Pharmaniaga sees 300% spike in orders on concession review

The sudden jump is due to fear of medicine supply disruptions, especially in rural areas

by AZREEN HANI/ pic by HUSSEIN SHAHARUDDIN

PHARMANIAGA Bhd had witnessed a 300% spike in orders, largely from hospitals and government clinics last week after the government announced the firm’s drugs and medical supply concession would end next month.

A source within the firm said the sudden jump was due to fear of medicine supply disruptions, especially in rural areas.

“We are getting more orders and at the same time various vendors have expressed concerns on whether there would be a disruption to the supply chain in the near term,” the source told The Malaysian Reserve.

Pharmaniaga has 90 vendors under the Health Ministry’s (MoH) approved product purchase list (APPL), supplying drugs and medical devices to 1,600 hospitals and clinics throughout the country.

Under the concession, Pharmaniaga purchases, stores, supplies and distributes at least 700 pharmaceutical products. But the concession ends this Nov 30.

The government had reviewed Pharmaniaga’s supply contract and decided not to renew the concession.

Pharmaniaga was awarded the concession in 1994. Some parties had requested the government to open the sector after 25 years of single operator contract.

Last week, Health Minister Datuk Seri Dr Dzulkefly Ahmad said the government would no longer implement a concessionaire for logistics and distribution services.

The government plans to implement an open tender system as it seeks to remove any monopolistic practices.

The government had argued the move to liberalise the supply chain would create competition and deliver a more cost-competitive pricing to the ministry. One of the largest spending by the MoH was on medicine and medical supplies.

The source did not deny worries over supplies had stroked the panic orders among customers and vendors.

“There were already concerns on whether the supplies, especially to areas inaccessible by land, can be done within the time stipulated, as what Pharmaniaga has been doing all these while,” said the source in the firm.

A vendor under the company’s concessionaire Antamax Manufacturing Sdn Bhd, expressed worries that any firm that may be selected under the open tender system may not be able to fulfil the vendors and customers’ demands.

“My worry is about APPL. Prior to this, we have been dealing with MoH directly under the central contract system. We had to manage the logistics side on our own, it’s very troublesome for us,” said

Antamax Manufacturing director Mohd Amirrol Mohd Shariff. “We can manufacture, but we found it hard to deliver our supply ourselves. These are additional costs as we are not in the logistics business. We do not have the infrastructure or expertise such as Pharmaniaga.

Will the new party be able to treat us as objectively as the firm?” he asked.

Mohd Amirrol also said prices of medicine had been set by the ministry and not Pharmaniaga.

“Even if there were, the ministry has a system where it could see where the increase was coming from, everything was on the record,” he added.

Another vendor, Foresight Sdn Bhd CEO Zulkifli Ismail questioned whether the concessionaire’s revision was meant to encourage foreign players into the market.

“I think if the government decides to appoint a new player, it will take some time for the new company to adjust and deliver the supplies accordingly,” Zulkifli said when contacted.

“I am doubtful that with the open tender system, we can lower the total costs as well. What I fear is, private companies may impose minimum order quantity for any orders, and the customers may have to incur more cost,” he said.

According to Hong Leong Investment Bank Bhd, Pharmaniaga could likely be retained as a key distributor due to the many issues which need to be ironed like the overall framework, tender and evaluation.

“Until all these are resolved, the government is likely to extend the logistics and distribution services of Pharmaniaga beyond Nov 30, 2019 (official concession expiry date), this has been echoed by MoH,” it said in a research note last week.

Pharmaniaga had expressed confidence in securing the right to distribute even in an open tender system, attributable to its extensive logistics network and infrastructure.

“As the government believes in meritocracy, the company is confident that its performance will be the key factor to continue its services either through an extension of concession or open tender contract,” it said.

“Pending the Cabinet’s decision, it is business as usual and we will continue to provide our best service for the rakyat, consistent with our tagline ‘Passion for Patients’,” the company said.