and also wrote down the goodwill of its Indonesian manufacturing cash-generating units of RM50.3 million. 

Pharmaniaga, a subsidiary of Boustead Holdings, is one of Malaysia’s largest listed integrated pharmaceutical groups and has lucrative contracts with the government, including the provision of Covid-19 vaccines. – April 19, 2023.