MD: If Pharmaniaga rakes in profit, people say we rip off govt

‘To be honest, I think people should see beyond the profit figure. We had fulfilled all the 21 KPIs set by the govt’

by AZREEN HANI / pic by HUSSEIN SHAHARUDDIN

PHARMANIAGA Bhd MD Datuk Farshila Emran (picture) said the public and related stakeholders should look at the delivery performance achieved by the concession holder and not measure the firm solely on the balance sheet.

Farshila said the pharmaceutical firm had complied and fulfilled all the 21 key performance indexes (KPIs) set by the government, including the hefty investment in the Pharmacy Hospital Information System (PHIS).

She said the concession requires the company to invest RM340 million to develop and implement the PHIS, and surrender the intellectual property to the government.

“It has been implemented at more than 1,200 Ministry of Health (MoH) facilities. Without PHIS, we would have higher profit, but with this system, our overall profit before tax margin for the entire concession period is at about 1.18%.

Such a low profit proves that the concession is value for money for the government.

“To be honest, I think people should see beyond the profit figure. If we make a lot of profit, people will say we are ripping off the government.

“So, I do not understand what seems to be the issue. We are the proof of a concession model that benefits both the people and the government,” said the outgoing MD in an exclusive interview with The Malaysian Reserve.

During the 60-minute interview, the 54-year-old executive, who will leave the Boustead Bhd-controlled company at the end of March, spoke of the many challenges faced by herself and the concession holder.

She didn’t hold back against the constant criticism on the firm’s profitability.

The MoH announced in 2018 that it would review the whole end-toend supply chain of drugs to ensure that any form of monopoly would be eliminated. Finance Minister Lim Guan Eng last year had also expressed his “uneasiness” over the effects of an alleged drug provision monopoly on public healthcare cost.

However, the government awarded a 25-month interim concession period for Pharmaniaga effective Dec 1, 2019.

Last month, Pharmaniaga confirmed Farshila’s departure and Mohamed Iqbal Abdul Rahman, the current COO, would assume the position of the acting MD.

Farshila also denied the monopoly claims, stressing that Pharmaniaga only supplies about 33% of overall drug and consumable purchases by the MoH.

“People tend to forget that this company has inherited a concession term in the past and we are running it based on the concession terms.

“We do not choose our vendors. So far, 90 vendors have been selected by the ministry,” she said, adding that suppliers are determined by the ministry upon completion of an open tender every three years.

But Farshila remained optimistic that Pharmaniaga would remain as the main distributor should the government decide to conduct an open tender for the distribution of medicine.

“We are confident we can do without the concession because we have the capabilities and expertise,” she said.

She also said the company had been preparing succession plans for all three management levels in the last few years.

“We have put the succession plan in place since the last few years because we are confident with the manpower and work culture that we have.

“I have the trust with our COO to take the helm of the leadership because he knows and understands what is at stake. We are not in a typical commercial business. Ours directly involves the lives of others,” she added.

Yesterday, Pharmaniaga announced a net loss of RM178.6 million in the fourth quarter ended Dec 31, 2019, from a net profit of RM4.44 million a year ago.

The poor result was due to the revision in the useful life of the rights to supply, a non-cash item worth RM247 million and the provision of stock write-off on the voluntary recall of the Ranitidine products.

“The rights to supply are expenses incurred for PHIS in providing and supplying to the government of Malaysia certain hardware and software, being part and parcel of the ordinary contractual obligations under the concession agreement.

“The title of the said hardware and software vests with the government of Malaysia. With the new contract arrangement, the remaining unamortised rights to supply has been fully recognised in the current period,” the company told Bursa Malaysia yesterday.

Revenue for the quarter rose 19.95% year-on-year to RM715.68 million from RM596.64 million last year, mainly attributable to stronger demand from the concession, non-concession and Indonesia businesses.

For the whole of 2019, Pharmaniaga posted a net loss of RM149.22 million compared to a profit of RM42.47 million recorded in 2018. Its shares closed 0.99% or two sen higher to RM2.04, valuing the company at RM532.91 million.