MOH Prepares To Sue Pharmaniaga For Refund Of Defective Ventilators

MOH has drafted a letter of demand to file against Pharmaniaga Logistics Sdn Bhd (PLSB) in court action for the reimbursement of 104 defective ventilators from China, as PLSB had refused a refund, claiming it acted on MOH orders, according to PAC’s report.

KUALA LUMPUR, Nov 1 – The Health Ministry is preparing to take its long-time supplier, Pharmaniaga Logistics Sdn Bhd (PLSB), to court for the reimbursement of 104 defective ventilators supplied in 2020 during the Covid-19 pandemic. 

According to an investigation by Parliament’s Public Accounts Committee (PAC) on Covid-19 management, whose report was tabled in the Dewan Rakyat last Monday, the Ministry of Health (MOH) drafted a letter of demand to PLSB, a fully-owned subsidiary by Pharmaniaga Bhd, earlier this year after a PAC proceeding last June. 

“Based on the previous PAC proceeding, we were advised to explore the possibility of obtaining a refund from Pharmaniaga (PLSB) for the non-functioning [ventilator] units. Out of the 136 units received, 32 are functional, and the remaining 104 are not,” MOH deputy secretary-general (finance) Norazman Ayob said, based on transcripts from the August 22 meeting published in PAC’s report.

“We have drafted a letter of demand to file against PLSB. However, PLSB has verbally indicated that they will challenge the letter of demand, as they claim they were acting under MOH’s instructions. 

“According to them, they were the agents, and we were the principals. Hence, they believe there is no basis for us to reclaim the money, as everything was approved by MOH. But this is something we will look into.”

As a result, plans to donate the 104 defective ventilators to higher learning institutions like Universiti Teknologi Malaysia (UTM), Universiti Teknologi Mara (UiTM), and several other vocational institutions have been postponed.

“The original plan was to hand them over to public universities for research and other purposes. However, because MOH is in the process of seeking reimbursement for the payment made for the 104 defective units, we cannot dispose of them yet.

“If Pharmaniaga contests this matter and it goes to court, we need the 104 ventilators as evidence. So, we cannot hand them over at the moment. They are still in MOH’s possession, yes,” Norazman said.

MOH and PLSB had agreed, in a meeting on September 1, 2020, that the supply of 136 ventilator units bought from China would cost RM24.1 million, inclusive of warranties and upgrade services by PLSB.

Upgrade works by PLSB, billed on top of the initial RM20.1 million used to procure the 136 ventilator units from China, were necessary as most of the purchased ventilators failed the testing and commissioning (T&C) process. It was evident early on, upon receiving the shipment from China, that 104 ventilators were unusable.

On September 2, 2020, MOH signed an order letter for the upgrade of all 136 ventilators, with PLSB committing to perform these upgrades over a week later on September 10.

However, MOH now claims that the 104 defective units (of 136 ventilators received) remain inoperable. MOH said there have been plans to either replace them with 20 non-invasive flowmetry units, based on PLSB’s two-year maintenance fee, or transfer the defective ventilators to public universities.

The PAC report did not indicate how much reimbursement the MOH was seeking for the 104 faulty ventilators. 

The 136 total ventilators were supplied by PLSB to MOH between April and May 2020, following a Cabinet meeting in March 2020, under Perikatan Nasional’s government. Dr Adham Baba was the health minister then.

PLSB Claims It Followed MOH Orders On Ventilator Procurement

In a separate PAC meeting on September 14, PLSB chief operating officer Mohamed Iqbal told the parliamentary committee that PLSB had strictly adhered to MOH’s instructions throughout the ventilator procurement process.

“After the Health director-general made the announcement (on the government’s need for 500 new ventilators), former MOH secretary-general (Chen Chaw Min) contacted Pharmaniaga (PLSB) and requested our assistance. 

“The government would direct Pharmaniaga on where to buy (the ventilators) and at what price. Pharmaniaga’s role was to procure, deliver, and facilitate the entire process,” Iqbal said.

This arrangement involved an initial RM30 million advance payment to PLSB on March 25, 2020, for the purchase of 500 ventilators.

However, due to supply constraints from Chinese suppliers, PLSB managed to secure only 136 ventilator units for RM20.12 million, a price reported to be four times higher than the usual rate, with payment made on May 14. As upgrades were necessary, PLSB retained an additional RM2.89 million.

On MOH’s instructions, the remaining RM6.97 million from the advance payment was subsequently returned to the Health Ministry on June 15. 

PLSB reimbursed an additional RM1.07 million for the ventilator upgrades, bringing the total procurement cost to RM24.1 million.

It was documented in PAC’s report that Chen, who was the MOH secretary general at that time, had taken responsibility for “making the call” to purchase the ventilator units from China, with approval from the Cabinet and the National Security Council (MKN).

Chen said the decision was made after due diligence by the MOH.

The PAC also highlighted the active role of former Transport Minister and Ayer Hitam MP Wee Ka Siong in every aspect of the ventilator procurement process from China. It was reported that Wee had good connections with China, and his position as transport minister allowed for better handling of logistical issues, given that most parts of the world were under complete lockdown.

According to the PAC report, Wee was involved in getting contacts, identifying suppliers, presenting quotations, overseeing the transaction, and arranging the transportation of the ventilators to Malaysia.

After months of investigation, the PAC concluded that no one could be held accountable for the supply of defective ventilators during the Covid pandemic, due to the absence of a formal contract between the MOH, PLSB, and ventilator suppliers in China.

Despite potential court action in the case of the defective ventilators, under Prime Minister Anwar Ibrahim’s administration, the MOH went ahead last July to renew its concession with PLSB for a whopping seven years for medical supply logistics services until June 30, 2030.

Health Minister Dr Zaliha Mustafa told the Dewan Negara last July that the MOH was not taking action over the supply of defective ventilators from PLSB, in response to a senator’s question on whether disciplinary action had been taken against MOH staff.

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