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PETALING JAYA: The RM1bil cost savings that Malaysia stands to gain by switching to generic drugs could be erased by price hikes of up to 50%, should India’s production costs spike due to geopolitical disruptions.
India is Malaysia’s primary source for generic drugs and relies heavily on the Strait of Hormuz for petroleum-based inputs and energy to run its manufacturing arm, said MBSB Research.
About 30% of suppliers are from India, and others include South Korea and Germany. These shipments do not travel through Hormuz.
“Globally, Hormuz is not a direct transit point for most finished drugs. However, the domino effect of the US-Iran war hits on hidden costs and raw material dependencies,” the research house said.
The conflict has triggered a surge in average selling prices for medications, posing a significant risk to the domestic pharmaceutical sector if it persists longer than six months.
Aside from the pills themselves, the crisis impacts upstream components. Notably, the Middle East accounts for 9% of global aluminium production.
“Shortages of these elements could affect the production of blister packs that house most generic drugs,” MBSB Research added.
The research house said, “To achieve pharmaceutical sovereignty, a multi-pronged long-term strategy of localisation of active pharmaceutical ingredients (APIs) and biosimilar production, as well as the establishment of a strategic buffer and adoption of advanced digitalisation, must be considered.”
MBSB Research’s top pick is Pharmaniaga Bhd for its long-term concession and new biopharmaceutical arm.
The research house has retained its “buy” call with a target price of 36 sen a share and kept its “positive” outlook on the healthcare sector.
“The immediate impact on a company level may be evident in Pharmaniaga, though we noted that it is a rather paradoxical situation of high strategic importance versus intense financial pressure.
“Pharmaniaga is seen to be the national shock absorber,” it said.
However, the biggest long-term concern is contract rigidity and API inflation.
Pharmaniaga supplies products under pre-agreed prices. With API costs spiking up to 90% for some generics, the group is highly likely to absorb this cost unless the government allows a price revision.
It holds adequate stock for now, but the industry is currently debating who is the bearer of the cost for the higher buffers.
“Additionally, the energy crisis creates a new drag on the group’s core profit – something that should be considered as this would impact its utility and packaging costs in the long run,” MBSB Research further said.
Pharmaniaga’s pivot from a simple distributor to a biopharmaceutical manufacturer is crucial for its turnaround.
The acceleration of its vaccine (PCV13, Hexavalent) and insulin manufacturing might be the factors that could reduce import dependency of non-generic drugs, further avoiding additional logistic surcharges and Hormuz risks associated with importing finished vials.
“Pharmaniaga reported RM13mil in its biopharmaceutical sales in 2025. This segment is expected to be a major profit driver by the second half of 2026, which could offset the thin margins in logistics,” MBSB Research added.
Mine current avg price is 0.245, I’m just looking at the long term. Recently saw the Norway government pension fund acquired it and usually they will stay for a long period
