Vietnam pharmaceuticals healthcare report q1 2013

Q1 2013
www.businessmonitor.com
PHARMACEUTICALS & HEALTHCARE REPORT
ISSN 1748-2305
Published by Business Monitor International Ltd.
VIETNAM
INCLUDES BMI'S FORECASTS
Business Monitor International
85 Queen Victoria Street
London
EC4V 4AB
UK
Tel: +44 (0) 20 7246 5162
Fax: +44 (0) 20 7248 0467
email:
web:


© 2013 Business Monitor International.
All rights reserved.

All information contained in this publication is
copyrighted in the name of Business Monitor
International, and as such no part of this publication
may be reproduced, repackaged, redistributed, resold in
whole or in any part, or used in any form or by any
means graphic, electronic or mechanical, including
photocopying, recording, taping, or by information
storage or retrieval, or by any other means, without the
express written consent of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as
to the accuracy or completeness of any information hereto contained.




VIETNAM
PHARMACEUTICALS &
HEALTHCARE
REPORT Q1 2013
INCLUDES 10-YEAR FORECASTS TO 2021


Part of BMI’s Industry Survey & Forecasts Series
Published by: Business Monitor International
Copy deadline: December 2012
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 2
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 3

CONTENTS
Executive Summary 7
SWOT Analysis 9
Vietnam Pharmaceutical And Healthcare Industry SWOT 9
Vietnam Political SWOT 10
Vietnam Economic SWOT 10
Vietnam Business Environment SWOT 11
Pharmaceutical Risk/Reward Ratings 12
Table: Asia Pacific Pharmaceutical Risk/Reward Ratings, Q113 12
Rewards 13
Risks 13
Vietnam – Market Summary 15
Regulatory Regime 17
Pharmaceutical Advertising 18
Intellectual Property Environment 19
IP Shortcomings 19
Counterfeit Drugs 21
Corruption 22
Pricing Regime 23
Price Spikes 24
Reimbursement Regime 26
Pricing And Reimbursement Developments 27
Industry Trends And Developments 29
Epidemiology 29
Communicable Diseases 30
HIV/AIDS 31
Non-Communicable Diseases 32
Healthcare Financing 33
Hospital Sector 33
Private Healthcare Sector 35

Healthcare Insurance 36
Healthcare And Pharmaceutical Reform 38
Foreign Partnerships 39
Research & Development 40
Biotechnology Sector 40
Vaccines 42
Clinical Trials 43
Medical Device Market 44
Industry Forecast Scenario 46
Overall Market Forecast 46
Table: Pharmaceutical Sales Indicators 2008-2016 47
Healthcare Market Forecast 48
Table: Healthcare Expenditure Indicators 2008-2016 50
Table: Healthcare Governmental Indicators 2008-2016 50
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 4
Table: Healthcare Private Indicators 2008-2016 50
Key Growth Factors – Macroeconomic 52
Table: Vietnam – Economic Activity 55
Prescription Drug Market Forecast 56
Table: Prescription Drug Sales Indicators 2008-2016 58
Patented Drug Market Forecast 59
Table: Patented Drug Market Indicators 2008-2016 60
Generic Drug Market Forecast 61
Table: Generic Drug Sales Indicators 2008-2016 62
OTC Medicine Market Forecast 63
Table: OTC Medicine Sales Indicators 2008-2016 64

Pharmaceutical Trade Forecast 65
Table: Exports and Imports Indicators 2008-2016 67
Medical Device Market Forecast 68
Table: Medical Devices Sales Indicators 2008-2016 69
Other Healthcare Data Forecasts 70
Key Risks To BMI’s Forecast Scenario 71
Competitive Landscape 72
Pharmaceutical Industry 72
Domestic Pharmaceutical Sector 73
Foreign Pharmaceutical Sector 75
Recent Pharmaceutical Industry News 76
Traditional Medicines 79
Pharmaceutical Distribution 80
Pharmaceutical Retail Sector 81
Table: Key Aspects Of Good Pharmacy Practice In Developing Countries 83
Company Profiles 84
Local Companies 84
Vietnam Pharmaceutical Corporation (Vinapharm) 84
Vietnam OPV Pharmaceutical Co 86
Vietnam Pharmaceutical Joint Stock Company (Ampharco) 88
Vidipha Central Pharmaceutical Joint Stock Company 90
Multinational Companies 91
Pfizer 91
Sanofi 93
Novartis 95
Merck & Co 96
GlaxoSmithKline 98
Vietnam Demographic Outlook 100
Table: Vietnam’s Population By Age Group, 1990-2020 (‘000) 101
Table: Vietnam’s Population By Age Group, 1990-2020 (% of total) 102

