A major supplier of pharmaceuticals to government hospitals, Pharmaniaga announced it had fallen under the PN17 classification on Monday following its largest ever quarterly net loss of RM664.39 million in the fourth quarter ending Dec 31, 2022.
It said the loss was driven by a RM552.3 million impairment on unsold Covid-19 vaccines.
Describing the development as a “wake up call” for the pharmaceutical sector, Galen Centre for Health and Social Policy said it has “potentially severe implications” across the entire Malaysian pharmaceutical landscape, especially the public health sector.
“The situation affecting Pharmaniaga exposes vulnerabilities in the current public health sector’s pharmaceutical procurement processes and highlights the need to undertake long argued-for reforms in this sector,” its CEO, Azrul Mohd Khalib, said in a statement today.
“The government’s practice of exclusive concessions which grant individual companies such as Pharmaniaga and other GLCs major influence and dominance over large portions of our healthcare system, including hospital services, creates an unhealthy dependence.
“These companies will be considered indispensable and become ‘too big to fail’.
“Our public healthcare system is at risk of massive disruption (to the supply of medicines and drugs) when those GLCs run into difficulty. This is one such example.”
Among the reforms Azrul suggested are reducing government interference, increasing competition, diversifying suppliers, and getting rid of tender agents as middlemen.
He said removing dependence on tender agents, who act as middlemen within the procurement process and charge commission for their services, would result in lower cost of medicines.
Azrul said allowing suppliers to negotiate and bid directly with the government could also potentially save millions in public funds, increase cost effectiveness, and allow for newer therapies to be made available for patients.
While he said Pharmaniaga’s PN17 classification would not disrupt its ability to service the public health sector in the short-term, the situation could “change rapidly” if the company’s financial situation did not improve within the next year.
He said if the government chose to intervene in Pharmaniaga’s predicament, it could provide a significant cash infusion or bailout for the GLC, which would likely be in the range of RM700 million to RM900 million.
The government could also provide a guarantee which Pharmaniaga could rely on to facilitate financial arrangements or obtain credit from banks or other financial institutions.
Another suggestion was to grant Pharmaniaga a new concession arrangement, which would guarantee it a significant and predictable volume of business for years to come.
“The last option would be good and build confidence in Pharmaniaga, but not necessarily beneficial for the government, healthcare system or patients overall,” he said.