Vietnam pharmaceuticals healthcare report q1 2012

Q1 2012
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PHARMACEUTICALS & HEALTHCARE REPORT
ISSN 1748-2305
Published by Business Monitor International Ltd.
VIETNAM
INCLUDES BMI'S FORECASTS
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VIETNAM
PHARMACEUTICALS &
HEALTHCARE
REPORT Q1 2012
INCLUDES 5-YEAR AND 10-YEAR INDUSTRY FORECASTS BY BMI


Part of BMI’s Industry Survey & Forecasts Series
Published by: Business Monitor International
Copy deadline: December 2011
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CONTENTS
Executive Summary 7
SWOT Analysis 9
Vietnam Pharmaceutical And Healthcare Industry SWOT 9
Vietnam Political SWOT 10
Vietnam Economic SWOT 11
Vietnam Business Environment SWOT 12
Vietnam – Business Environment Ratings 13
Table: Asia Pacific Pharmaceutical Business Environment Ratings, Q112 13
Rewards 14
Risks 15
Vietnam – Market Summary 16
Regulatory Regime 17
Pharmaceutical Advertising 18
Intellectual Property Environment 19
IP Shortcomings 19
Counterfeit Drugs 21
Pricing Regime 22
Price Spikes 23
Reimbursement Regime 24
Recent Pricing and Reimbursement Developments 25
Industry Trends and Developments 27
Epidemiology 27
Recent Public Health Developments 28
Communicable Diseases 29
HIV/AIDS 30
Non-Communicable Diseases 31
Healthcare Financing 32
Hospital Sector 33
Private Healthcare Sector 33

Hospital Sector 34
Healthcare Insurance 35
Healthcare and Pharmaceutical Reforms 37
Foreign Partnerships 38
Research and Development 39
Biotechnology Sector 39
Vaccines 40
Clinical Trials 42
Medical Device Market 42
Industry Forecast Scenario 45
Overall Market Forecast 45
Table: Pharmaceutical Sales Indicators 2007-2016 46
Key Growth Factors – Industry 47
Table: Healthcare Expenditure Indicators 2007-2016 48
Table: Healthcare Governmental Indicators 2007-2016 49
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Table: Healthcare Private Indicators 2007-2016 49
Key Growth Factors – Macroeconomic 50
Table: Vietnam – Economic Activity 53
Prescription Drug Market Forecast 53
Table: Prescription Drug Sales Indicators 2007-2016 55
Patented Drug Market Forecast 56
Table: Patented Drug Market Indicators 2007-2016 57
Generic Drug Market Forecast 57
Table: Generic Drug Sales Indicators 2007-2016 58
OTC Medicine Market Forecast 59

Table: OTC Medicine Sales Indicators 2007-2016 60
Medical Device Market Forecast 61
Table: Medical Devices Sales Indicators 2007-2016 62
Pharmaceutical Trade Forecast 63
Table: Exports and Imports Indicators 2007-2016 64
Other Healthcare Data Forecasts 65
Key Risks to BMI’s Forecast Scenario 66
Competitive Landscape 67
Pharmaceutical Industry 67
Domestic Pharmaceutical Sector 68
Foreign Pharmaceutical Sector 70
Recent Pharmaceutical Industry News 71
Traditional Medicines 74
Pharmaceutical Distribution 75
Pharmaceutical Retail Sector 76
Table: Key Aspects Of Good Pharmacy Practice (GPP) In Developing Countries 78
Company Profiles 79
Indigenous Manufacturer Profiles 79
Vietnam Pharmaceutical Corporation (Vinapharm) 79
Vietnam OPV Pharmaceutical Co 81
Vietnam Pharmaceutical Joint Stock Company (Ampharco) 83
Vidipha Central Pharmaceutical Joint Stock Company 85
Leading Multinational Manufacturers 86
Pfizer 86
Sanofi 87
Novartis 89
Merck & Co 90
GlaxoSmithKline (GSK) 92
Country Snapshot: Vietnam Demographic Data 93
Section 1: Population 93

Table: Demographic Indicators, 2005-2030 93
Table: Rural/Urban Breakdown, 2005-2030 94
Section 2: Education And Healthcare 94
Table: Education, 2002-2005 94
Table: Vital Statistics, 2005-2030 94
Section 3: Labour Market And Spending Power 95
Table: Employment Indicators, 1999-2004 95
Table: Consumer Expenditure, 2000-2012 (US$) 95
Glossary 96
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BMI Methodology 98