Table: Vietnam’s Key Population Ratios, 1990-2020 103
Table: Vietnam’s Rural And Urban Population, 1990-2020 103
Glossary 104
BMI Methodology 106
How We Generate Our Pharmaceutical Industry Forecasts 106
Pharmaceuticals Risk/Reward Ratings Methodology 107
Ratings Overview 107
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 5
Table: Pharmaceutical Business Environment Indicators 108
Weighting 109
Table: Weighting Of Components 109
Sources 109
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 6

Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 7
Executive Summary
BMI View: Corruption will continue to affect Vietnam's pharmaceutical and healthcare business
environment and potentially delay the introduction of universal healthcare coverage for its people. While

corruption is a clear downside risk, we maintain that the sector still offers strong growth opportunities
for foreign investors.
Headline Expenditure Projections
 Pharmaceuticals: VND50,081bn (US$2.43bn) in 2011 to VND61,910bn (US$2.94bn) in 2012;
+23.6% in local currency terms and +21.4% in US dollar terms.
 Healthcare: VND157, 666bn (US$7.63bn) in 2011 to VND181,879bn (US$8.65bn) in 2012;
+15.4% in local currency terms and +13.3% in US dollar terms.
 Medical devices: VND15,137bn (US$733mn) in 2011 to VND17,029bn (US$810mn) in 2012;
+12.5% in local currency terms and +10.5% in US dollar terms.
Risk/Reward Rating: In this update of our RRRs, we highlight an improvement in ranking for Vietnam
from 12th in Q412 to 11th in Q113 out of the 18 key markets in the region, primarily due to an
improvement in its own RRR. In Q113, Vietnam's RRR is 49.3, which is a 6.5% increase from Q412's
46.3. This is due to the upgrade in pharmaceutical spending following the receipt of new data from the
Ministry of Health.
Key Trends And Developments
 Several private healthcare investors are now eyeing Vietnam's private healthcare market. In
August, Philippines-based United Laboratories partnered with Hi Precision Diagnostics to set
up a clinic specialising in diagnosis and medical tests in Ho Chi Minh City. In addition, an
agreement was signed in June between Dai An Industrial Park's developer and Canada-based
Trip Eye Company to construct a 200-room hospital worth US$160mn.
 In November 2012, as a precautionary measure, the Drug Administration of Vietnam announced
the recall of Typhim Vi typhoid vaccine by Sanofi Pasteur, a pre-filled syringe and 20-dose vials.
The vaccine met all requirements at the time of distribution, yet some lots were discovered to
have an antigen content that was lower than the established minimum level in some pre-filled
syringes.
 Vietnam records more than 3,500 new cases of Nasopharyngeal Cancer (NPC) and about 2,700
people die due to the disease each year. NPC is one of the 10 most common cancers and the fifth
Vietnam Pharmaceuticals & Healthcare Report Q1 2013

© Business Monitor International Ltd Page 8
most common type of cancer among males in the country. NPC's first symptom is a lump in the
neck, while some of the other symptoms are loss of hearing; ear infections; nosebleeds;
headaches; and facial cramps or numbness. The disease can be treated with new developments in
the medical sector, provided early detection and diagnosis are carried out for the disease.
BMI Economic View: Recent economic data have reinforced our bullish outlook for the Vietnamese
economy to expand at a robust pace of 7.0% in 2013. However, we expect growth to be highly uneven at
the industry level, with the banking and property sectors likely to experience a weak recovery. Meanwhile,
we foresee a strong pickup in retail sector growth as pent up domestic demand recovers. We also see the
manufacturing sector benefiting from a pickup in demand from China as we head into 2013.
BMI Political View: Vietnam's biggest political question over the coming decade is whether one-party
rule under the Communist Party of Vietnam (CPV) will face growing calls for democratisation, as was
the case in other major South East Asian countries. While our core scenario envisages the CPV
transforming itself into a technocratic administration, it faces major economic challenges which if
mismanaged could lead to widespread unrest. On the foreign policy front, we expect an increasingly
powerful China to drive Vietnam further into the camp of Asian nations with close relations with the US.

Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 9
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.
 No bioequivalence requirement in place for locally made generic medicines.
 Little distinction made between prescription and over-the-counter 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, which makes it vulnerable to currency movements.
 Underdeveloped primary care services and a shortage of trained pharmacists are
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 Harmonisation and World Health Organization 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 market, in addition to fledging
biotechnology.
 Full 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 practices 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 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.

Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 10
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 2012 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 undemocractic 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.



Vietnam Economic SWOT
Strengths
 Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 7.1% annually between 2000 and 2011.
 The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58.0% in 1993 to 14.0% in 2010.

Weaknesses
 Vietnam still suffers from substantial trade, current account and fiscal deficits,
leaving the economy vulnerable to global economic uncertainties in 2012. The fiscal
deficit is dominated by substantial spending on social subsidies that could be difficult
to withdraw.
 The heavily-managed and weak currency reduces incentives to improve quality of
exports, and also keeps import costs 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
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 11
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.





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.

Weakness
es
 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. According to
Transparency International's 2011 Corruption Perceptions Index, Vietnam ranks 112
out of 183 countries.

Opportunit
ies
 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.


Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 12
Pharmaceutical Risk/Reward Ratings
In BMI's Q113 Asia Pacific Pharmaceutical Risk/Reward Ratings (RRRs), which assesses
pharmaceutical markets according to attractiveness to multinationals, the region scored 53.4 out of 100,
which is a slight increase of 0.2% from Q412's score of 53.3. This score is behind Western Europe (65.8)
but ahead of Central and Eastern Europe (50.7), the Americas (49.4) and the Middle East and Africa
(44.2).

Table: Asia Pacific Pharmaceutical Risk/Reward Ratings, Q113
Rewards Risks

Industry
Rewards
Country
Rewards Rewards
Industry
Risks
Country
Risks Risks
Pharma

RRR
Regional
Rank
Japan
80 63 76 80 77 79 77,0
1
Australia
50 87 59 72 84 77 66,2
2
South Korea
60 67 62 70 69 70 64,9
3
China
67 50 63 67 56 63 62,5
4
Singapore
40 80 50 80 79 80 61,9
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 70 59,3
8
India
60 43 56 53 50 52 54,4
9

New Zealand
27 83 41 60 87 71 52,9
10
Vietnam
57 47 54 40 45 42 49,3
11
Indonesia
53 50 53 40 46 42 48,4
12
Thailand
47 47 47 37 58 45 46,1
13
Philippines
43 57 47 43 45 44 45,7
14
Sri Lanka
37 43 38 40 48 43 40,2
15
Pakistan
40 47 42 33 40 36 39,5
16
Bangladesh
37 43 38 40 36 38 38,3
17
Cambodia
33 37 34 30 36 32 33,5
18
Regional
Average
49 57 51 55 60 57 53,4

Scores out of 100, with 100 highest. Source: BMI


Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 13
In this update of the RRRs, we highlight an improvement in ranking for Vietnam from 12th in Q412 to
11th in Q113 out of the 18 key markets in the region, primarily due to an improvement in its own RRR.
In Q113, Vietnam's RRR is 49.3, which is a 6.5% increase from Q412's 46.3. This is due to the upgrade
in pharmaceutical spending following the receipt of new data from the Ministry of Health.
We maintain that Vietnam's pharmaceutical and healthcare sector presents strong growth opportunities for
foreign investors, although corruption will continue to pose a downside risk. Through to 2021, we
forecast that Vietnam's pharmaceutical and healthcare sectors will grow at local compound annual growth
rates (CAGRs) of 12.3% and 9.9% respectively. Much of this attractiveness is supported by the country's
increasingly affluent and ageing population, a rise in non-communicable diseases as well as the country's
aim to provide universal healthcare coverage.
Rewards
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 (just
over US$20 in 2011) and a relatively small market 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 2-5mn people died,
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 89mn are fewer than

