Industry Overview: Vietnam pharmaceutical Industry

Vietnam is a large and fast growing population, which is expected to reach 96 million by
2019. Rising drug consumption and government investment make Vietnam an attractive
pharmaceutical market. Health ministry statistics show that the country's total medicine
consumption value was more than US$2.43 billion in 2011, of which only $1.14 billion,
or less than half, came from domestic medicine. The average drug expense per capita was
$27.6 last year. The Ministry of Health forecast that the size of the Vietnam
pharmaceutical market will exceed US$2.0 billion and annual growth will reach between
17-19 percent in 2012. Globally, Vietnam ranks 66th out of 83 countries surveyed in our
ever-expanding pharmaceutical universe.
Health Ministry statistics show that the country's total medicine consumption value was
more than US$2.43 billion in 2011, of which only $1.14 billion, or less than half, came
from domestic medicine. The average drug expense per capita was $27.6 last year. The
Ministry of Health forecasts that the size of the Vietnam pharmaceutical market will
exceed US$2.0 billion and annual growth will reach between 17-19 percent in 2012.
TechNavio's analysts forecast the Pharmaceutical market in Vietnam to grow at a CAGR
of 18.5 percent over the period 2011-2015. One of the key factors contributing to this
market growth is the increasing life expectancy of people. The Pharmaceutical market in
Vietnam has also been witnessing the trend of an increase in the number of awareness
campaigns. However, poor regulatory standards in healthcare in Vietnam could pose a
challenge to the growth of this market.
There are around 171 pharmaceutical companies in Vietnam, out of which 9.0 percent are
owned by foreign investors and 4.0 percent are joint ventures. About 28.0 percent of them
have the Global Manufacturing Practice (GMP) certification. Local pharmaceutical
production was valued at nearly US$920 million and met 48.0 percent of the nation's
needs. Imported drugs account for the remaining 52.0 percent.
According to the Ministry of Healthcare, Vietnam now has 137 operational private
hospitals, including six foreign invested hospitals, and about 30,000 consulting rooms.
Out of these six foreign invested hospitals have the initial investment capital of 94
million dollars. By July 2012, the Vietnamese government had licensed 78 foreign
invested projects in the healthcare sector which included a total investment capital of
1.16 billion dollars. There are an increasing number of international hospitals and clinics
in the major urban centres. Last year, India's Fortis Healthcare agreed to pay $64 million
for a 65% stake in Hoan My Medical Corporation, one of Vietnam's biggest private
healthcare groups. Singapore-based Parkway Group is building an $80-million, 319-bed
hospital in Ho Chi Minh City, expected to open in the first quarter of next year. VinMec,
Vietnam's largest private, hotel-like hospital, built by the leading property developer
VinGroup, was recently inaugurated in Hanoi. It introduced a five-star hotel standard and
incorporated 25 VIP rooms and two presidential suites.

Although most of the medicines and generic drugs are imported in Vietnam, there has
been a growing interest in the domestic pharmaceutical sector as well. The Vietnam Nipro
Pharma Ltdis building a facility for producing new medicines and medical equipment at a
cost of US$250 million. It is expected to be finished in August 2013 and officially put
into operation in April 2015. US-based Watson Pharmaceuticals has also opened a sales
office in Vietnam.
To encourage more foreign investment in the healthcare sector, the government has
allowed the investors in this field to enjoy a low corporate income tax rate of 10% for the
whole life of the project, They also enjoy a tax exemption for 4 years apart from enjoying
lower land leasing fee for at least seven years. The government has also decided to
reserve land for two big healthcare centers in My Dinh and Gia Lam districts to attract
foreign investment.
The future outlook of Vietnam pharmaceutical industry is quite optimistic as companies
in the country are investing huge amounts of money in healthcare. With the increase in
population, hospital and health system development becomes a necessity. Being a fastgrowing economy, Vietnam provides a tremendous opportunity for foreign healthcare
firms to consolidate and establish a high quality patient-centric tertiary hospital network
and develop healthcare as an area of interest for foreign investors.
(Source: Insight Alpha)
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Parkway Group

Vietnam Pharmaceutical: A Brief Overview

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by L.Y Kam
Vietnam is currently one of the fastest growing pharmaceutical markets in Southeast
Asia. Business Monitor International (BMI) in their report Vietnam Pharmaceutical and
Healthcare Q2 2014 revealed that pharmaceutical market value of Vietnam has increased
from US$3.30 billion in 2013 to US$3.92 billion in 2014, marked an increment of 19.1%
in term of US$. Global Data in its recent economic forecasts have expected the value to
increase continually over the next six years reaching a net worth of US$8 billion by 2020,
representing a Compound Annual Growth Rate (CAGR) of 15.4%. This rapid growth of
pharmaceutical market in Vietnam is attributed to the key factors including expanding
population in the country and Vietnam effort in introducing the New Health Insurance
Law.
Despite the rapid growth of the pharmaceutical market in Vietnam, the prospect for
domestic drug manufacturer remains limited leading to a relatively high drug price in
Vietnam. According to a statement by Dr Le Van Truyen, Vietnams former deputy
Minister of Health, Vietnam population in general has less confidence in the domestic