How We Generate Our Pharmaceutical Industry Forecasts 98
Pharmaceuticals Business Environment Ratings 99
Risk/Reward Ratings Methodology 99
Ratings Overview 99
Table: Pharmaceutical Business Environment Indicators 100
Weighting 101
Table: Weighting Of Components 101
Sources 101
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Executive Summary
BMI View: Despite strong growth potential, the government’s protectionist policy of preventing foreign-
owned companies from distributing their products and other regulatory inefficiencies will continue to
hinder the development of the pharmaceutical sector in the country. We note that the country will
continue to rely heavily on pharmaceutical imports given that counterfeits drugs are rampant and that the
domestic pharmaceutical sector is still underdeveloped. As the country joins other Asian countries such
as Singapore, Taiwan, South Korea and Malaysia in their quest to use biotechnology to boost the
economy, we believe that the country will continue to underperform in this area unless significant
improvements are made in terms of regulations and monetary commitments.
Headline Expenditure Projections
 Pharmaceuticals: VND32,773bn (US$1.71bn) in 2010 to VND38,902bn (US$1.89bn) in 2011;
+18.5% in local currency terms and +10.3% in US dollar terms. Forecast largely unchanged
from Q411 due to elevated inflation.
 Healthcare: VND151,755bn (US$7.93bn) in 2010 to VND177,860bn (US$8.63bn) in 2011;
+17.2% in local currency terms and +8.9% in US dollar terms. Forecast down slightly from
Q411 due to macroeconomic factors.
 Medical devices: VND13,393bn (US$700mn) in 2010 to VND14,967bn (US$727mn) in 2011;
+11.7% in local currency terms and +3.8% in US dollar terms. Forecast unchanged from
Q411.
Business Environment Rating: The country’s score has fallen slightly from 44.7 in Q411 to 44.6 in
Q112. Despite this slight decrease, Vietnam continues to rank 14
th
out of the 18 key markets surveyed. Its
Risks and Rewards profiles are relatively evenly balanced.
Key Trends & Developments

 In November 2011, Heber Biotech signed an agreement with American Vietnamese Biotech
(AVB) to distribute vaccines and other Cuban-made pharmaceutical products in Vietnam. Earlier
in February 2011, Heber signed an agreement with AMV’s subsidiary Hapharco to distribute
approximately US$2.5mn worth of Cuban-made pentavalent paediatric and anti-hepatitis
products in the country.
 Chilean generic drug manufacturer Corporacion Farmaceutica Recalcine (CFR) will be the
biggest shareholder in Vietnamese firm Domesco Medical Import & Export after the purchase
of a 41.88% stake for US$14.4mn. CFR already has production facilities in the country, as well
as in Argentina, Colombia and Peru. The Vietnamese government has a 35% stake in Domesco.
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BMI Economic View: We expect Vietnam's real GDP growth for 2011 and 2012 to be much weaker than
previously anticipated due to escalating economic headwinds in the US, eurozone and China. We are
increasingly concerned that the slowdown in manufacturing sector growth, which indicates weak demand
for Vietnamese exports, will be sustained over the coming quarters, presenting significant downside risks
to growth. Consequently, we have downgraded our real GDP growth forecast from 6.3% to 6.0% for
2011, and we expect growth to remain subdued at 6.9% in 2012.
BMI Political View: Despite slow progress, the Vietnamese government remains fully committed to its
agenda on eradicating corruption. We remain optimistic that plans to implement a draft law to combat
money-laundering activities, publishing information on personal property of public servants and
formalising the legal responsibilities of government entities, should help support existing efforts to deter
graft. Success in tackling corruption should reinforce confidence in the Communist Party of Vietnam's
leadership and boost its credibility in pushing forward with further political reforms over the coming
years.

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SWOT Analysis
Vietnam Pharmaceutical And Healthcare Industry SWOT
Strengths
 Significant growth potential, given a large and growing population.
 The government’s commitment to developing the health sector.
 Sizeable local generic drugs sector, which is being encouraged by the government.
 Strong traditional medicines segment with potential to improve the non-prescription
drugs market in the longer term, as long as sufficient investment in extraction
technologies can be found.

Weaknesses
 One of the least developed pharmaceutical markets in Asia, with low per capita
spending on drugs.
 Counterfeit drugs account for a significant amount of market consumption.
 Little distinction made between prescription and over-the-counter (OTC) drugs, with
most medicines available without a prescription.
 Complex drug pricing policy biased towards local drug producers.
 Import-reliant market, especially in terms of high-tech products and active
pharmaceutical ingredients (APIs), which makes it vulnerable to international
currency movements.
 Underdeveloped primary care services and a shortage of trained pharmacists is
continuing to hamper access to medicines and product market penetration.
 Population concentrated in rural, rather than urban areas, preventing access to
modern drugs and encouraging dependence upon traditional medicines.

Opportunities
 The Association of South East Asian Nations (ASEAN) harmonisation initiative,

including the adoption of Western regulatory standards such as International
Conference on Harmonization (ICH) and WHO guidelines.
 Introduction of five-year exclusivity for clinical dossier data encouraging research-
based multinationals.
 If investment can be found for technological improvements, then there is great
potential in the traditional Chinese medicine (TCM) market, in addition to fledging
biotechnology.
 Full World Trade Organisation (WTO) membership improving the trading climate and
potentially, in the longer term, redressing pharmaceutical trade issues.
 Requirement for domestic companies to comply with international Good
Manufacturing Practice (GMP) should boost exports.

