KUALA LUMPUR, Sept 9 — The government is reviewing its drug procurement concession with Bumiputera tender agent Pharmaniaga that Finance Minister Lim Guan Eng described as a “monopoly”.
Lim noted that the public health system has to deal with rising costs as Malaysia becomes an ageing society, as it is projected that 7 and 14 per cent of Malaysians will turn 65 or older by 2020 and 2045 respectively.
“The government is also concerned with monopoly power over the provision of drugs and its effects on health care cost,” Lim said in a speech at a 2020 Budget focus group meeting on health last Friday.
“We are currently studying the existing contract between the government and Pharmaniaga to find the best way forward to address the problem.
“At the moment, the monopoly is costing the government more than RM1.1 billion yearly.”
Lim urged the Health Ministry to implement administrative reforms to enable savings and to improve the efficiency of health service delivery.
He said the Finance Ministry had a new policy of returning savings made by any ministry through such administrative changes so that ministries would not simply request for additional funding.
“I believe the public health system will be able to spend more efficiently and help address the problem of rising living costs, if we are able to introduce healthy competition within the drugs supply market,” said the finance minister.
He noted that the Health Ministry’s RM29 billion allocation in the 2019 Budget comprised about 9 per cent of total budget spending by the federal government, making it among the largest ministries in terms of spending.
Lim’s remarks about reviewing Pharmaniaga’s concession with the Ministry of Health (MOH) come ahead of the Bumiputera tender agent’s contract expiring in less than three months on November 30.
Dr Salmah Bahri, former senior director of MOH’s Pharmaceutical Services Programme, warned the government recently that public hospitals could face drug shortages if it didn’t quickly decide on Pharmaniaga’s concession.
Domestic Trade and Consumer Affairs Minister Saifuddin Nasution Ismail reportedly said last April that a Cabinet committee on monopolies was investigating Pharmaniaga that has been exclusively procuring certain drugs for the government for 25 years.
Pharmaniaga is the biggest Bumiputera tender agent in the country with exclusive concession to supply 700 items in the Approved Product Purchase List (APPL), determined by MOH, to government hospitals, institutions, and clinics. This comprises over a third of the government’s drug supply.
The company received sole concession for a quarter of a century since Putrajaya privatised the medicine procurement system in 1994.
Pharmaniaga’s concession provides distribution and logistics services for the products procured under the APPL. According to the Malaysia Competition Commission (MyCC), Pharmaniaga supplied 38.5 per cent of the total cost of medicines procured for all MOH hospitals, institutions and clinics in 2015.