pharmaceutical product and some of the key reasons highlighted including failure of
domestic pharmaceutical company in providing sufficient evidence of the efficacy of
their product in comparison with imported drug. Moreover, some drugs are patent
protected and thus preventing domestic pharmaceutical manufacturer from manufacturing
the product. Furthermore, the free trade agreement that may prolong the patent terms has
worsened this situation. Consequently, there is a high dependency on imported drug in
Vietnam. According to data provided by the Ministry of Health (MoH) Vietnam, imported
drug accounted for more than 50% of the domestic demand in year 2012 and 2013.
Source:
Global Data: Vietnams Pharmaceutical Market Value to Hit $8 billion by 2020, says
Global Data May 2014
Industry Trend Analysis-Foreign Firms to Benefit from Reliance on Imported
Pharmaceutical - Mar 2014
VPBank Securities Co.Ltd. (VPBS) Report-Vietnam Pharmaceutical Industry April 2014

Entering the Market

In the effort to promote pharmaceutical production domestically, Vietnam entered into the
World Trade Organization (WTO) agreement and in 2009, Vietnam opened its door to
foreign pharmaceutical companies to operate as wholly foreign-owned enterprise
(WFOE) to import and sell their own pharmaceutical product to licensed domestic
distributor. Thus, foreign investor may now enter Vietnam pharmaceutical market by
establishing a joint-venture company with a Vietnamese partner or as wholly foreignowned enterprise (WFOE) to import and sell their pharmaceutical product to licensed
domestic distributor in Vietnam. Furthermore, Vietnam has implemented the WHO-Good
Manufacturing Practise (GMP) to increase the quality of locally produced pharmaceutical
product. These have generally increased the interest among foreign pharmaceutical
company to establish manufacturing plant and marketing facilities in Vietnam.
Like many other countries, Vietnam has its own strict licencing requirement for foreign
pharmaceutical to operate in Vietnam. Before investing in Vietnam, the foreign company
is required to apply for the Certificate of Investment (equivalence to Certificate of
Business Registration for local companies) with the local Department of Planning to
carry out the business activities in Vietnam. The applicant is required to submit complete
and detailed documents containing information of the company, its business content,
occupancy and land, financial capacity and other related information to the authority for
an investment evaluation. The evaluation and license approval may take up to four
months or more and qualified foreign investor may then enjoy certain tax and land
incentives. Subsequently, foreign pharmaceutical company should also obtain the
Operating License with the Ministry of Health as it is a key license that allows the
company to conduct further actions such as acting as Marketing Authorization and as a

direct supplier to a local importer. The license also allows company to engage in
marketing strategy such as drug advertising and to exchange professional experience and
information through scientific meetings. A foreign pharmaceutical company is required to
have valid licenses for manufacture or trading in the country of origin and have at least
three years of experience in manufacture or trading of medicines to obtain the Operating
License. It is a time-consuming process where it may take up to eight months or so to
obtain this license and the license fee is approximately US$ 750. In addition,
manufacturer should also obtain the WHO-GMP Certificate. The WHO-GMP Certificate
may be obtained within one month if the manufacturing site fulfilled all the requirement
of WHO-GMP and the fee for a WHO-GMP Certificate is about US$ 1000.
Source:
Vietnam Pharma Update April 2014, Tilleke & Gibbins
(http://tilleke.com/sites/default/files/2014_VN_Pharma%20Update.pdf) Medicinal
Product Regulation and Product Liability in Vietnam: Overview 2014, Tilleke & Gibbins
(http://us.practicallaw.com/6-518-6504) Foreign Direct Investment, Vietnam
International Law Firm Clifford Chance
(http://www.cliffordchance.com/briefings/2014/07/vietnam_investmentguideforeigndirec.html)

Challenge for Vietnam Market

Apart from counterfeiting, lack of drug price control and inadequate intellectual property,
the availability of raw material in Vietnam is one of the major challenges in Vietnam.
According to a report in Thanh Nien News, the major obstacle for pharmaceutical
company especially the manufacturer is the cost of raw materials. Today, Vietnam still
relies heavily on imported raw material. About 90% of the raw materials use in Vietnam
is imported with China and India being the main supplier for the raw material (see figure
below)