Threats
 Government resistance to aligning patent law fully with international standards
deterring multinational sector expansion.
 Need to resolve infrastructural and power supply issues, as well as higher education
provision, before higher levels of foreign direct investment (FDI) can be expected.
 The government is increasingly interfering in the industry, protecting indigenous firms
through the use of legal trade barriers, which will affect competitiveness.
 Pharmaceutical price inflation threatens to put medicines out of reach of poor and
therefore limit market volume growth.
 Legalisation of parallel imports negatively impacting performance of patented drugs.
 New health insurance legislation decreasing patients’ access to medicines.

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Vietnam Political SWOT

Strengths
 The Communist Party of Vietnam remains committed to market-oriented
reforms and we do not expect major shifts in policy direction over the next five
years. The one-party system is generally conducive to short-term political
stability.
 Relations with the US have witnessed a marked improvement, and Washington
sees Hanoi as a potential geopolitical ally in South East Asia.

Weaknesses
 Corruption among government officials poses a major threat to the legitimacy of
the ruling Communist Party.
 There is increasing (albeit still limited) public dissatisfaction with the leadership's
tight control over political dissent.

Opportunities
 The government recognises the threat corruption poses to its legitimacy, and
has acted to clamp down on graft among party officials.
 Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within
the one-party system.

Threats
 Macroeconomic instabilities in 2010 and 2011 are likely to weigh on public
acceptance of the one-party system, and street demonstrations to protest
economic conditions could develop into a full-on challenge of undemocratic rule.

 Although strong domestic control will ensure little change to Vietnam's political
scene in the next few years, over the longer term, the one-party-state will
probably be unsustainable.
 Relations with China have deteriorated over recent years due to Beijing's more

assertive stance over disputed islands in the South China Sea and domestic
criticism of a large Chinese investment into a bauxite mining project in the
central highlands, which could potentially cause wide-scale environmental
damage.

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Vietnam Economic SWOT
Strengths
 Vietnam has been one of the fastest-growing economies in Asia in recent years,
with GDP growth averaging 7.2% annually between 2000 and 2010.
 The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 12.0% in 2009.

Weaknesses
 Vietnam still suffers from substantial trade, current account and fiscal deficits,
leaving the economy vulnerable to global economic uncertainties in 2011. The
fiscal deficit is dominated by substantial spending on social subsidies that could
be difficult to withdraw.
 The heavily managed and weak dong reduces incentives to improve quality of
exports, and also means import costs remain high, contributing to inflationary
pressures.

Opportunities
 WTO membership has given Vietnam access to both foreign markets and
capital, while making Vietnamese enterprises stronger through increased

competition.
 The government will in spite of the current macroeconomic woes, continue to
move forward with market reforms, including privatisation of state-owned
enterprises, and liberalising the banking sector.
 Urbanisation will continue to be a long-term growth driver. The UN forecasts the
urban population rising from 29% of the population to more than 50% by the
early 2040s.

Threats
 Inflation and deficit concerns have caused some investors to re-assess their
hitherto upbeat view of Vietnam. If the government focuses too much on
stimulating growth and fails to root out inflationary pressure, it risks prolonging
macroeconomic instability, which could lead to a potential crisis.
 Prolonged macroeconomic instability could prompt the authorities to put reforms
on hold as they struggle to stabilise the economy.


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Vietnam Business Environment SWOT
Strengths
 Vietnam has a large, skilled and low-cost workforce that has made the country
attractive to foreign investors.
 Vietnam's location – its proximity to China and South East Asia, and its good
sea links – makes it a good base for foreign companies to export to the rest of
Asia, and beyond.

Weaknesses
 Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate
to cope with the country's economic growth and links with the outside world.
 Vietnam remains one of the world's most corrupt countries. Its score in
Transparency International's 2010 Corruption Perceptions Index was 2.7,
placing it in 22nd in the Asia-Pacific region.

Opportunities
 Vietnam is increasingly attracting investment from key Asian economies, such
as Japan, South Korea and Taiwan. This offers the possibility of the transfer of
high-tech skills and know-how.
 Vietnam is pressing ahead with the privatisation of state-owned enterprises and
the liberalisation of the banking sector. This should offer foreign investors new
entry points.

Threats
 Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
 Labour unrest remains a lingering threat. A failure by the authorities to boost
skills levels could leave Vietnam a second-rate economy for an indefinite period.



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Vietnam – Business Environment Ratings

Table: Asia Pacific Pharmaceutical Business Environment Ratings, Q112

Rewards

Risks


Industry
Rewards
Country
Rewards Rewards
Industry
Risks
Country
Risks Risks
Pharma
Rating
Regional
Ranking
Japan 73 63 71 73 77 75 72.4 1
South Korea 63 67 64 70 69 70 66.4 2
Australia 50 87 59 72 84 77 66.2 3
China 70 50 65 67 56 63 64.0 4
Singapore 43 80 53 80 79 80 63.4 5
Taiwan 53 60 55 70 65 68 60.2 6
Hong Kong 47 70 53 67 79 72 60.2 7
Malaysia 50 60 53 70 69 69 59.3 8
New Zealand 30 80 43 70 87 77 56.3 9
India 60 43 56 60 50 56 56.0 10
Philippines 50 57 52 43 45 44 48.7 11

Thailand 50 47 49 37 58 45 47.6 12
Indonesia 50 50 50 40 46 42 46.9 13
Vietnam 47 47 47 40 44 42 44.6 14
Bangladesh 43 43 43 40 36 38 41.3 15
Pakistan 43 47 44 33 40 36 41.0 16
Sri Lanka 33 43 36 40 48 43 38.7 17
Cambodia 33 37 34 30 35 32 33.4 18
Regional
Average
49 57 51 56 59 57 53.7
Source: BMI. Scores out of 100, with 100 highest.

