PETALING JAYA: A think tank has called for a revamp of the system of procuring medicines for the public sector to prevent virtual or actual monopolisation by any company.
In welcoming Finance Minister Lim Guan Eng’s statement that Putrajaya was reconsidering its decades-long contract with the government-linked Pharmaniaga, Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib said he feared the possibility that the company would be granted another long-term deal.
He noted press reports saying Pharmaniaga was optimistic that it would get a fresh concession contract.
Citing a study by the Malaysian Competition Commission (MyCC) activist group, Azrul said Pharmaniaga had already enjoyed 25 years of an exclusive concession to purchase, store, supply and distribute at least 700 pharmaceutical products.
“This is about a third of the government’s branded and generic drug supply,” he said, noting that one of the manufacturers was a company owned by Pharmaniaga.
The health ministry also procures drugs through direct tenders and local purchase orders. The purchase orders are for products that are not in the direct tender list and not covered under the Approved Product Purchase List (APPL) programme.
In 2015, Pharmaniaga as the sole concession holder supplied 38.5% of the RM2.3 billion worth of medicines procured for all government hospitals and clinics as well as other health ministry institutions.
The ministry has repeatedly denied claims that Pharmaniaga has a monopoly. Deputy Health Minister Dr Lee Boon Chye recently said the company was responsible only for the logistics of supplying drugs in the APPL programme, adding that purchases came under the ministry.
He said Pharmaniaga earned a mark-up on purchase prices and that the percentage was fixed.
Azrul said the government’s review should include a reconsideration of the provision in the contract that had allowed Pharmaniaga to earn a fixed percentage.
“If it is true that Pharmaniaga is just a logistics company, it should charge a fee,” he said. “Logistics companies do not charge a percentage of the value of the cargo they move.”
He said a more competitive, diverse and transparent procurement and supply chain framework could encourage the availability of better medicines and treatment options, lower the prices of drugs and services, and ensure the financial sustainability of Malaysia’s healthcare system for years to come.
“The government must ultimately transit towards a completely open tender procurement system and do away with long-term exclusive concessions,” he added.
Social activist Lim Mah Hui, one of the conductors of the MyCC study, said Pharmaniaga did not have a monopoly over supply but a virtual monopoly over logistics.
He said the study showed that the margins from the logistics business were thin and that Pharmaniaga’s key performance index was to ensure the drugs could be distributed.
He said prices were affected more by patents held by big multinational companies, but acknowledged there was room for improvement.
“The government is a big purchaser of drugs, but only for the public sector. If you opt for private healthcare, you will pay a lot more for medicines as their margins are higher.”
He said a private hospital recently charged him RM40 per sachet of Fortrans for a colonoscopy. He noted that a box of Fortrans containing four sachets was being sold online for RM60.
“We should look at the Australian system where there is a government body which negotiates with pharmaceutical companies on behalf of the private and public healthcare sectors,” he said.
“This gives the government greater bargaining power. Due to the economies of scale, it can enjoy lower drug prices.
“The big problem is price control, not Pharmaniaga.” - FMT
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