Vietnam pharmaceuticals healthcare report q2 2014

Q2 2014
www.businessmonitor.com
VIETNAM
PHARMACEUTICALS & HEALTHCARE REPORT
INCLUDES 10-YEAR FORECASTS TO 2023
ISSN 1748-2305
Published by:Business Monitor International
Vietnam Pharmaceuticals &
Healthcare Report Q2 2014
INCLUDES 10-YEAR FORECASTS TO 2023
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: March 2014
Business Monitor International
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:
© 2014 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.

CONTENTS
BMI Industry View 7
SWOT 9
Political 11
Economic 12
Business Environment 13
Industry Forecast 14
Pharmaceutical Market Forecast 14
Table: Pharmaceutical Sales Indicators, 2010-2018 15
Healthcare Market Forecast 16
Table: Healthcare Expenditure Indicators, 2010-2018 19
Table: Healthcare Governmental Indicators, 2010-2018 20
Table: Healthcare Private Indicators, 2010-2018 20
Prescription Drug Market Forecast 21
Table: Prescription Drug Sales Indicators, 2010-2018 23
Patented Drug Market Forecast 24
Table: Patented Drug Market Indicators, 2010-2018 25
Generic Drug Market Forecast 26
Table: Generic Drug Sales Indicators, 2010-2018 27

OTC Medicine Market Forecast 28
Table: OTC Medicine Sales Indicators, 2010-2018 30
Pharmaceutical Trade Forecast 31
Table: Vietnam Pharmaceutical Trade Data And Forecasts (US$mn) 32
Table: Vietnam Pharmaceutical Trade Data And Forecasts (VNDmn) 33
Other Healthcare Data 33
Key Risks To BMI's Forecast Scenario 34
Macroeconomic Forecasts 36
Economic Analysis 36
Table: Vietnam - Economic Activity 39
Industry Risk Reward Ratings 40
Asia Risk/Reward Ratings 40
Vietnam Risk/Reward Ratings 46
Rewards 46
Risks 46
Market Overview 48
Industry Trends And Developments 50
Epidemiology 50
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 4
Healthcare Financing 52
Hospital Sector 54
Private Healthcare Sector 56
Healthcare Insurance 57
Healthcare And Pharmaceutical Reform 59
Research And Development 61
Biotechnology Sector 63
Clinical Trials 66
Regulatory Development 69
Regulatory Regime 69

Pharmaceutical Advertising 70
Intellectual Property Environment 71
Corruption 74
Pricing Regime 75
Reimbursement Regime 79
Pricing And Reimbursement Developments 81
Competitive Landscape 83
Pharmaceutical Sector 83
Domestic Industry 84
Foreign Industry 87
Traditional Medicines 89
Pharmaceutical Distribution 90
Pharmaceutical Retail Sector 91
Table: Key Aspects Of Good Pharmacy Practice In Developing Countries 92
Company Profile 93
DHG Pharmaceutical 93
Traphaco Pharmaceutical 95
Vietnam Pharmaceutical Corporation (Vinapharm) 97
Vietnam OPV Pharmaceutical Co 100
Vietnam Pharmaceutical Joint Stock Company (Ampharco) 102
Vidipha Central Pharmaceutical Joint Stock Company 105
Pfizer 107
Sanofi 109
Novartis 113
Merck & Co 115
GlaxoSmithKline 117
Demographic Forecast 119
Table: Vietnam's Population By Age Group, 1990-2020 ('000) 120
Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 121
Table: Vietnam's Key Population Ratios, 1990-2020 122

Table: Vietnam's Rural And Urban Population, 1990-2020 122
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 5
Glossary 123
Methodology 125
Pharmaceutical Expenditure Forecast Model 125
Healthcare Expenditure Forecast Model 125
Notes On Methodology 126
Risk/Reward Ratings Methodology 127
Ratings Overview 128
Table: Pharmaceutical Risk/Reward Ratings Indicators 128
Indicator Weightings 129
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 6
BMI Industry View
BMI View: Vietnam's reliance on imported drugs (both generic and patented) will continue to
provide ample commercial opportunities for foreign drugmakers. However, the population's concerns over
drug quality means that only companies with relatively positive branding are likely to succeed in the
Vietnamese pharmaceutical market. In addition, downside risks for foreign generic
drug manufacturers include free trade agreements and the government's aim to promote locally produced
drugs.
Headline Expenditure Projections
■
Pharmaceuticals: VND69,297bn (US$3.30bn) in 2013 to VND80,680bn (US$3.92bn) in 2014; +16.4%
in local currency terms and +19.1% in US dollar terms.
■
Healthcare: VND230,140bn (US$10.94bn) in 2013 to VND263,931bn (US$12.8bn) in 2014; +14.7 in
local currency terms and +17.3% in US dollar terms.
Risk/Reward Rating: Vietnam's Pharmaceutical Risk/Reward Rating (RRR) score for Q214 is 49.1 out of
the maximum 100 in our newly improved RRR system. The country scored above average for some

