Renewing Pharmaniaga deal unhealthy, say critics

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Coverage by: Free Malaysia Today (FMT)

PETALING JAYA: Awarding the contract to provide logistics for medical supplies to a Pharmaniaga Bhd subsidiary might have been convenient for the government, but it is not beneficial for the public healthcare system, a think tank says.

The new contract will extend Pharmaniaga Logistics Sdn Bhd’s (PLSB) decade-long monopoly over the provision of logistics for medical supplies for the public health service.

Azrul Khalib of the Galen Centre for Health and Social Policy said the health ministry had only created an unhealthy dependence on a single company for such a critical service given.

“(While) this (contract award) may be convenient for the government, it has a serious impact on health system resilience and sustainability,” he told FMT Business.

“(Nonetheless, it is) good news for Pharmaniaga as it reassures investors and stakeholders that future business is possibly assured.”

However, Azrul said, the immediate problem that Pharmaniaga faces with regards to its cash flow as well as outstanding commitments and debt has not been addressed.

For instance, he said, it has yet to deal with the RM522 million impairment on Covid-19 vaccines.

“The contracts are promises for the future, (but) the debts are today and immediate,” he said.

PLSB, a wholly owned subsidiary of Pharmaniaga, has just bagged a new contract from the government to provide logistics for medical supplies for seven years.

In a filing with Bursa Malaysia, Pharmaniaga said the contract is from July 1, 2023 to June 30, 2030. It comes at the end of a previous contract which had commenced on Dec 1, 2019. However, the contract sum was not disclosed.

The contract was awarded to Pharmaniaga despite revelations by the auditor-general that the company supplied 93 faulty ventilators to the health ministry during the Covid-19 pandemic, leading to an estimated RM13.07 million loss for the government.

In April, health minister Dr Zaliha Mustafa announced that Pharmaniaga had been granted a conditional agreement to continue providing medical supplies to the government, despite its financial distress.

However, Azrul said, the public’s trust in the ministry is not likely to be affected. It appears that both the public and their elected representatives “seem to be apathetic” to how these decisions are made as well as the lack of accountability or responses for past mistakes or actions committed by the ministry, he said.

“They only care when healthcare services to themselves and their families are affected, but not necessarily (on) how taxpayers’ funds are spent,” he said. “So it might not even matter to people that defective ventilators were supplied by this GLC during a national health emergency. (It is a) sad, but possible reality.”

Kepong MP Lim Lip Eng urged the ministry to explain the rationale for awarding the contract to Pharmaniaga despite its Practice Note 17 (PN17) classification.

“Otherwise, the matter (contract award) would raise doubts on the government’s ability, especially of the health ministry,” he told FMT Business.

At a Dewan Rakyat sitting in March, Lim had called for an accounting of its RM664.39 million Q4 2022 loss and provisions for RM552.3 million in unsold Covid-19 vaccines.

Pushpan Murugiah of anti-corruption group C4 said the contract award exemplified why Malaysia was ranked third in The Economist’s Crony Capitalism Index 2023.

“Thanks to its extensive influence over the health ministry and the years of patronage, the government had to make the difficult decision to support a PN17 company,” Pushpan told FMT Business.

He said the contract could be part of the plan to regularise Pharmaniaga’s PN17 status.

Apart from defence contracts which must be closed for national security concerns, he said, all other tenders should be done through an open and transparent process.

“This narrative is that it’s business as usual, that we (in Malaysia) support crony companies, and we allow government-linked companies to compete in the private sector unfairly,” he said.

“(It also shows that) we don’t encourage new players or (allow) market forces to dictate competition which will undoubtedly improve the quality of products and services.

“This sends the wrong message to the public and will affect the narrative that the prime minister has been saying about fighting corruption and making changes.”




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