Globally speaking, Asia Pacific is the second most attractive region for multinational drugmakers.
Although it currently closely follows Emerging Europe, Asia Pacific is expected to overtake and even
increase its lead over the latter, due to its improving reward profile – given more favourable economic
and demographic factors. In our Pharmaceuticals & Healthcare BERs table for Q112, Asia Pacific’s score
is 53.7, which is again broadly in line with the global average.
Vietnam has slipped by one position, now ranking 14
th
of now 18 key regional markets, due to the
addition of New Zealand. Due to a combination of economic and regulatory drawbacks, Vietnam is a
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relatively high-risk proposition. Nevertheless, over our forecast period through to 2020, we expect
Vietnam to consolidate its placing above other markets such as Pakistan and Bangladesh, as the country’s
market matures. Globally, Vietnam ranks 62
nd

out of the 84 countries surveyed in our pharmaceutical
universe. The key components of Vietnam’s score are:
Rewards
Pharmaceutical market and country
structure scores are weighted and
combined to form the overall rewards
score. Vietnam’s score of 47 is below the
regional average for the quarter.
Industry Rewards
Vietnam is an attractive market currently
experiencing double-digit growth and,
importantly, we expect this trend to
continue for at least the next five years.
However, very low annual per-capita
spending (of just around US$20) and a
relatively small market (US$1.71bn in
2010) represent distinct drawbacks,
which limit the country’s score in this category.
Country Rewards
Vietnam scores poorly because of its large rural population, which lacks access to healthcare providers
such as hospitals, clinics and pharmacies. As a result of the Vietnam War – when between two and five
million people perished – demographics are skewed, so there are many more youths than elderly people.
Since old people consume more medicines the opportunities for drugmakers in a country with a
population of 86mn are fewer than expected. However, with rapid demographic growth anticipated, there
should still be opportunities. By 2020, the population should top 96mn.
Business Environment Rat
ings By Sub
-
Sector Score
Q112

Scores out of 100. Source: BMI

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Risks
Industry and Country Risks are weighted and combined to form the overall score for Risks. Vietnam’s
score of 42 is among the lowest scores in the table, indicating substantial risks facing multinationals
operating and wishing to operate in the country. The regional average stands at a slightly improved 57 in
Q112.
Industry Risks
One of the most obvious drawbacks of the Vietnamese pharmaceutical market is erratic pricing. In 2009,
numerous products saw double-digit price hikes, with some companies raising prices for their drugs twice
in a couple of months. This was partly due to currency depreciation and rises in the cost of imported
active pharmaceutical ingredients (APIs), but is also partly due to poor state monitoring, with this
situation continuing. While a significant obstacle to smaller domestic manufacturers, the upcoming
deadline to adhere to good manufacturing practice (GMP) requirements should benefit foreign firms that
are already accredited.
Country Risks
Vietnam is a stable Communist state and thus scores highly for policy continuity. Its economic structure,
which is characterised by increasing privatisation, is below global standards, but improvements are
expected. Corruption is an issue, as is the sub-standard legal framework and occasional demonstrations;
although we see limited evidence to suggest that a large-scale political uprising could occur in the short-
to-medium term.
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Vietnam – Market Summary
In common with many of its regional
neighbours, the Vietnamese pharmaceutical
market is underdeveloped and suffers from poor
regulatory and intellectual property (IP)
standards, which have held back foreign
investment in the country. Low-cost, locally
produced generic drugs – as well as counterfeit
products – account for a sizeable proportion of
drug consumption due to low consumer
purchasing power and an under-funded
healthcare system. Uneven and inadequate
public insurance coverage means that patients
are responsible for financing many of their
medical needs, which in the past has hampered
stronger market growth. Consequently,
pharmaceutical consumption represents only 1.7% of Vietnam’s GDP, with no improvement expected in the
coming years, as GDP growth outstrips growth in drug expenditure.
Nevertheless, the membership of the WTO will serve to promote the development of Vietnam’s pharmaceutical
sector as well as to reduce the role of counterfeit trade. The domestic industry, traditionally characterised by
poor manufacturing standards and obsolete facilities, is likely to undergo a wave of consolidation in the face of
rising pressure – and associated costs – on companies to implement international GMP standards. Additionally,
WTO membership will have a positive effect on the sector as it encourages imports and foreign direct
investment (FDI) and improves operational efficiency in what has traditionally been an overly bureaucratic and
less than dynamic industry.
Prescription medicines will remain dominant over the next five years, with the biggest focus on drugs for the
treatment of infectious and chronic diseases. The over-the-counter (OTC) sector has the potential to be boosted
by the re-categorisation of popular traditional medicines, although presently there are no such plans. In the

