‘Red flag’: Pharmally sold medical supplies to DOTr at higher prices than own catalog
MANILA, Philippines — A senator said Tuesday that Pharmally Pharmaceutical Corp. sold medical supplies to the Department of Transportation at prices higher than those listed on the company’s own catalog.
The Commission on Audit said this is a "red flag" that merits further investigation.
It was Sen. Risa Hontiveros who uncovered these contracts between Pharmally and the Philippine National Railways as the Senate Blue Ribbon Committee resumed its probe into the firm's anomalous deals with the government.
In the two purchase orders she presented, Pharmally charged PNR-DOTr in April and May for thermometers, face shields, and goggles at prices significantly higher than those listed by the firm in a catalog shopped to private firms in May.
The firm's contracts with DOTr were confirmed by two Pharmally executives: corporate treasurer Mohit Dargani and director Linconn Ong.
Asked to account for the disparate prices, Dargani said the catalog in question was only issued by the firm when supply had stabilized.
But Hontiveros countered that the catalog retrieved by her office reflected prices as of May 2020, around the same time the deals with PNR-DOTr were contracted.
Dargani later confirmed that the price list was issued on May 20, 2020. While Hontiveros said that prices could not have changed so drastically and quickly, the Pharmally executive maintained that they did at the time.
"It's hard to accept that Pharmally happened to sell these items at a higher price than your own price list [or] catalog because prices were volatile then [when], in fact, in your price list, you were confident enough about the stability of the prices and your profit margin that you had a lower end price or discounted price," Hontiveros said.
"So, it really will not hold water that you happened to charge DOTR-PNR higher because of the volatility of prices."
According to the senator, the thermometers sold by Pharmally to DOTr may have been overpriced by 62-69%, the goggles at 70-75%, and the face shields were overpriced by 53-61%. On average, she alleged, the items were overpriced by 62-68%.
"So, the only thing I can conclude, Mr. Dargani…is that in the middle of the pandemic, you were offering supplies and prices grossly disadvantageous to our government. While the frontliners were toiling, Pharmally was thinking about making a profit," Hontiveros said partially in Filipino.
While Pharmally executives have often explained away the high prices of its medical equipment by citing rising costs due to low supply, their reasoning is undermined by their refusal to submit source documents for their financial statements, including the cost of sales, that can corroborate the claim. Dargani and his sister, Twinkle, were cited in contempt and ordered detained for this same reason.
"You refuse to submit the source documents and yet you can readily claim that your cost for this merchandise is higher," Senate Minority Leader Franklin Drilon told Dargani.
"We suspect that your source documents show a very low price and your additional cost is some payments made somewhere that you do not want to reveal and yet you want to use to lower your taxes."
COA: DOTr contracts 'red flag,' further inquiry needed to determine overpricing
Drilon said that while the administration and its allies have ruled out overpricing in Pharmally's deals with the government, the purchase orders and catalog uncovered by Hontivros are a "classic" example of overpricing.
He went on to ask Commission on Audit chief Michael Aguinaldo if he considers the DOTr contracts with Pharmally a "red flag."
"I'm not saying that this is proof of overpricing, I’m saying that as COA, you would consider this a red flag that there is overpricing and therefore requires deeper examination. But on the surface, there appears to be overpricing. Is that a correct proposition?"
Aguinaldo replied: "Well, it is a red flag. Whether its overpricing or not, of course, is another issue."
COA is conducting a special audit of Pharmally's contracts with the government. Aguinaldo has maintained that he does not want to preempt the findings of that audit which will also take into account information uncovered during the Senate's inquiry.
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