KUALA LUMPUR, Nov 1 — The Galen Centre for Health and Social Policy today urged the government to eliminate tender agents who act as middlemen in public drug procurement.

The health think tank lauded Pakatan Harapan’s (PH) decision not to renew government-linked company Pharmaniaga Bhd’s 25-year-long sole concession , which ends this November 30, to procure, store, and distribute certain drugs and medical devices for Ministry of Health (MOH) hospitals and clinics, as the concession system will transition to open tender.

“Having an open tender, and allowing suppliers to negotiate and bid directly with the government could potentially enable millions in public funds saved, lower prices, increase cost effectiveness and for newer therapies to be made available for patients,” Galen Centre CEO Azrul Mohd Khalib said in a statement.

According to a Malaysia Competition Commission (MyCC) report, Bumiputera tender agents charge a fee of between 2 per cent and 3 per cent for their services.

Bumiputera agents act as intermediaries between government hospitals on one hand, and foreign and Malaysian non-Bumiputera pharmaceutical companies on the other, who bid for public procurement of drugs and other medical supplies. Some Bumiputera tender agents provide additional services like warehousing and distribution, while others are purely middlemen.

Pharmaniaga, which has warehousing and logistics facilities, is the biggest Bumiputera tender agent in the country with exclusive concession to supply 700 items in the Approved Product Purchase List (APPL) comprising medicines and other medical items, determined by MOH, to government hospitals, institutions, and clinics. This comprises over a third of the government’s drug supply.

“Competition has the potential to drive prices lower, improve cost effectiveness and encourage innovation,” Azrul said.

“Let’s not be afraid of competition and good governance. Pharmaniaga’s track record will undoubtedly put it at a significant advantage in a merit-based system. I have no doubt that this government-linked company will continue to play a major role in the Malaysian healthcare landscape for many years to come.”

He added that he had confidence in the government’s ability to implement a smooth transition from a concessionnaire to open tender system without causing massive disruption to the supply of medicines in the public health care system.

“It is wrong to imply that our healthcare system is too fragile and cannot survive without depending on one single company such as Pharmaniaga taking such a dominating role. The fact is that by opening up the tenders, the heavy responsibility of providing such mission-critical support can also be shared with other logistics service providers,” Azrul said.

All tenders for APPL items must pass through Pharmaniaga Logistics, according to MyCC. Pharmaniaga’s concession provides distribution and logistics services for the products procured under the APPL.

Unlike typical logistics companies that charge shipping based on product weight and distance of the destination, Pharmaniaga charges MOH a percentage of the value of products purchased to cover logistics and distribution expenses.