Vietnam pharmaceutical market update 2013
Pacific Bridge Medical
Ames Gross of Pacific Bridge Medical shares his insights into the Vietnamese pharmaceutical market.
Vietnam is one of the fastest growing pharmaceutical markets in Asia. In 2012, Vietnam’s drug market was worth almost $3 billion – about one-third the size of the Indian market. It is expected to grow at a rate of more than 20 percent through 2017. According to Business Monitor International, Vietnam ranks 13 of 175 countries for the fastest growing global markets in drug spending.
Drug consumption per capita in Vietnam is also climbing. In 2010, the typical Vietnamese citizen spent $104 annually on pharmaceutical products. This compares to $148 in China and $51 in India. Per capita spending on drugs in Vietnam should more than double by 2015. That increase is fueled by a richer and older society and by an expansion of the country’s national health insurance system. Today, 65 percent of Vietnam’s 89 million people are covered by the national system. By 2020, that number will reach 90 percent.
“In 2012, Vietnam’s drug market was worth almost $3 billion – about one-third the size of the Indian market.”
All of this makes Vietnam an attractive market for foreign pharmaceutical companies, who continue to enter the country in growing numbers.
Local pharmaceutical production accounted for nearly half of Vietnam’s drug needs in 2012. However, those products were almost all low-cost generics. Imports accounted for more than 70 percent of the pharmaceuticals market by value during the same year. The most sophisticated drug products in Vietnam are imports.
In 2012, there were about 170 pharmaceutical companies in Vietnam. Almost ten percent were owned by foreign investors, with another four percent operating under joint venture agreements. The largest drug companies in terms of market share include GlaxoSmithKline, Bristol Myers Squibb and Novartis. Leading Vietnamese companies include Savipharm and Imexpharm.
To boost domestic production of higher-quality drugs, Vietnam has recently encouraged manufacturers to obtain Good Manufacturing Practice (GMP) certification. However, only about one-third of Vietnamese pharmaceutical companies have GMP certification today.
According to Vietnam’s Ministry of Health (MoH), the country has 140 private hospitals and close to 900 public hospitals. Of the private hospitals, six have foreign investments totaling close to $95 million.
The Vietnamese government is making its own investments in healthcare infrastructure. In its 2013 budget, the MoH established funding for new facilities (and upgrades to aging facilities) in rural and disadvantaged areas. According to the MoH, it has invested $2.5 billion in healthcare infrastructure improvements since 2009.
“Per capita spending on drugs in Vietnam should more than double by 2015.”
Entering the market
Previously, foreign pharmaceutical companies were not allowed to establish wholly-owned subsidiaries in Vietnam. They instead had to form joint ventures with local pharmaceutical companies. But wholly-owned foreign subsidiaries are now permitted. Since 2009, foreign pharmaceutical companies have also been given the right to open branches in Vietnam.
Subsidiaries generally promote better overall control of one’s business. However, setting up a subsidiary can be a long and painstaking process. Local subsidiaries must have their own manufacturing facility in Vietnam. Therefore, only companies with sufficient commercial interests tend to do so. Many foreign pharmaceutical firms choose to promote and sell their products through Vietnamese distributors.
The Drug Administration of Vietnam (DAV), under the MoH, is the country’s primary drug regulatory authority. Regulations can often be unclear and they are frequently implemented on a case-by-case basis. These uncertainties can pose a barrier to market entry for foreign pharmaceutical companies. Additionally, drug approval times often vary. Without the right connections, long delays are typical.
Only the following entities are permitted to register pharmaceutical products in Vietnam:
• Domestic pharmaceutical manufacturers.
• Foreign-invested companies licensed to manufacture pharmaceuticals within Vietnam.
• Domestic entities that are permitted to trade in pharmaceuticals.
• Foreign entities that hold trading licenses.
To complete a product registration application, the following items are required:
• GMP Certificate for the manufacturing facility in the country of origin.
• Free Sale Certificate issued in the country of origin. The product sold in Vietnam has to have the same specifications as the product sold in the country of origin.