meantime, market figures will remain distorted by the lack of distinction between prescription and OTC drugs,
with most medicines available without a prescription.
Vietnamese drug makers account for just 40% of the total medicines market, while the country imports around
90% of the active pharmaceutical ingredients (APIs) used in drug production. However, capacity is improving
gradually, with the government aiming to ensure that 60% of domestic demand was met by local
pharmaceutical companies during 2010. Local firms have been looking to increase the sophistication of their
production facilities and product portfolios. Vinapharm exemplifies this trend – having signed technology
transfer agreements with US and Chinese firms in recent years. At the start of 2005, there were more than
10,000 kinds of medicines registered for sale in Vietnam, of which some 60% were produced locally.
Pharmaceutical Market By Sub
-
Sector
(US$bn)
2010

Source: Drug Administration of Vietnam (DAV), Vietnam
Ministry of Health, domestic companies, local press, BMI
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Regulatory Regime
The main regulatory authority in Vietnam is the Ministry of Health (MoH) and its Drug Administration of
Vietnam (DAV), established in 1996. The basis for market regulation is MoH’s Decision No.
1203/BYT/QD, Regulations on Medicine Registration, implemented in 1996. Drug approval times vary
although long delays are the norm, while the MoH has been accused in the past of being susceptible to
lobbying from drugmakers. In September 2011, the Office of the Central Steering Committee for Anti-
Corruption stated that it had received complaints from eight pharmaceutical firms (Stada Vietnam,
S.Pharma, Agimexpharm, Tipharco, Pymerpharco, Minh Hai Company and Khanh Hoa Pharma

Company) that the chief of the DAV, Truong Quoc Cuong, broke the rules in granting medicine
circulation licenses, drug import licenses and favouring foreign firms. For example, he permitted BV
Pharma to import several tonnes of pseudoephedrine to produce influenza pharmaceutical products, one
to two days after the firm submitted documentation.
Despite noticeable improvements in the past few years, the DAV reported that some 1,600 applications
were awaiting decisions at end-2010. Additionally, product visa renewals are required by the MoH every
five years, which adds between eight months and one year to the administrative burden.
By 2004, some 7,569 drugs had received registration, according to official figures. By the start of 2005,
more than 10,000 kinds of medicines were registered for sale in Vietnam, with some 6,107 produced
locally and 4,656 medicines sourced from foreign companies. The DAV, however, recently ordered the
immediate withdrawal of several medicines from the market, baomoi.com reported in April 2011. The
recall was issued after the medicines were found to be of substandard quality. Meanwhile, the Hanoi
Department of Health has asked district authorities to monitor medicine manufacturers and cosmetic
producers as well as the implementation of state regulations on addictive medicines trading in the region.
Regulations governing the pharmaceutical industry have traditionally been unclear and often implemented
on a case-by-case basis, representing a market entry barrier to foreign companies. Nevertheless, some
have been able to take advantage of the situation and increase the price of pharmaceutical products
considerably in recent years.
Vietnam’s regulators are facing their greatest challenge due the country’s entrance to the WTO, which
was achieved in January 2007 (full adoption of rules took place in January 2009). Foreign enterprises
have been given the right to open branches in Vietnam and to import medicines directly, although they
will still be barred from distributing their products. As part of its membership application, Vietnam also
pledged to set import duties at less than 5% for pharmaceutical products and drug tariffs are expected to
average just 2.5% within five years of accession. Forty-seven pharmaceutical categories that have tariffs
of between 10 and 15% were the first to be targeted in the shake-up, despite strong opposition from the
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local industry. In addition, foreign companies have gained the freedom to import and distribute their
products in the country as well as to establish local branch offices.
The newly liberalised environment could cause problems for Vietnam’s small drug production sector and
the government called on firms to adopt GMP standards by the start of 2010. In July 2008, however, the
MoH extended the deadline for domestic producers to obtain good manufacturing practice (GMP)
certificates to the end of 2010, which provided some relief to smaller players in particular. It was
subsequently revealed that even this extension could be negotiated.
Distributors, meanwhile, have been slowly applying ISO 9001: 2000 quality management standards. The
Ministry of Health, for its part, is also taking action and is developing the distribution network to help
improve access to medicines throughout the country. Official statistics indicate that Vietnam currently has
165 drug manufacturers, of which 48 have been certified as GMP-compliant.
The authorities issued an order for the removal of two medication drugs – Genzivit Plus syrup in 100ml
strength and the New Cobex tablet – from the market on May 15 2011. The order was issued after the
drugs failed to meet the required safety standards. During tests conducted by health experts, the drugs,
used as vitamin supplements, were found to have insufficient vitamin B12. The department has asked
hospitals, medical clinics and pharmacies to withdraw both the drugs from their shelves.
Pharmaceutical Advertising
Pharmaceutical advertising is restricted in Vietnam. All advertising materials must be registered with the
DAV.
Prescription drugs cannot be advertised directly to consumers, restricting the potential marketplace.
However, these products can be promoted to health officers via qualified representatives of
pharmaceutical companies and through product conferences and health seminars. Foreign firms are
required to obtain permission from a provincial health department before holding a conference and the
department must be made aware of any pharmaceutical displays.
Advertising laws are more liberal for OTCs than for prescription products. Consumer marketing is
permitted via magazines and newspapers as well as leaflets and brochures. The Ministry of Health issues
a list of drugs that can be advertised to consumers through TV, radio and other mass media outlets.
In September 2011, industrial insiders revealed that a number of doctors were advertising pharmaceutical
products under the guise of medical advice. Many doctors in the country have recently recommended
specific drugs while answering health questions in local media. This is despite a 1996 decree that stated