indicators and sub-indicators, including overall market expenditure and sector value growth, pensionable
population. Consequently, with this moderate score Vietnam continues ranked 11
th
behind Thailand out of
the 19 key markets in Asia Pacific.
Key Trends And Developments
■
In March 2014, Vietnam's Health Minister Nguyen Thi Kim Tien proposed several changes to improve
payment policies and reduce violations in the healthcare sector. The health ministry will propose
solutions such as setting up new criteria for starting salaries and adding seniority allowances, Tien stated.
Doctors' starting wages need to be higher than those of other agencies due to the training costs involved,
Tien added. The ministry will also try to reduce hospital overloads to cut down working hours and
pressures on doctors. The service fees will be recalculated as the government only provides insurance to
families living in poverty, near-poverty or other special cases, Tien added. The ministry also intends to
improve allowance policies for medical staff and doctors at centres in rural areas.
■
In January 2014, US-based Mentholatum Company initiated a voluntary recall of Rohto Arctic, Rohto
Ice, Rohto Hydra, Rohto Relief and Rohto Cool eye drops. The recall was initiated due to a
manufacturing review at its production facility in Vietnam concerning sterility controls. The recall
includes only products manufactured in Vietnam.
■
In the same month, Vietnam's Deputy Prime Minister Vu Duc Dam held on online meeting in early
January focussing on the implementation of anti-disease programmes in Hanoi, Vietnam, in 2014. The
country's Agriculture and Rural Development Ministry, Health Ministry and associated agencies attended
the meeting. According to the prime minister, the ministries should not be lax in implementing disease
prevention programmes and need to conduct ongoing programmes to raise awareness of different
diseases.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 7
BMI Economic View: We forecast that Vietnam's fiscal deficit will narrow over the forecast period to less

than 1% of GDP in 2018 from 4.7% in 2013. The improvement in the government's fiscal accounts will
come on the back of both higher revenue growth as well as a more tempered expenditure outlook. That said,
we see risks to these forecasts on the back of potential for the government to have to absorb liabilities from
the banking sector.
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 Q2 2014
© Business Monitor International Page 8
SWOT
SWOT Analysis

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.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 9
SWOT Analysis - Continued
■
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.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 10
Political
SWOT Analysis

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 continue 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 Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 11
Economic
SWOT Analysis

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 2012.
■
The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.
Weaknesses
■
Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy
vulnerable to global economic uncertainties. 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 and the upcoming ASEAN AEC in 2015 should give Vietnam
greater 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.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 12
Business Environment
SWOT Analysis

Strengths
■
Vietnam has a large, skilled and low-cost workforce, which 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. According to
Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123
out of 176 countries.
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.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 13
Industry Forecast
Pharmaceutical Market Forecast
Vietnam's pharmaceutical market was valued at

VND69,297bn (US$3.30bn) in 2013, a 17.0% year-
on-year increase in local currency terms. Over the
forecast period to 2018, BMI expects
pharmaceutical consumption to reach
VND139,832bn (US$7.06bn), equating to a
compound annual growth rate (CAGR) of 15.1% in
local currency and 16.5% in US dollar terms. Over
the extended forecast period to 2023, the CAGRs
will be slightly lower, remaining in double digits.
Inflation will be a major factor in these high nominal
market growth rates. Nevertheless, our forecast for
GDP-beating drug market growth underlines our
view that there is considerable scope for increased
pharmaceutical consumption in a country where per
capita drug expenditure is just US$31.26. This,
combined with an expanding population, higher
levels of health awareness and increased access to
pharmaceuticals, creates a strong base for market growth assuming the required resources are put into
healthcare sector development. However, pricing remains a concern, due to a lack of controls and regulatory
bias against foreign products.
Additionally, some have blamed unscrupulous practices by pharmaceutical companies and prescribers for
pharmaceutical expenditure being higher than necessary. However, it is not just companies that bribe
Vietnamese healthcare professionals. Patients pay doctors and nurses to avoid waiting lists and receive
above-average care. Those on low incomes that cannot afford 'gifts' for staff members have to use
overcrowded facilities and rely on relatives to complement the provision of care.
In fact, according to a survey by the Vietnam Union of Science and Technology Associations (VUSTA)
published on the VietNamNet Bridge website in September 2009, gifts - which we interpret mostly as cash,
but can also be physical goods - accounted for 9% of the cost of a health check-up. The research was
Pharmaceutical Market Forecast
2010-2023