• Product information including drug interactions, indications for use, dosage, management of overdose, storage conditions and shelf life.
• A detailed description regarding the manufacturing process, as well as the in-process quality control procedures.
• Stability data (in real time) from three batches.
• Quality specifications including the relevant analytical methods for finished products, raw materials and excipients.
• Three samples of the product, including Certificates of Analysis, active ingredients and excipients.
• Packaging materials including Vietnamese language inserts.
Most of the above materials may be submitted in English. Once the MoH begins the application review process, applicants will have to wait about six months for an approval license. The approval license is valid for five years.
“The private healthcare market in Vietnam has also been growing strongly after the government removed the ban on private practices in the late 1980s.”
Under Vietnamese law, Foreign Invested Enterprises (FIE) are not allowed to distribute pharmaceutical products in Vietnam. Therefore, foreign drug companies generally turn to Vietnamese distributors to sell their products on the Vietnamese market.
Distribution of pharmaceutical products in Vietnam is conducted through two channels, called treatment and commercial channels. A treatment channel represents the bidding and selling that takes place through the hospitals. A commercial channel represents the bidding and selling that takes place through pharmacies and other commercial entities. Currently, one-third of distribution takes place through treatment channels and two-thirds of distribution takes place through pharmacy or commercial channels. Foreign pharmaceutical companies who want their products widely prescribed have to engage in the bidding process at hospitals.
“…foreign drug companies generally turn to Vietnamese distributors to sell their products on the Vietnamese market.”
The bidding process is rife with corruption. A 2010 government inspection found that Vietnamese retail prices were up to eight times higher than the prices for similar drugs in other nations. In Hanoi, an inspection team found that the winning bid prices for many drugs were 130 to 245 percent higher than their original import prices. The reason given by the inspection team was hospital corruption.
Oftentimes, underpaid doctors and hospital procurement committee members receive “commissions” from drug sales within the hospital. Therefore, they have a natural incentive to accept high bids. In the past, pharmaceutical companies that wanted to survive in the Vietnamese market would go along with hospital requests for higher than normal bids. This practice is changing, but slowly.
Advertising pharmaceutical products remains highly restricted in Vietnam. For example, prescription drugs cannot be advertised to consumers directly. To get around this restriction, pharmaceutical companies can promote their products to health officials and healthcare workers through health seminars and conferences. However, foreign pharmaceutical companies must obtain permission from provincial health departments before holding any such conferences. They must also provide copies of any pharmaceutical displays to the provincial health department in advance. All other advertising materials have to be registered with the DAV.
Foreign companies in Vietnam
There has been a growing interest among foreign drug companies in establishing production and sales facilities in Vietnam. For example, in 2012 Japan’s Nipro Pharma Corporation invested $250 million into a manufacturing plant for new drugs and medical equipment. The facility will specialize in high quality, low-priced injectable drugs for export into developed countries, including Japan.
Other pharmaceutical companies are buying shares in their Vietnamese counterparts. In 2012, the Netherlands based Stada Service Holding bought a 25 percent stake in a Vietnamese drug maker called Pymepharco. The transaction brought Stada Service Holdings’ total share to 49 percent.
Finally, many foreign pharmaceutical companies are partnering with Vietnamese drug makers for manufacturing and distribution. In 2010, for example, GlaxoSmithKline signed an agreement with leading Vietnamese pharmaceutical company Savipharm. Under the agreement, GlaxoSmithKline is responsible for marketing authorization, technical support and quality control (including the upgrading of Savipharm’s quality control systems), while Savipharm is responsible for both manufacturing and distribution.
About the author:
Ames Gross is president and founder of Pacific Bridge Medical, a Bethesda, Md.-based consulting firm that helps medical companies doing business in the Asia market. A recognized national and international leader in the Asian medical markets, he founded Pacific Bridge Medical in 1988, which has helped hundreds of medical companies with business development and regulatory issues in Asia.
Catherine Matacic is a senior associate at Pacific Bridge Medical.
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