that doctors and medical officials are ban from using their stature to give recommendations in the media.
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Intellectual Property Environment
Vietnam’s accession to the WTO, ratified in January 2007 and implemented two years later, has already
resulted in some improvements to the country’s IP regime after the government agreed to immediately
implement IP guidelines to the standards of the Trade-Related Aspects of Intellectual Property Rights
(TRIPS) pact.
The government has taken a number steps to increase IP protection and the country’s patent structures are
already broadly in line with those demanded by the WTO. This includes a 20-year patent term and the
five-year market exclusivity of undisclosed and other test data, which was clarified in September 2006 by
a more detailed decree. The exception to this rule is when an applicant grants a third-party permission to
use its data, such as through a contract manufacturing or partnership agreement, or when a company
generates the data anew. The regulatory authorities, meanwhile, will release protected data only if it is
deemed necessary to protect the public.
IP Shortcomings
Counterfeiting remains a major deterrent for research-based foreign companies, and recently these
problems have escalated given the current economic crisis. Leading the criticism is the Office of the US
Trade Representative (USTR) and the US research-based drug makers’ association Pharmaceutical
Research and Manufacturers of America (PhRMA), with the former leaving Vietnam among its ‘watch’
countries in its 2011 Special 301 Submission, a status unchanged from 2004.
In its 2009 version, PhRMA noted improvements in terms of protection against unfair commercial use of
data generated to obtain marketing approval. However, in 2010 and 2011, the association was critical of
the limited progress made in addressing some of the concerns, despite acknowledging the government’s
willingness to consult on proposed reforms. In general, IP enforcement is considered disorganised and
patchy, worsened by the fact that many agencies can independently decide whether to take action or not,
or refer the complaints to another body. In addition, the legal system has little experience of patent

enforcement and interpretation, with guidelines on those issues lacking.
In the past, PhRMA has also called on the government to adopt an amendment to patent law that would
require companies with compulsory licences to pay compensation to the original patent holder, which
would be in line with WTO provisions. Presently, however, there is no specification that a patented
import is legally equivalent to manufacturing the product locally, which therefore does not block the grant
of a compulsory licence on the basis of non-use or inadequate use.
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Key concerns voiced by PhRMA in 2011 include the following:
 Drug Pricing: The system for drug pricing in Vietnam is based on cost, insurance and freight (CIF)
costs, which provides an unfair advantage to locally produced products that are inevitably cheaper.
The CIF methodology is lacking in transparency, with some drug prices seemingly set on the basis of
the price in neighbouring countries of same or similar products. Additionally, the system causes
delays in market access for foreign-manufactured drugs.

 Parallel Imports: In May 2004, the MoH authorised parallel imports of medicines used for the
prevention and treatment of various diseases. Under the regulations, which are criticised for lacking
transparency, parallel imports must be less expensive than the same drug already registered in
Vietnam. However, the move also allowed imports by third companies that have no prior approval
from patent holders, which violates the rights of the latter. Vietnamese consumers stand to benefit
from the parallel import law, although the country’s pharmaceutical trade balance may suffer. There
are also concerns that some parallel imports are improperly handled, which raises safety issues.
 Patent and Data Protection: While new legislation allows for 20 years of patent protection, the
enforcement of patent legislation is lax due to the fragmentation of the agencies responsible for such
matters, including the Ministry of Finance, the Ministry of Planning and Investment and the National
Office of Intellectual Property (NOIP). Although the parliament is working on rectifying the situation,
no changes are expected in the immediate future. PhRMA is ultimately hoping that patent disputes can

