FINDINGS

The first question that arose in connection with the procurement of COVID-19 supplies was the
transfer of P42-B funds from the Department of Health (DOH) to the Procurement Service of
the Department of Budget and Management (DBM-PS). This transfer was deemed to be
questionable as this was “not supported with complete documentary requirements, contrary to
law and regulations, and casted doubts on the validity, regularity and propriety of transactions ,”
according to the Commission on Audit (COA). In other words, this has been transferred to
implementing agencies without memorandum agreement and other documents. Moreover, it
was also expected that the DOH is more equipped in terms of the knowledge about the
technical specifications of the supplies to be procured thus, why is there a need to pass on the
responsibility to the DBM-PS.

DOH Secretary, Francisco Duque III, provided that this transfer was actually documented in
Agency Procurement Request and all technical specifications required for the supplies were
provided to the DBM-PS. He admitted that they sought help in procurement due to the sheer
volume of purchases needed. Moreover, Lloyd Christopher Lao, the former DBM
Undersecretary, mentioned that a memorandum of agreement for the transfer of the P42-B
funds was not needed because the items to be procured are considered common supplies; in
which this statement has been contradicted by Senator Drilon.

The second question is regarding the awarding of bids for the procurement of supplies.
Pharmally Pharmaceutical Corporation got the biggest amount of government contracts for
pandemic supplies, which is also questionable. At the time of Pharmally’s incorporation, they
only have P625,000 total assets which gives doubt as to how they were able to generate and
enter into contract supply agreements worth P8.67-B.

Face masks were priced at P27.72 per piece while face shields cost P120 per piece. These,
although there is a high demand for these supplies during that time, were still considered
overpriced. For the record, the only approved budget for the first purchase was P8-M but
Pharmally got paid for P13.86-M. Moreover, it was also mentioned that concurrent with this
procurement, the Red Cross was able to procure face masks at P5. Aside from this, there was a
local manufacturer offering masks for P13 per piece, which is much lower than the bid awarded
to Pharmally. Thus, Lao didn’t exercise due diligence and prudence before dealing with
Pharmally.

On March 25, 2020, three hours after the DBM-PS requested the 500,000 face masks, the same
was delivered to their warehouse at Paco, Manila.

These were the in-betweens: Pharmally didn’t have face masks in its inventory; hence, not
having the capability to supply the items being procured. To deliver the 500,000 face masks,
Pharmally admitted that they got them from another supplier. It turns out that Pharmally didn’t
actually serve as the supplier but an agent or trader and earned from a markup. Linconn Ong,
Pharmally director and supply chain head, contacted a firm, the “TigerPhil Marketing,” which
will supply the 500,000 face masks where they were able to purchase it at P23 per piece.

However, when Mago was asked by Senator Hontiveros if Pharmally had the four basic
documents required in transactions like this, she admitted that they didn't have a delivery
order, which is the first requirement for the completion of delivery.

Furthermore, purchase orders were only awarded to Pharmally almost 2 weeks after the
delivery of the supplies, but payment came earlier. This was what Senator Panfilo Lacson
questioned: why payment was made a day before the DBM-PS issued a purchase order. Mago
only answered that, based on Pharmally’s records, the DBM-PS purchase order was actually
dated April 6, 2020.

Below are some of the significant timelines in the procurement of supplies to Pharmally:
(Reference: Rappler)

● On March 24, 2020, Linconn Ong went to the DBM-PS office to submit a letter of intent
to supply COVID-19 items and met Lao for the first time. Ong says he also gave a
sample of a face mask Pharmally could supply to the government.

According to Ong, Lao asked Pharmally if it could deliver masks “as soon as possible,”
but “still following [proper government] processes.”

● On March 25, 2020 at around 2:00 pm, Pharmally received an email from DBM-PS on a
“request for price proposal for supply and delivery.” The email contains a request for
quotation for 500,000 masks.

According to Mago, the unit per price in the PS-DBM’s request is P27.72, while the
contract has an approved budget of P8 million.

Mago shared details of the DBM-PS email with other Pharmally officials in a group chat.

Ong contacted a firm called “TigerPhil Marketing,” which says it can supply the 500,000
masks. Ong buys the masks at P23 per piece.

At around 5:00 pm, 500,000 masks were delivered to the PS-DBM’s warehouse in Paco,
Manila, according to Mago.

● On March 26, 2020, Mago responded to the DBM-PS that it can fulfill the request for
500,000 masks at a price of P27.72 per piece. (Meaning: Pharmally's email reply was
sent the following day after those masks had been delivered to the DBM-PS’
warehouse.)
● On April 6, 2020, 12 days after the delivery of the supplies, Pharmally said it was
awarded its first contact or purchase order for 500,000 masks.
 ● On April 15, 2020, Pharmally was paid P13.86 million for supplying 500,000 masks on
March 25. Senators pointed out the amount was above the approved budget of P8
million earlier stated by the DBM-PS.

● On April 16, 2020, Pharmally was awarded its first purchase order, according to the
Commission on Audit (COA) report on the DBM-PS.

(End of timeline)

On September 10, 2021 Blue Ribbon Committee Hearing, Yang continues to deny his
connection with Pharmally. However, Huang Tzu Yen, Pharmally chairman, revealed that Yang
backed the company; serving as their financier and guarantor. This has been also admitted by
Ong, who previously denied the same, that Pharmally was being assisted by Yang to fulfill
contracts with the government.

On the same hearing at September 13, 2021, Yang was unable to attend due to “over blood
pressure,” according to his lawyer; and his health has been affected due to hearings in which
he surfaces as the financier of Pharmally.