Pharmaceutical sales, US$bn (LHS)
Pharmaceutical sales at CER, US$bn (LHS)
Pharmaceutical sales, % of GDP (RHS)
2010
2011
2012
2013
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
0
5
10
15
2
2.5
f = BMI forecast. CER = constant exchange rate. Source:
BMI, Drug Administration of Vietnam (DAV), Vietnam
Ministry of Health, domestic companies, local press
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 14
performed through interviews with 140 people in rural and urban areas who had visited public and private
hospitals over the previous six months. Interestingly, 'medications/examinations/tests' only accounted for

53% of expenditure. It is not clear how the remaining funds were spent.
Vietnam's regulators faced their greatest challenge with the country's entrance to the WTO at the start of
2007. 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 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.
The liberalised environment could cause problems for Vietnam's small drug production sector.
Nevertheless, while the government originally called on firms to adopt GMP standards by the start of 2010,
the deadline was extended to the end of 2010. However, in August 2008, it was revealed that companies that
did not have accreditation could come up with provisory regulations. Firms not planning to establish GMP
standards must either shift to other sectors or produce traditional medicines, the latter being an area with
problems of its own, as many traditional drugs are incorrectly labelled and dispensed by unqualified
practitioners. According to Savipharm, the country has 108 factories compliant to GMP-WHO, few plants
compliant to EU and Japanese GMP as of November 2011. Meanwhile in January 2012, United
International Pharma Company became the first company with a facility that is compliant with the
Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S) GMP
standards.
Table: Pharmaceutical Sales Indicators, 2010-2018

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Pharmaceutical
sales (US$bn) 2.06 2.42 2.84 3.30 3.92 4.60 5.34 6.17 7.06
Pharmaceutical
sales (US$bn), %
chg y-o-y 20.2 17.9 17.0 16.2 19.1 17.3 16.1 15.5 14.5
Pharmaceutical
sales (VNDbn) 39,316.0 50,081.5 59,213.7 69,297.5 80,679.8 93,548.9 107,959.6 123,341.6 139,832.4
Pharmaceutical
sales (VNDbn), %
chg y-o-y 29.1 27.4 18.2 17.0 16.4 16.0 15.4 14.2 13.4

Pharmaceutical
sales at constant
exchange rate
(US$bn) 1.87 2.38 2.82 3.30 3.84 4.45 5.13 5.87 6.65
Pharmaceutical
sales, per capita 23.09 26.96 31.24 35.94 42.39 49.27 56.70 64.94 73.80
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 15
Pharmaceutical Sales Indicators, 2010-2018 - Continued

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
(US$)
Pharmaceutical
sales, % of GDP 1.82 1.80 1.82 1.93 2.01 2.08 2.14 2.20 2.23
Pharmaceutical
sales, % of health
expenditure 29.04 29.01 29.39 30.11 30.57 31.05 31.67 32.13 32.47
f = BMI forecast. Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies,
local press
Healthcare Market Forecast
BMI has revised its health expenditure forecast for
Vietnam, following the publication of new data by
the World Health Organization (WHO) in Q213.
Subsequently, we upgraded the forecast for private
health expenditure in December 2013 due to the
government's plan to raise hospitals fees between
2014 and 2018. We now forecast that the sector will
reach a value of VND726,892bn (US$38.0bn) by
2023. Through to 2018 and 2023, the sector is
projected to grow at local CAGRs of 13.4% and

