‘Overpricing’ probe: PH firms are biggest losers to ‘favored’ Pharmally

Michael Yang —MALACANANG FILE PHOTO

MANILA, Philippines — Local businessmen who invested hundreds of millions of pesos in response to calls by officials to convert their manufacturing plants to produce pandemic supplies ended up losing to a foreign-controlled company “favored” by the government, senators were told on Tuesday.

This further infuriated Sen. Richard Gordon, who is leading a Senate inquiry into billions of pesos worth of purchases of alleged overpriced medical supplies by the Procurement Service of the Department of Budget and Management (PS-DBM) from the undercapitalized trading company Pharmally Pharmaceutical Corp.

“What these people did to you is revolting,” he told the Filipino companies during the fourth hearing on the purchases called by the Senate blue ribbon committee which he heads.

“You are Filipino companies who only wanted to fulfill your duty to help this government during this pandemic but what the government did to you, it’s like a snake had attacked you,” he said.

Deliveries on hold

Among the Filipino-owned companies that repurposed their factories was EMS Components Assembly Inc., which was awarded a contract for 100 million medical-grade face masks at P13.50 each, much lower than the P27.72 that the PS-DBM got for 12.9 million pieces from Pharmally.

EMS chair Ferdinand Ferrer said his company got paid at the agreed price for only 25.8 million pieces. He said EMS committed to delivering 8.5 million monthly but their deliveries were often put on hold.

Ferrer said that “every time we tried to ship and we requested for a delivery … we were not given authority to ship,” until they were told by the government to deliver the remaining supplies at only P2.35 apiece.

In the end, the company was able to collect P523 million, around 42 percent of its P1.3-billion contract, he said.

Ferrer said EMS invested close to P200 million in imported equipment and raw materials and other “refacilitation” needs to be able to produce medical-grade masks.

For 17 years, the company had been producing electronic components, mainly for export, for the automotive and aerospace industries.

“I believe it was our duty as a Filipino company to produce medical-grade masks,” Ferrer said, despite being unsure how long the COVID-19 pandemic would last.

“But we knew we were entering into a war, so we felt it was the duty for our company to contribute even just a little bit,” he said.

Told to repurpose

At the onset of the pandemic in March last year, the Department of Trade and Industry (DTI) asked local manufacturers to repurpose their facilities to make medical-grade personal protective equipment (PPE).

The Confederation of Philippine Manufacturers of PPE, a new group made up of five manufacturers with decades of experience in electronics and garment manufacturing, responded and invested $35 million, or P1.7 billion for the factory conversions.

After expanding their production capacity, the group felt it was the government that fell short, when the Department of Health and the PS-DBM continued to buy majority of their PPE requirements from foreign companies.

In April, industry players told the Senate committee on trade that the local garment industry lost more than 25,000 jobs, including the companies that repurposed their plants to produce PPE.

Still, Ferrer credited the DTI and other agencies for helping transform EMS in just “seven to eight weeks” with a capacity to produce 12 million masks monthly.

“This is proof that the Filipino can do it,” he said.

Gordon said he was embarrassed by what the government did to EMS and the other companies.

“You were betrayed by your own government,” he said.

Yang vows to appear

The owners and officers of Pharmally, and Michael Yang, a Chinese national and former economic adviser to President Duterte who introduced the company officials to him in 2017, still did not appear for Tuesday’s hearing, prompting the senators to order their arrest for contempt of the Senate.

Pharmally, whose business is to import and sell pharmaceuticals and medical devices, won P8.82 billion in contracts to supply surgical and KN95 masks, COVID-19 test kits and PPE, according to Gordon, who waved copies of the deals.

“The Filipino companies who took the risk suffered losses while others made a killing,” he said, pointing out that the Bayanihan 2 law gave preference to local producers of the pandemic supplies.

Senate President Vicente Sotto III told reporters that he had signed an arrest warrant against Yang, along with five Pharmally officers, at Gordon’s request.

Lawyer Raymond Fortun, who represents Yang, wrote Gordon on Tuesday saying his client “apologizes for his absence” at the hearing and assuring the senators that he would be present at the next one, which is scheduled for Friday. Fortun said his client vowed “full and complete cooperation.”

Pharmally’s part-owner and CEO, Huang Tzu Yen, who is wanted in Taiwan for financial crimes, appeared in a video conference from his Singapore residence but wasn’t questioned thoroughly as he had not taken an oath to tell the truth during the inquiry.

His father, Huang Wen-Lai, chair of Pharmally’s Taiwan-based mother company, Pharmally International Holding Co., who is also wanted in Taiwan for embezzlement, stock manipulation and other criminal cases, remained missing.

The older Huang is also accused of colluding with Zheng Bingqiang, president of the Xiamen, China-based Full Win Group of Companies chaired by Yang, in a stock manipulation scheme involving Pharmally International.

Huang told the senators he did not know the whereabouts of his father as they had been estranged since 2020.

5 to be arrested

He said he had not known about the case against him until March this year, adding that he had asked his lawyer to clarify the matter.

Huang agreed to swear an oath at the Philippine Embassy in Singapore before testifying.

Besides Yang, Gordon also asked the Senate leadership to issue warrants against five Pharmally executives who had failed to show up despite subpoenas: treasurer and corporate secretary Mohit Dargani, president Twinkle Dargani and officers Justine Garado, Linconn Ong and Krizle Grace Mago.

The Senate secretariat said its servers had failed to present the summons to Yang at the Taguig office of the Philippine Full Win Group of Companies. They were told that Yang was “no longer connected” with the office.

A driver at his listed South Forbes Park residence refused to receive the Senate’s subpoena claiming that he was not a resident there.

Gordon showed a copy of the lease contract on the residence. Yang had paid a P1-million deposit for a P500,000-yearly rental ending in April 2022.

—WITH A REPORT FROM INQUIRER RESEARCH