Why Pharmaniaga Deserves The Concession

orangmelayukita

WHAT DOES GALEN WANT

• Azrul Mohd Khalib, CEO of think tank Galen Centre for Health and Social Policy says ending Pharmaniaga's concession will create disruptions in the logistics chain and will favour the larger players who already supply multiple products to the Health Ministry.

• It is impossible to end the concession immediately without causing massive disruption.

• Therefore, the government should grant a further five-year concession to Pharmaniaga and in the meanwhile begin making preparations for a transition to an open tender for the APPL by the time the period ends. This should be the way forward.

WHAT PLAYERS SAY:

• If the concession is ended, all these companies would need to develop and manage their own ordering systems and logistics processes to supply the medicine or devices directly to the hospitals and clinics in both peninsular and east Malaysia which may lead to short term supply disruptions and potentially higher pricing,

WHY PHARMANIAGA DESERVES THE CONCESSION

• MIDF Amanah Investment Bank Bhd analyst Nabil Fikri Zainoodin notes that Pharmaniaga has fulfilled the strict requirements of the concession contract.

• There is a fair chance that the concession business will still be awarded to the company based on its years of experience and expertise in the logistics and distribution business, which can be seen as a huge amount of investment to ensure efficient deliveries and massive savings enjoyed by the Health Ministry from Pharmaniaga's handling capability.

• Pharmaniga is working on reducing its dependence on the concession business, with the non-concession business accounting for 47% of revenue or RM1.1b in FY18.
• The Indonesian operation commands the largest contribution of about 62% of the total non-concession business. This is significantly contributed by PT Millennium Pharmacon International Tbk (MPI), whose logistics and distribution arm recorded an increase of 13% in net sales to IDR2.4 tril (RM709,000) during the year, attributable to strong sales of ethical and medical disposable products
• Going forward, the research house expects the growth momentum to continue, given the company's focus on the manufacturing segment which commands a better margin.