be resolved prior to the generic product reaching the market. On the subject of data protection,
PhRMA is working with the DAV on the improvement of some points contained within the Data
Protection Circular, which has now been signed into law. Key issues of concern include the
requirement for a separate data protection application and marketing approval application.
 Investment Restrictions: Since the start of 2009, Vietnam has allowed 100% foreign-owned
companies to import medicines into the country. However, guidance on the importing entities does
not appear to have been finalised. PhRMA has expressed it hope that the MoH will continue to use the
current supply chain, which allows drugmakers to use foreign-owned storate and logistics firms –
licenced by the Ministry and compliant with international standards.
 Clinical Trials: In its 2011 submission, PhRMA expressed its concerns over the new regulations on
clinical trials, which could hamper innovative pharmaceuticals, especially as local capacities for the
conducting of clinical trials are underdeveloped. The requirements also stipulate that new indications
and any variations of currently approved products would require support of local clinical trials.
PhRMA has requested that clinical data obtained overseas is accepted. Additionally, quality tests,
which are conducted by the National Institute for Control of Vaccine and Biologicals (NICVB) and
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are required for the registration approval of new imported batches of vaccines and biologics, are
causing further regulatory delays.
Vietnam’s imposition of import quotas on pharmaceutical companies has been criticised, although the
quotas are due to be phased out under international trade agreements including accords signed as a
precursor to WTO membership. Another source of difficulty for foreign firms is a regulation, known as
Dispatch No. 5410, which requires all imported APIs to be used in finished formulations within six
months of manufacture. Instead, PhRMA has called on the government to revise the rules to cover inputs
within 12 months of manufacture or within six months of the date of expiry of shelf life.
Counterfeit Drugs
Despite recent improvements to the IP environment, illegal copying remains commonplace, partly due to

the lax enforcement of legislation. Part of the problem is the fact that the government has little scope to
tackle the problem, given that the majority of drug sales in Vietnam are achieved not through regulated
pharmacies but through private dealers that handle drugs worth an estimated US$450mn per year. In
addition, the country has long, poorly monitored borders with countries such as Laos, China and
Cambodia, where the counterfeit drug trade is active.
The MoH reported that of the 16,500 medicines examined in 2005 0.09% were counterfeit drugs, the
highest level for five years. Among the examined products, 3.4% were ‘low quality’, down from a figure
of 3.74% in 2003. Vietnam’s testing system has the capacity to analyse around 500 pharmaceutical
ingredients or about 50% of the total licensed for sale. In the five years to September 2007, some 35mn
doses of fake medicines circulated in the local market.
The MoH acknowledges that the high levels of fake and low-quality drugs are due to lax management and
therefore it is planning to introduce more drastic punishments for producers and importers found
circulating such products, a move supported by the WHO. In addition, Vietnam’s drug management
administration has in the past revoked the licence for a number of medicines on sale in the domestic
market. The seized drugs include anti-allergy treatment astemizole, which can cause dangerous side
effects. Of the banned drugs, five had been imported from India.
The MoH estimates that the country’s traditional medicine market comprises of around 500 products,
with only 50 of these being legal (50 being legitimate imports and a further 20 domestically produced).
Ho Chi Minh City (HCMC)’s District 5 (otherwise known as Chinatown) is estimated to account for up to
70% of all counterfeit trade.
Reports published by local news provider Thanh Nien in November 2009 suggest that few improvements
have been made. Following suggestions that many unqualified doctors were prescribing overpriced and
inappropriate drugs to patients, the MoH began a countrywide inspection of Chinese and other foreign
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clinics to examine the validity of medical licences, the medicines stocked and their origins. Figures
published by the ministry in November 2009 claimed that, in NHMC alone, a fifth of the 1,500 traditional

medicine clinics did not meet government regulations regarding medical care and treatment.
In February 2010, the police issued an arrest warrant for the director and a number of other racketeers
operating under a front called Viet-Phap (France) Medicine Company. The men stand accused of
manufacturing and supplying fake pharmaceuticals. In late January 2009, Ho Chi Minh police also
exposed a gang that had re-packaged local drugs in boxes labelled as imports.
Pricing Regime
Due to a lack of controls, medicine costs fluctuate wildly throughout the supply chain, which has emerged
as a key concern for foreign companies. Imported API prices follow the global market’s fluctuations.
Domestic manufacturers use mark-ups indiscriminately and wholesalers also take seemingly random cuts.
Finally, retail pharmacies do not adhere to Good Pharmacy Practice (GPP) standards set by the WHO.
These factors combine to create variable prices for the consumer. The DAV wants to end this situation by
exerting its influence more effectively. Under the present system, importers calculate the cost, insurance
and freight (CIF) and then submit wholesale and retail price recommendations to the DAV. The DAV
then decides whether the proposed prices are reasonable before allowing them to be distributed. However,
the management of this system has been criticised as lax. Pharmaceutical companies must also publicly
list product prices and make announcements when changes are made.
Prices of pharmaceuticals in Vietnam have been rising rapidly, but this is not due to the new WTO rules.
The main driver is the growing consumer price index (CPI), with increasing wages and electricity costs
also having an effect. The DAV warned that medicine prices, especially of local products made with
imported APIs, would rise by over 10% in 2009, due to the depreciation of the dong against the dollar.
Consequently, in H109, the DAV effectively controlled drug spending, with medicine prices rising by
only 1.82%. The prices of domestically produced drugs remained stable, again highlighting the
importance of an indigenous pharmaceutical industry. A survey of 8,000 drugs showed that only 22
products recorded price increases over the period, while 10 reported price decreases. However, during
H209, price inflation accelerated, as increased costs for gasoline pressured manufacturing and
distribution, and the appreciation of the US dollar against the dong made imports more expensive.
In order to prevent rapid price rises for the remainder of the year, the DAV was listing medicine prices on
a daily basis on its website, thus allowing regional health departments to compare the prices of drugs on
the market, when making purchasing decisions.
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In June 2010, DAV Chief Truong Quoc Cuong rejected claims made by a Vietnamese analyst that a
WHO survey of seven popular medicines had shown prices in the country to be 5-40 times higher than the
world average. Cuong added that the prices of the medicines are actually lower than those in many other
countries.
Price Spikes
Pricing also gained attention due to recent research published in specialist journal, Southern Med Review,
in September 2009, which voiced concerns about the costs of medicines in Vietnam. An investigation was
conducted into the price and accessibility of 42 different drugs (25 of which belong to the WHO and
Health Action International’s (HAI) list of core medicines) across five regions.
The study authors found that not only were these medicines high in price, but that they were also
unavailable in some areas. The authors concluded that lower-priced drugs should be made available,
particularly in Vietnam’s public sector, and that the authorities should promote generic drugs as a means
of widening access to medicines.
Additional studies suggest that medicine prices are far from uniform. A survey conducted by students of
HCMC’s Medicine and Pharmacy University in mid-2009 found that drug prices varied from 10-38%
across retail outlets, with large drugstores charging between 4-10% more than Good Pharmacy Practice
stores like Eco and V-Phano.
In November 2010, pharmaceutical price rises again hit the news, with the prices of at least 39
pharmaceuticals having increased since November 1 2010. The price increases were attributed to the
higher cost of ingredients and imported materials following variations in the USD/VND rate. Drug stores
located in Ho Chi Minh City have confirmed the inflated price figures. For example, pharmaceutical
company Xuan Phuc Co. has raised the prices of 27 pharmaceutical products by 11-54%, while Hoa
Linh Co. increased the cost of six pharmaceutical products.
As a consequence, Vietnam's MoH has faced sharp criticism over its failure to control the prices of
essential drugs. The ministry has also reportedly failed to impose policy restrictions over promotions of
essential drugs in the country. During a meeting of the National Assembly's Standing Committee on the