(Source: Vietnam Custom, VietinbankSc Industry Report: Vietnam Pharmaceutical

Industry- Hang T. Nguten)
Additionally, the unfavorable rules and regulations in Vietnam also pose a challenge to
the pharmaceutical market in Vietnam. Recently, the Law on Tendering which took effect
from 1st July 2014 has posed a great impact to the industry especially to foreign
pharmaceutical company. According to the newly effective law, if there is availability of
domestic drugs that are able to fulfill the requirements on medical treatment and price as
according to the criteria published by the Ministry of Health, the offering tenders will be
prohibited from importing the drugs. Furthermore, if there are tenders that are ranked
equally, then tender that provides higher domestic production costs with more local
employees will prevail. The Vietnam Investment Review in July 2014 stated that these
provisions applied to all industries, but the pharmaceutical industry will be among the
hardest hit.
In addition, according to the Circular 47/2010/TT-BYT, drug importing activities for
foreign invested companies in Vietnam is limited to importing drug materials for its drug
manufacturing business and indicate that other drug import activities will be governed by
separate legislation. Thus, not until new legislation outline the import procedures and
storage practice is passed, foreign pharmaceutical companies cannot operate with its
maximum capacity to import and trade.
In general, Vietnam is striving to strengthen its health system by improving the regulatory
policy. The pharmaceutical company on the other hand is subjected to more stringent
regulatory requirement. Thus, it is important for pharmaceutical companies to comply

with the requirement and consider their rights and license owned in Vietnam
pharmaceutical market so that they are eligible to register the product for market in
Vietnam. Currently, the local pharmaceutical manufacturer and foreign pharmaceutical
company with manufacturing license are allowed to for product registration. Besides,
local and foreign entities holding the trading license are permitted for product registration
as well.

Overview Pharmaceutical Product Regulation in Vietnam

Pharmaceutical products in Vietnam are regulated by Drug Administration of Vietnam
(DAV), under Ministry of Health (MOH). Vietnam adopted the ASEAN Common
Technical Dossiers (ACTD) format for pharmaceutical product registration which
includes:

Part I Administrative data and product information

Part II Quality

Part III Preclinical/Safety

Part IV Clinical/Efficacy

Application dossier for new chemical entity should include all four parts while
application dossier for generic drug includes only Part I and II. Along with the dossier,
following are the documents and information usually required for the registration:

Product Data Sheet including information on indication, contraindication, dosage,

side effect, safety of the product Pharmacology, Pharmacokinetics and
Bioavailability, Toxicology Report

Manufacturing and Quality Control Process

Product and its labelling samples

Stability Report

Certificate of analysis by manufacturer

GMP Certificate

Free Sale Certificate

The product registration fee usually ranged from US$ 220 to US$ 300, depending on the
medicinal product. The time frame for new registration of vaccines, biological medicines

and chemical medicines takes 18 to 24 months while generic drug takes 14 to 22 months
from the date of dossier submission. For license renewal, 12-14 months is required after
the submission of the dossier.
Upon obtaining the product license, the product license holder has the responsibility to
report annually to the Drug Administration of Vietnam (DAV) for registered drugs that
are not being manufactured or imported. Furthermore, the license holder must be
accountable in notify the Drug Administration of Vietnam (DAV) and other relevant
authorities if there are any adverse drug reaction of the registered product, new
information relating to the quality, safety and effect of the drug or if the registered drug is
being called back in other country. In addition the Ministry of Health (MoH) can have the
authority to withdraw the license if:

Drugs are not manufactured in accordance to the registration dossier

Drugs failed to satisfy the quality standard

Request from the manufacturer or establishment to withdraw their Vietnamese

registration number

Drug registration have been withdrawn in the host country

Drugs containing unsafe active ingredient as recommended by WHO or Ministry

of Health (MoH)

Drugs found to be infringed intellectual property right

Source:
Vietnam Pharma Update April 2014, Tilleke & Gibbins
(http://tilleke.com/sites/default/files/2014_VN_Pharma%20Update.pdf) Medicinal
Product Regulation and Product Liability in Vietnam: Overview 2014, Tilleke & Gibbins
(http://us.practicallaw.com/6-518-6504) Global Health Technologies Coalition: Vietnam:
drug (http://regulatory.ghtcoalition.org/data/vietnam/drugs/)

Conclusion
In conclusion, Vietnam pharmaceutical industry is still in its early stage of growth period
and remains challenging for both local and foreign investor. Nevertheless, Vietnam is
taking great effort to improve domestic pharmaceutical manufacturing standards by
making WHO-GMP requirement a mandatory for all drug manufacturers operating in
Vietnam by 2014. Vietnam is also endeavouring in improving the rules and regulations
for the industry in Vietnam and support the ASEAN pharmaceutical regulatory
harmonization. Furthermore, Vietnam is improving its social health by implementing

New Health Insurance Law for universal coverage. Therefore, despite the various
challenges and obstacles, Vietnam is still a promising market offering tremendous
opportunity for growth in the future.