Does Pharmaniaga hold a monopoly over healthcare? Deputy health minister explains

John Bunyan
Dr Lee explained that the firm distributes medicine in the Approved Products Purchase List (APPL), while the purchase of the drugs falls under the Ministry of Health (MoH) rather than the company. — Picture by Farhan Najib

IPOH, Sept 11 — Finance Minister Lim Guan Eng’s recent remarks on Pharmaniaga Bhd’s supposed monopoly has cast a spotlight on the drug concessionaire, following news of a review of other similar cartels as Putrajaya carries out a cost-cutting exercise.

When queried by Malay Mail, Deputy Health Minister Dr Lee Boon Chye explained that Pharmaniaga is only responsible for the logistics of supplying drugs to government health facilities, rather than the supply itself. 

Dr Lee explained that the firm distributes medicine in the Approved Products Purchase List (APPL), while the purchase of the drugs falls under the Ministry of Health (MoH) rather than the company.

“Pharmaniaga is the concession holder for the distribution of APPL drugs to MoH facilities,” he told Malay Mail in a brief interview. 

“Under the concession agreement, Pharmaniaga provides the logistics for APPL drugs only, 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 prices.

“The APPL drugs, which are valued at about RM1.1 billion in 2017 and RM1.2 billion in 2018, are purchased via a tender board headed by MoH and not Pharmaniaga,” he stressed. 

Last week, Finance Minister Lim Guan Eng had announced that Putrajaya will be re-looking at its existing contract with Pharmaniaga, and expressed concerns about the effects of an alleged drug provision monopoly on public healthcare cost. 

Lim said that the alleged monopoly is costing the government more than RM1.1 billion yearly and the government had also allocated a total of RM193.6 billion between 2010 and 2018, for the provision of healthcare services alone.

He also said that the public health system could spend more efficiently and the problem of rising living costs could be addressed if MoH introduces a healthy competition to the drugs supply market. 

Lim also called on the MoH to carry out administrative reforms to enable savings on expenditure, and the delivery of more efficient healthcare services.

In response, Dr Lee clarified that Pharmaniaga is not the sole logistic solution for drugs for MoH and private health facilities, as there are other established companies providing similar services.

He also added that the RM1.1 billion figure cited is not the amount of money spent on Pharmaniaga each year, but for the total purchase of the APPL drugs. 

“The logistics cost and profit to Pharmaniaga is a fraction of that amount,” he added. 

Dr Lee further explained that the APPL drugs are purchased through a tender exercise done every three years. 

“The tender board headed by MoH selects the suppliers of products for the APPL based on product specifications and criteria. 

“Pharmaniaga handles the logistics of these APPL drugs from the suppliers to ensure timely delivery of the drugs to all the clinics and hospitals under MoH,” he said. 

However, Dr Lee points out that Pharmaniaga only supplies APPL drugs which only makes up around one-third of the RM1.1 billion purchase. The other two-thirds are drugs not in the APPL, bought by central contracts or quotations. 

“These drugs are distributed by the logistics service provider appointed by the respective drug suppliers. 

“Pharmaniaga supplies some of the APPL drugs, but does so via the tender process and not directly to MoH. The supplier is decided by the tender board,” he explained. 

The Edge Financial Daily previously reported Pharmaniaga as saying that only 33 per cent of the ministry’s supplies come from the group. 

Following Lim’s remarks, Dr Lee said he appreciates the 3R (Repairs, Replace and Restore) suggestions by the finance minister and added his ministry is always striving to ensure cost effective delivery of quality healthcare to the public. 

He also agreed with Lim’s suggestions to have a healthy competition in the drug supply market. 

“We always strive to encourage competition to ensure quality and value for money,” he said. 

When asked if the ministry will renew the contract with Pharmaniaga, as the firm’s 10-year concession agreement with the government is expected to end this November, Dr Lee said the decision rests with the Cabinet.

Malay Mail had also contacted Datuk Seri Dzulkefly Ahmad for comments, but the health minister could not respond in time for publication.

Pharmaniaga has not responded to Malay Mail’s request for comments yet.

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