expected. However, with rapid demographic growth anticipated, there should still be opportunities. By
2021, the population should top 97mn.
Risks
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.
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 14
Country Risks
Vietnam is a stable communist state and therefore 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.
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 15
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
represented only 1.98% of Vietnam’s GDP in 2011.
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 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 drugmakers account for just 40% of the total medicines market, while the country imports
around 90% of the 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. Despite increased production, health ministry statistics showed that less than half
(US$1.14bn) of the country’s total medicine consumption value (approximately US$2.45b) came from
Pharmaceutical Market By Sub-Sector
(US$bn)
2011

Source: Drug Administration of Vietnam (DAV), Vietnam Ministry
of Health, domestic companies, local press, BMI
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 16
domestic medicine. Due to the low consumption rate, the ministry held a campaign in August 2012 called
the ‘Vietnamese people give priority to use Vietnamese medicines’ to change the country’s awareness
and encourage them to use locally-produced drugs.
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 and about 60% were produced locally.
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 17
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. For example, 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 about 1,600 applications
were awaiting decisions at the 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
Vietnam Pharmaceuticals & Healthcare Report Q1 2013

© Business Monitor International Ltd Page 18
targeted in the shake-up, despite strong opposition from the 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 liberalised environment caused problems for Vietnam’s small drug production sector, especially as
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 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
MoH, 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 recommended specific
drugs while answering health questions in local media. This is despite a 1996 decree that says doctors and
medical officials are ban from using their stature to give recommendations in the media.
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 19
Intellectual Property Environment
Vietnam’s accession to the WTO was ratified in January 2007 and implemented two years later. The
membership 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) agreement.
The government has taken a number of 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.
However, concerns remain over the policy that exempts local manufacturers of generic medicines from
submitting bioequivalence studies prior to regulatory approval. Foreign research-based industry members
are critical of this lack of strict equivalence requirements, which negatively impacts on patient safety.
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 2012 Special 301 submission, a status unchanged since 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.
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 20
Key concerns described by PhRMA in 2012 included:
 IP protection and enforcement: Vietnam’s Data Protection Circular is not clear on whether the five-
year term of regulatory data protection applies in cases that involve a generic product relying on or
referencing innovator data in support of its marketing approval application. In addition, PhRMA
members continue to face delays in granting patents due to reasons such as insufficient personnel
capacity, eroding the effective term of patent protection. PhRMA has also called on the authorities to
provide better mechanisms that would challenge those that breach terms of patent protection.


Drug pricing: The system for reference 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 lacks transparency, with some drug prices seemingly set on

the basis of the price in neighbouring countries of the same or similar products. Additionally, the
system causes delays in market access for foreign-manufactured drugs. The companies are also
concerned that recent currency devaluations of the local tender have effectively meant that drug
producers as well as importers have had to absorb the rising costs, given price controls on medicines.

 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 in the Data Protection Circular,
which has been signed into law. Key issues of concern include the requirement for a separate data
protection application and marketing approval application.
 Distribution restrictions: Research-based pharmaceutical firms also face limited control over
product distribution as they are required to partner with local distributors. PhRMA feels the MoH
should allow member companies to make contracts with foreign-owned storage and logistical services
that certify that their pharmaceutical supply chain meets international standards. In addition, wholly
owned subsidies should be permitted to employ local employees as professional sales representatives.
 Clinical trials: PhRMA expressed its concerns over the new regulations that stipulate domestic
clinical trials requirements for marketing approval of all pharmaceuticals that have not been made
available in the country for more than five years. Member companies are concerned this could hamper
innovative pharmaceuticals development, especially as local capacity for conducting clinical trials is
underdeveloped. The requirements also stipulate that new indications and any variations of approved
products would require support of local clinical trials. PhRMA has requested that clinical data
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 21

