Malaysia’s pharmaceutical vulnerability exposed by conflict

2026-03-19 - 04:00

From Azrul Mohd Khalib The armed conflict around the Strait of Hormuz should end any comforting illusion or complacency that Malaysia’s pharmaceutical supply is secure simply because the shelves are still stocked. The Strait of Hormuz is not just an energy chokepoint. It is a stress point for the entire logistics chain that modern medicine depends on. This includes fuel, insurance, port access, flight costs, shipping container availability and the just-in-time system of pharmaceutical ingredients and finished drugs, which forms the pillar of modern manufacturing processes. In this crisis, Malaysia’s potential pharmaceutical vulnerability is exposed with alarming clarity. Around one-fifth of global oil and liquefied natural gas supplies normally move through the strait, and current attacks or threats of armed conflict have effectively choked off most shipping there. On March 17, Reuters reported that Iran had halted almost all maritime traffic through the waterway. Tanker transits had also collapsed by around 92% from the week before the conflict. War-risk insurance has also surged to eye-watering rates. For Malaysia, this crisis is not an abstract geopolitical concern. Besides being an energy crisis, it is also a problem of access to medicine. Malaysia is a net importer of pharmaceuticals. According to the Malaysian Investment Development Authority’s pharmaceutical industry profile, imports rose from RM7.76 billion in 2019 to RM11.30 billion in 2023. Pharmaceutical exports in 2023 were RM2.92 billion, a significant trade deficit of RM8.38 billion. Thirty-nine percent of the medicines listed on the National Essential Medicine List (NEML) are not produced in Malaysia. In 2022, imports of those essential pharmaceuticals reached RM779 million, including more than RM400 million spent on biologics and biosimilars. Malaysia may manufacture some medicines locally, but it is still structurally dependent on imports. Generic medicines loom large as the backbone of the affordability strategy. The health ministry’s National Generic Medicines Framework highlights that generic prescribing and strategic purchasing are policy goals intended to ensure stable prices and supply of medicines. More than 90 pharmaceutical companies in Malaysia can produce generics in many dosage forms, yet the country still cannot make all the essential products it needs. There are 277 licensed pharmaceutical manufacturers in Malaysia, but only 88 actually produce pharmaceuticals; the rest are primarily in traditional medicine, supplements or veterinary products. Generic medicines are often the most exposed to supply shocks, such as during the Covid-19 pandemic. They operate on thin margins, rely on high-volume procurement and are less able to absorb sudden increases in freight, insurance, storage, fuel and financing costs. When shipping becomes dangerous and expensive, low-margin products become the first casualties. A patented or high-priced speciality product may still move because buyers will pay almost any transport premium. A cheap antihypertensive, antibiotic, diabetes tablet or painkiller, on the other hand, will likely be stuck. That is how shortages begin in the real world. Not a total collapse with dramatic headlines in the media, but with a series of small commercial behind-the-scenes decisions which make certain low-margin lines uneconomical to ship quickly. The danger is not only to direct shipping through the Persian Gulf. Even when Malaysia sources finish products from India, Europe or other parts of Asia, the Hormuz conflict drives up the logistics costs of moving goods. Fuel prices rise. Marine war-risk premiums soar. Shipping schedules become less reliable. Ports in the Gulf and nearby logistics hubs become congested or disrupted. Airspace closes due to the threat of missile and drone attacks. Air freight, often used for urgent and temperature-sensitive health products, becomes more expensive when jet fuel spikes. This is not theoretical. All of this is happening now. Reuters reported this week that jet fuel prices doubled in 10 days. An airline was forced to cancel 1,000 flights. Medical humanitarian cargo bound for Sudan was stranded in Dubai. Rerouting around the conflict area had increased delivery times and raised shipping costs by 25% to 30%. Malaysia’s own pharmaceutical spending profile makes the risk even more serious. The health ministry’s national health accounts estimate total pharmaceutical expenditure (public and private) at RM16.921 billion in 2023, equal to about one-fifth of total health spending. Nearly 72% of that pharmaceutical expenditure came from the private sector. This means a supply shock will not be confined to government hospitals. It will hit community pharmacies, private clinics and hospitals, employer-funded care and households with out-of-pocket health spending. In a stressed market, the private sector will bid for supply, prices will rise and patients who are poor and dependent on public services will feel the squeeze first. There is some good news. The Pharmaceutical Services Programme reported that 99.24% of health ministry facilities achieved the target of holding one to three months of medicine stock in 2024. Though reassuring, it is not a substitute for resilience. One to three months is a buffer, not a strategy. It buys time. If the conflict around the Persian Gulf drags on, energy prices will remain elevated, insurers will continue to price in war risks, and if suppliers or countries begin rationing or banning the export of key generic medicines altogether, inventory discipline alone will not protect Malaysia. Malaysia must start treating medicine security as part of its national health security strategy. The government should also seriously consider establishing a health security agency to lead on these issues. It needs to build strategic stockpiles for essential generics and critical active pharmaceutical ingredients, not just warehouse buffers. NEML products that are single-supplier, import-dependent or commercially fragile need to be identified and ring-fenced to support domestic production incentives. Procurement sources need to be diversified beyond the cheapest bidder, and incentives and rewards should be based on supply reliability. Malaysia will need to engage in deeper regional cooperation with Asean partners on pooled procurement, emergency stock sharing, and manufacturing redundancy. Malaysia has been warned before by the Covid-19 pandemic. Efficiency without resilience is a dangerous illusion. The Hormuz conflict is another warning. This time, the intersection of war, energy, and trade is making it clear that investing in health security is no longer a nice-to-have but an existential necessity. Malaysia should not wait for stock-outs of common generics to discover that the real weakness in the health system is not clinical skill or hospital capacity, but the fragility of the logistics chain behind a strip of tablets. Azrul Mohd Khalib is the founder and CEO of Galen Centre for Health and Social Policy. The views expressed are those of the writer and do not necessarily reflect those of FMT.