Materia Medica Malaysiana

Storm brews over move to make drug labels
Source: Business Times, Singapore, April 28 2004

CONTROVERSY is brewing over a Malaysian government decision to award a little-known private company a concession to security-label medical products and prescription drugs, an arrangement that will undoubtedly push up medical product prices.
Early this year, Malaysia's Health Ministry revealed that Mediharta would supply security labels that involve hologram technology to all pharmaceutical companies to be affixed on all drug packs.
That includes traditional medicines and dietary supplements as well as imported and locally manufactured drugs, a market that some analysts estimate at RM3-4 billion (S$1.3-1.7 billion) a year.
Mohd Zin Che Awang, the ministry's director of pharmacy, said the ruling 'was to eliminate counterfeits from the market'.
Mr Mohd Zin said that RM27 million worth of fake medical products were confiscated last year.
It is estimated that 7 per cent of all medical products sold in Malaysia are counterfeit.
The concession - agreed upon in the waning years of former prime minister Mahathir Mohamad's government - is expected to be a goldmine for Mediharta and will lead to an increase in drug prices throughout Malaysia.
But it is also likely to be unpopular and, going forward, could even lead to international complications.
Drug companies will pay Mediharta 5.6 sen for each label and will be responsible for affixing the labels themselves.
Given that it could involve repacking of, especially, imported drugs, the final price hike at the retail level could be anything from 5 per cent to 30 per cent, say executives from several drug companies.
Even so, it is not clear what the final hikes will be. Indeed, some government officials worry that pharmaceutical companies will use the issue as an excuse to increase their margins.
Drug prices, on average, have increased 10 to 13 per cent every year in Malaysia without any help from companies like Mediharta.
In his September 2002 budget speech, Dr Mahathir announced that security labels would be affixed on all tobacco, alcohol and medical products in future to combat counterfeit and contraband material.
According to executives familiar with Mediharta, the award to the company was agreed to in late 2003 and signed 10 months later.
The plan was to have been implemented last June, but was deferred to May 1, 2005.
But medical practitioners contacted by BT mostly professed ignorance about the matter, the result of relatively muted press coverage.
Even The Sun, which gave the issue some space, confined its relatively indignant comments to three columns.
A check with Malaysia's Companies Commission showed that Mediharta is capitalised at RM1 million and has five shareholders, mostly unknown except for two.
They are Saleha Mohd Ali, the sister-in-law of Dr Mahathir with 9 per cent, and entrepreneur Sandra Wong with 25 per cent.
Ms Wong used to be a corporate adviser to Halim Saad in the early 1990s when the tycoon ran the Renong conglomerate but left to pursue her own business interests in 1996.
Both women hold no executive positions in Mediharta, however, which is run by Dr Andreas Teoh who holds another 25 per cent.
The controversy over the issue stems from a number of factors not least being the potential price hikes.
There is also anger over what is perceived to be an opaque bidding process.
But executives familiar with the exercise say that 'many other companies also submitted proposals' after Dr Mahathir's speech in Parliament.
Mediharta isnt the only company that has benefited from Dr Mahathir's speech.
In September, 2003, Kuala Lumpur awarded another little known company, Kod Efisien, an exclusive mandate to supply security labels for locally produced cigarette and beer products, an arrangement that could generate up to RM140 million in potential revenue for the concession holder.
It is not at all clear if smuggling in cigarette and beer products, fairly rampant in Malaysia because of high duties, has been curbed in any way.
Finally, there could be an international rumpus over the issue.
According to senior executives in Malaysia's pharmaceutical industry, a preliminary opinion sought from the Switzerland-based International Dietary Supplements Association has indicated that Malaysia's hologram requirement could be considered a restrictive measure hindering international trade and, thus, could be construed as non-WTO compliant.
An e-mail on the matter obtained by BT said: 'Any country member of the World Trade Organisation could challenge Malaysia on this before a WTO dispute panel.' Even so, the message conceded that 'it wasn't aware of any previous similar case resolved by the WTO.'