KUALA LUMPUR, March 1 — The Pharmaniaga Berhad (Pharmaniaga) issue is a "wake up call” for the pharmaceutical sector as it highlights the need for urgent reforms, especially on the procurement practices of medicines.

Further deterioration of the company could have severe effects on the entire Malaysian pharmaceutical landscape, chief executive officer of the Galen Centre for Health and Social Policy Azrul Mohd Khalib said in a statement today.

"If the company deteriorates further, there could be a massive disruption to the supply of medicines and drugs to the public health system,” he said.

Azrul said that reforms would include removing dependence on tender agents who act as middlemen during the procurement process and charge commissions for their services, therefore increasing the cost of medicines.

Potentially millions could be saved in public funds by allowing suppliers to negotiate and bid directly with the government, he said.

Azrul explained that it would also lower prices, increase cost-effectiveness and make newer therapies available for patients.

"It will introduce improved diversity of suppliers and reduce vulnerability,” he said.

Besides that, the government’s practice of exclusive concessions can create an unhealthy dependence since individual companies including Pharmaniaga and other government-linked companies (GLCs) have dominance over large portions of the healthcare system, he added.

"Our public healthcare system is at risk of massive disruption when those GLCs run into difficulty. This is one such example,” he said.

He pointed out that the government made a commitment to move away from concession agreements towards open tenders in 2019, but disruptions caused by the Covid-19 pandemic provided Pharmaniaga with multiple extensions.

"Arguably, the soft landing never happened and the reduction of reliance on these arrangements has not been achieved,” he said.

However, he expressed his belief that Pharmaniaga’s classification will not cause any disruption in its current ability to service the public health sector but added that the situation could change rapidly if its financial situation does not improve within the year.

He also said that Pharmaniaga will find it difficult to offload most of its Sinovac Covid-19 vaccines which were worth RM552.3 million and will expire in June next year.

He added that the government has a few options to intervene, including a cash infusion, guarantee or bailout; providing a government guarantee so that Pharmaniaga could make its own financial arrangements; granting another concession arrangement; or building confidence in Pharmaniaga.

Yesterday, national news agency Bernama reported that Pharmaniaga shares fell 43 per cent after the company’s RM552.3 million provision for "slow-moving inventories of Covid-19 vaccines” dragged it into the Practice Note 17 (PN17), or financially distressed, category.

The day before that, Pharmaniaga reportedly posted a net loss of RM607.32 million for the financial year ended Dec 31, 2022 (FY2022) against a net profit of RM172.15 million in the previous year.