12.2% respectively (14.7% and 13.2% in US dollar
terms).
Over the long term, Vietnam's healthcare sector is
forecast to grow in accordance with its strong
economic growth. However, we highlight that rising
healthcare expenditure does not necessarily equate to
quality healthcare provision. According to the
General Statistics Office of Vietnam, the number of hospitals in 2012 was 963. Meanwhile, the number of
hospital beds and doctors per 1,000 people stayed flat - at 2.01 and 0.65 respectively.
Moreover, despite a double-digit growth in healthcare expenditure, the country has yet to address the rising
burden of communicable diseases such as tuberculosis, AIDS and hand, foot and mouth disease. Much of
Healthcare Expenditure Forecast
2010-2023
Health expenditure, US$bn (LHS)
Health expenditure at CER, US$bn (LHS)
Health expenditure, % of GDP (RHS)
2010
2011
2012
2013
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f

0
20
40
f = forecast. CER = constant exchange rate. Source: BMI,
World Health Organization (WHO)
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 16
this increased expenditure will be on health infrastructure, which remains basic in many rural areas. Over
the longer term, this is likely to result in greater access to basic medicines.
The country's low per capita health and pharmaceutical expenditure highlights the population's poor access
to healthcare services and low affordability levels for medicines - particularly high-value drugs. This
represents a short-term challenge for pharmaceutical firms, but over the long term we believe economic
development will aid growth in the pharmaceutical and healthcare sector. Our country risk team remains
bullish about the Vietnamese economy as it forecasts strong economic growth through to 2023.
In the meantime, the government has outlined plans for the investment of up to US$1.5bn in the
pharmaceutical manufacturing sector over the next 10 years to reduce reliance on imports. The money is to
be used for a variety of programmes, including upgrading technology to meet GMP standards, the
development and expansion of the pharmaceutical supply network to poor and remote areas, the
establishment of joint ventures (JVs) with foreign players and achieving a greater percentage of domestic
pharmaceutical demand.
The government's intention to invest in the development of its biotechnology sector is likely to act as a
catalyst for wider industry reform, in particular concerning patent protection. However, local drug
production is still weak and incapable of meeting domestic demand, although local regulation reform on a
considerable scale is expected to attract foreign investment. In some sectors, such as vaccines, considerable
progress has been made to increase Vietnam's self-sufficiency, with the country now producing sufficient
measles vaccines domestically to meet national demand.
To help make further progress, the government has outlined plans to invest US$241mn in eight projects
within the local drug manufacturing industry. This will include the construction of four pharmaceutical
plants in the next four years. The authorities aim to have 80% of domestic demand met by local producers
by 2020, up from around 50% currently.

In a workshop help by Vietnam Ministry of Health in August 2013 in collaboration between Medical
Excellence Japan and Japan's Ministry of Economy, Trade and Industry, the two countries reiterated Japan's
support towards Vietnamese healthcare through investment in three hospitals including: Bach Mai Hospital,
Hue Central Hospital and Cho Ray Hospital.
In an interview with local media, Vietnam News, Pham Le Tuan, deputy minister of health, stated that
public hospital fees will increase progressively until 2018, in line with Decree 85/2012/ND-CP. In 2012, the
government increased the prices of three out of seven cost elements incurred by patients, which include the
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 17
cost of medicines, chemicals, consumable materials, electricity, water, equipment maintenance and others.
Under the plan developed by the Ministry of Health on increasing hospital fees, this will cover the
remaining four out of seven cost elements (beds, medical equipment, salaries, and other hospital operation
costs). These four elements were previously covered by the government.
Timeline Of Hospital Fees Increments
■
2014: Hospital fees charged to patients will include the bed cost for inpatient services and part of the cost
of their surgery.
■
2015: Fees will include medical equipment used for patient treatment, hospitals' management and
operating costs and 20-30% of hospital staff's basic salary at provincial hospitals in mountainous regions,
central highlands and district hospitals in Ha Noi and Ho Chi Minh City.
■
2016-17: Part of the hospital fee will be used to pay basic salary cost for staff at provincial hospitals,
central government hospitals and district hospitals in two major cities of Ha Noi and Ho Chi Minh City.
■
Post-2018: full cost recovery policy for medical services will be implemented across the board.
The deputy health minister believes that with these increments in fees service quality will improve
considerably, as hospitals will be dependent on patients. He added that 'more patients mean more money for
hospital and their staff.' We highlight that this is potentially regressive as patients will have to shoulder the
burden of healthcare costs due to low funding from the government. In addition, we see a risk of