issue on October 18 2010, the legislators remained sceptical after the ministry admitted it was unable to
manage essential drugs prices effectively.
According to Deputy Minister of Health Cao Minh Quang, setting maximum prices for each medicine is
difficult due to the presence of different elements in the same medicines, by different brands. He added
that the ministry is planning to impose regulations on maximum wholesale margins on the basis of import
prices. However, the difficult operating environment and high manufacturing costs have in the past led to
some companies failing to fulfil their contracts with hospitals.
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However, there are allegations that importers collude with distribution monopolies in order to keep prices
artificially high. One method of achieving this is through restricting supplies, thus forcing prices upwards.
Another factor causing price inflation is the cutting of promotions. For example, whereas previously
retailers would offer free products if a customer purchased a certain quantity, these offers are now being
removed, which is impacting access for low-income patients.
Similarly, in order to cut costs, representatives from Imexpharm Pharmaceutical Joint-Stock
Company said that many drug companies had been forced to buy foreign currency on the black market
because banks could not meet their demands. Reinforcing this unacceptable situation, the National
Pharmaceuticals Company No. 25 said it took nearly two weeks to secure enough foreign currency
from a bank to purchase a shipment of goods. Meanwhile, Vidipha Central Pharmaceutical Joint-
Stock Company estimated that the price of some APIs had risen six-fold since June 2007.
The lack of foreign currency has in the past led to drug shortages, particularly among cardiovascular
medicines. Fearing a public health crisis, the Health Ministry moved to break its price freeze on a total of
788 medicines from the start of July 2008. Conscious of fuelling inflation, the government relaxed the
controls in a stepwise fashion, following a meeting with the industry.
However, some pharmacies increased prices by 20-50% after the government sanctioned a 5-10% rise in
the prices of some medicines, fearing a supply shortfall. According to a VietNamNet Bridge report, the
ministry had requested that municipal and provincial authorities monitor prices following the June 30

2008 expiry of a government directive forbidding price hikes for essential commodities. The ministry was
set to allow raising medicine prices to ensure adequate supply for hospitals, but was concerned that some
firms may take undue advantage of the situation to increase profits.
Reimbursement Regime
Since the start of 2010, a new health insurance system has been in place in Vietnam, causing public
discontent. Many people on low incomes cannot afford the co-payments and are forgoing check-ups and
treatment. The new legislation states that certain patients – ethnic minorities, welfare recipients and
people who contributed to the revolution – must pay 5% of medical services costing over VND97,500
(US$5.28). Up to that level, the provision of healthcare is free. Students, employees and others not
obliged to buy health insurance will have to pay 20% of healthcare costs out-of-pocket. It is calculated
that 90% of patients will have to make a co-payment.
Vietnam previously also had a law that stipulated co-payments on medical services, although this was not
enforced. Parents are now also being charged for some of their children's medical treatments. Insurance
covers up to VND29.2mn (US$1,581), but many complicated procedures, such as heart surgery, cost
considerably more. In the meantime, hospitals stand accused of overprescribing and of excessive use of
expensive foreign-made medicines in particular.