obtained overseas is accepted. Additionally, quality tests, which are conducted by the National
Institute for Control of Vaccine and Biologicals (NICVB), which are required for the registration
approval of new imported batches of vaccines and biologics, are causing further regulatory delays.
Vietnam’s import quotas on pharmaceutical companies have been criticised, though the quotas are due to
be phased out under international trade agreements, including accords signed as precursors to WTO
membership. Another source of difficulty for foreign firms is a regulation, 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 to date. 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
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 22
inappropriate drugs to patients, the MoH began a nationwide inspection of Chinese and foreign 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 HCMC 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.
The presence of counterfeit drugs will impede the eradication of malaria, as well as other high-prevalence
diseases in the country. According to the US National Institutes of Health, over a third of malaria drugs
that were examined in South East Asia, including Vietnam, were counterfeits, with 30% of the 1,437-drug
sample failing a test of their pharmaceutical ingredients. While we believe it is highly unlikely that
counterfeit drug manufacturing will cease completely due to its lucrative nature, it is our view that the
authorities have to establish stringent regulatory measures to prevent the use and distribution of fake
medicine in their countries. PhRMA members are also calling on Vietnamese authorities to increase
penalties for counterfeit drugs perpetrators.
Corruption
A survey by the World Bank, 'Corruption from the Perspectives of Citizens, Enterprises and Public
Officials', showed that corruption remains an issue in Vietnam's healthcare system. Key findings
included:
• Healthcare is ranked seventh out of 22 sectors. Approximately 60-70% of the people (5,400 in
total) surveyed (comprising public officials, enterprises and citizens) perceived high levels of

corruption; more so than other sectors such as transport, customs and construction.
• There is a 25% chance of paying a bribe when using healthcare services or dealing with these
healthcare agencies. This figure is lower than the 49% for traffic police and school education
(32%) but higher than that for business registration (12%) and taxation services (3%).
• Approximately 76% of the 'unofficial' payments or gifts made for healthcare services were
voluntary.
• The existence of rampant corruption will continue to hinder the country's progress in the
pharmaceutical and healthcare sector, bringing downside risks to its business environment. In
August 2012, it was revealed that Vietnam's social health insurance funds are running a deficit,
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 23
in part due to mismanagement of funds as well as a result of corruption. In March 2012, Doan
Van Cuong, an ex-employee of the Can Tho social insurance department, made fraudulent
claims. He used the names of pregnant women and asked for postnatal assistance worth
VND119.5bn (US$5,730), even though these women were not his employees.
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 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 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 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.
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. He added that the prices of the medicines are actually lower than those in many other
countries.
Vietnam Pharmaceuticals & Healthcare Report Q1 2013



© Business Monitor International Ltd Page 24
Still, according to the Vietnam Pharmaceutical Companies Association (VPCA), the results of an April
2012 survey of pharmacies showed that the prices of 65 locally produced medicines had increased. Some
prices, such as those of cardiovascular drug Trafedin, rose by as much as 40% on a month-on-month (m-
o-m) basis. The prices of foreign-made treatments also rose, with GlaxoSmithKline (GSK)’s Augmentin
(amoxicillin clavulanate) 500mg now selling at VND175,000, a 9% increase. The VPCA survey of raw
materials found that their price only rose by 5.5% on average, which seems to suggest that drug producers
and importers arbitrarily increased the prices.
Nevertheless, in April 2012, the DAV stated that it would heavily fine organisations that violate medicine
price regulations from June 2012. New price regulations have been established by the ministries of health,

finance and industry and trade. The Ministry of Health can disapprove the documents of a medical trader
violating price regulations, which will remove conflicts in pricing. According to the inter-department
circular, traders will be wholly responsible for their product’s original, listed and selling prices, which
will be strictly monitored by the price management authorities. Drugmakers will have to record both
import prices and original prices of foreign drugs and domestic medicines. They also need to register the
wholesale and retail prices offered to the DAV, the Ministry of Health and local health centres.
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 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 GPP stores such as 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 US$/VND rate. Drug stores
located in Ho Chi Minh City have confirmed the inflated price figures. For example, pharmaceutical firm
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.