overcharging by hospitals if the implementation of these increments is not properly regulated. Conversely,
hospitals may also not generate sufficient revenues despite the implementation of the regulation. In August
2013, Vietnam News reported that hospitals in Ha Noi ran into problems in applying new hospital fees due
to unclear regulations and staffing shortages.
Nevertheless, as a result of these progressive increments, we have upgraded Vietnam's private healthcare
expenditure forecast, as the increased costs will be borne by patients rather than the government. Through to
2017, we forecast that private health expenditure will increase at a compound annual growth rate of 14.7%
(15.6% in US dollar terms). This growth rate is higher than government health expenditure (12.8%). The
forecast for government health expenditure has remained unchanged. We highlight that the government may
spend savings generated elsewhere to boost health services, such as improving health infrastructure.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 18
Table: Healthcare Expenditure Indicators, 2010-2018

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Health
expenditure
(US$bn) 7.1 8.4 9.7 10.9 12.8 14.8 16.9 19.2 21.8
Health
expenditure
(US$bn), %
chg y-o-y 8.2 18.1 15.5 13.4 17.3 15.5 13.8 13.8 13.3
Health
expenditure
(VNDbn) 135,367.8 172,649.9 201,465.8 230,139.8 263,930.9 301,239.9 340,855.7 383,883.7 430,716.9
Health
expenditure
(VNDbn), %
chg y-o-y 16.2 27.5 16.7 14.2 14.7 14.1 13.2 12.6 12.2
Health

expenditure
at constant
exchange
rate (US$bn) 6.4 8.2 9.6 10.9 12.6 14.3 16.2 18.3 20.5
Health
expenditure
per capita
(US$) 79.5 93.0 106.3 119.4 138.7 158.7 179.0 202.1 227.3
Health
expenditure
(% GDP) 6.3 6.2 6.2 6.4 6.6 6.7 6.8 6.8 6.9
Source: BMI, WHO
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 19
Table: Healthcare Governmental Indicators, 2010-2018

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Government
health
expenditure
(US$bn) 2.6 3.4 3.9 4.4 5.0 5.7 6.5 7.3 8.3
Government
health
expenditure
(US$bn), %
chg y-o-y 3.3 28.3 14.8 12.4 15.7 13.9 12.8 13.1 12.9
Government
health
expenditure
(VNDbn) 50,257.5 69,665.5 80,821.0 91,513.4 103,524.2 116,516.6 130,670.6 146,230.9 163,453.1

Government
health
expenditure
(VNDbn), %
chg y-o-y 10.9 38.6 16.0 13.2 13.1 12.6 12.1 11.9 11.8
Government
sector health
expenditure,
% of total 37.1 40.4 40.1 39.8 39.2 38.7 38.3 38.1 37.9
Source: BMI, WHO
Table: Healthcare Private Indicators, 2010-2018

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Private health
expenditure
(US$bn) 4.5 5.0 5.8 6.6 7.8 9.1 10.4 11.9 13.5
Private health
expenditure
(US$bn), %
chg y-o-y 11.3 12.0 15.9 14.1 18.3 16.5 14.4 14.3 13.6
Private health
expenditure
(VNDbn) 85,110.3 102,984.4 120,644.8 138,626.4 160,406.7 184,723.3 210,185.0 237,652.8 267,263.9
Private health
expenditure
(VNDbn), %
chg y-o-y 19.5 21.0 17.1 14.9 15.7 15.2 13.8 13.1 12.5
Private sector
health
expenditure,

% of total 62.9 59.6 59.9 60.2 60.8 61.3 61.7 61.9 62.1
Source: BMI, WHO
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 20
Prescription Drug Market Forecast
The market figures for prescription and non-
prescription sectors are blurred by a lack of any
proper distinction between the two. In fact,
according to some drugstores, only 20-30% of
patients buy drugs with a prescription. Only
medicines that cause dependency, such as
benzodiazepines, are routinely refused sale without a
prescription. Antibiotics are the most popular drug
sold without a prescription. This has resulted in
worrying levels of antibiotic resistance. For
example, nearly 70% of bacteria carried by people
living in urban parts of Vietnam are resistant to
penicillin.
Nevertheless, the growth of the prescription
medicines market will outpace the growth of OTCs,
mainly due to the influx of expensive patented
products from abroad and increased demand for
sophisticated drugs. Additionally, tighter regulations
in the pharmaceuticals sector as a whole are likely to lead to the introduction of stricter dispensing
guidelines with the good pharmacy practice (GPP) recommendations coming into force in 2011.
By 2018, we forecast that prescription medicines will be worth VND104,612bn (US$5.28bn) at consumer
prices, posting a CAGR of 15.5% in local currency terms (thus somewhat above the wider pharmaceutical
market). In percentage terms, at this point, prescription drugs will account for 74.8% of the total market,
from 73.6% in 2013, driven by expanded access to formal healthcare in rural areas.
Demographic and environmental trends will be some of the key drivers of the prescription market in

