Uneasy with monopoly’s effect on healthcare cost, Putrajaya to study Pharmaniaga contract

KUALA LUMPUR, Sept 8 — Finance Minister Lim Guan Eng today said that Putrajaya will be re-looking its existing contract with drug concessionaire Pharmaniaga Bhd, expressing concern on the effects of a drug provision monopoly on public healthcare cost.

He said that the government had allocated RM193.6 billion between 2010 and 2018, for the provision of healthcare services alone.

“The Government is also concerned with monopoly power over the provision of drugs and its effects on healthcare cost. We are currently studying the existing contact 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 said in his speech during the Budget 2020 Focus Group Meeting on healthcare held in Cyberjaya.

Lim also pointed to lifestyle changes, which he said already gave an impact on the need and delivery of heath services, on top of the public healthcare system, which is forced to cope with rising cost.

“This is especially as Malaysia’s demographic profile is getting older. In 2020, it is projected that seven per cent of Malaysians will be 65 years old or older. By 2045, it is projected to hit 14 per cent,” he said.

Lim also called on the Ministry of Health (MOH) to carry out administrative reforms to enable savings on expenditure, and the delivery of more efficient healthcare services.

He said that the Ministry of Finance practices a refund policy on any savings made by the respective ministries, to encourage all ministries to ramp up reform efforts through “creative and innovative approaches”, rather than request for additional allocation.

“As tabled during the 2019 budget, the Ministry of Health received a total allocation of RM28.7 billion, or approximately nine per cent of the total budget spending. The RM28.7 billion allocation is about 8 per cent higher than it was in 2017. This made the [Health] Ministry among the largest ministries in terms of spending.

“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,” he added.

In April, this year The Edge Financial Daily reported that Padiberas Nasional Bhd (Bernas), Puspakom Sdn Bhd, Pharmaniaga Bhd and My E.G. Services Bhd were being scrutinised by a special Cabinet committee on monopolies, quoting Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail.

He reportedly said that there were three elements to consider in assessing the aid monopolies, namely whether the policies allowing for the creation of these monopolies are still relevant, the size of their investments and the economic impact of potentially dismantling them.

Pharmaniaga however, later dismissed claims that it is monopolising the supply of medicines to MOH, saying only 33 per cent of the ministry’s supplies come from the group, the business daily reported.

However, the firm’s managing director Datuk Farshila Emran, reportedly said that its supplies to MOH, account for 53 per cent of the group’s revenue.

The firm has a 10-year concession agreement with the government, which is set to expire in November this year.

The Edge, however, reported Farshila expressing confidence that the agreement would be renewed yet again, based on its performance.

She reportedly said that the company has met all of the ministry’s 21 key performance indicators such as product delivery within seven working days in Peninsular Malaysia and 10 working days in Sabah and Sarawak.