Vietnam. Respiratory problems, including asthma and COPD, are on the rise, partly due to the high
prevalence of smoking and partly due to poor air quality. Manufacturers of drugs in the respiratory
therapeutic category will, therefore, have considerable room for expansion over the coming years. Similarly,
increased incidence of cancer, diabetes and hypertension among the Vietnamese population will provide
scope for drugmakers to expand.
Prescription Drug Market Forecast
2010-2023
Prescription drug sales, US$bn (LHS)
Prescription drug sales, % of total sales (RHS)
2010
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
0
5
10
72
73
74
75

76
77
f = BMI forecast. Source: BMI, Drug Administration of
Vietnam (DAV), Vietnam Ministry of Health, domestic
companies, local press
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 21
One therapeutic area that has strong potential is oncology. At an international scientific conference in April
2013, Mai Trong Khoa, deputy director of Hanoi-based Bach Mai Hospital, stated that Vietnam reports
about 110,000 new cases of cancer annually, with over 73% of patients dying from the disease - one of the
highest rates in the world. He added that the average death rate in developing countries is 67.8% while that
for developed countries is 49.4%. In January 2014 a representative from the Vietnam Social Insurance
Agency stated that cancer drugs account for a large percentage of insurance expenses. Moreover,
prescribing patterns seem to be influenced by economic considerations, with drug companies paying
commissions to doctors who promote certain types of product. The HCMC authorities conducted an
investigation into the practice, with findings revealing that a number of doctors were in receipt of more than
VND500mn (US$26,300) each month. The investigators looked into the prescribing of Merck & Co's
hepatitis drugs - namely PegIntron (interferon Alfa-2b) in 50mcg and 80mcg dosages, with commissions
reportedly being in the region of 10% to 30% of the drugs' cost. Joint monthly revenues for the two drugs
are reportedly in excess of VND6bn (US$315,000). In September 2012, Nguyen Thi Kim Tien echoed
similar view stating that prescribers receive 'commission' from foreign pharmaceutical firms therefore many
prescriptions contain expensive medicines.
Local industry representatives claim that large firms can therefore gain an upper hand as they can afford to
pay higher commissions, although doctors' relationship with companies also have a role to play in their
decisions. Moreover, despite the existence of hospital medicine councils - which are in charge of making
prescribing suggestions and supervising prescribing patterns - many doctors can still suggest different types
of medicines to their patients. Patients have also stated that commissions are widespread.
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 22
Table: Prescription Drug Sales Indicators, 2010-2018

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Prescription
drug sales
(US$bn) 1.50 1.77 2.08 2.42 2.90 3.41 3.97 4.60 5.28
Prescription
drug sales
(US$bn), %
chg y-o-y 20.5 18.4 17.4 16.5 19.4 17.7 16.5 15.9 14.9
Prescription
drug sales
(VNDbn) 28,622.01 36,603.17 43,419.93 50,982.17 59,553.47 69,283.48 80,224.49 91,963.60 104,611.54
Prescription
drug sales
(VNDbn), %
chg y-o-y 29.5 27.9 18.6 17.4 16.8 16.3 15.8 14.6 13.8
Prescription
drug sales,
% of total
sales 72.80 73.09 73.33 73.57 73.81 74.06 74.31 74.56 74.81
f = BMI forecast. Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies,
local press
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 23
Patented Drug Market Forecast
Value development of the patented drugs segment -
and consequently the overall prescription segment -
will be hampered by the government's plan to
contain pharmaceutical costs through restrictions on
advertising and the request that hospitals and

medical professionals give preference to
domestically produced drugs, as well as the fact that
most of the insured now incur some sort of co-
payment. Moreover, a number of high-value drugs
are due to come off patent in the coming years.
Nevertheless, the price increase evident since the
start of 2011 may take the value of the prescription
and patented markets beyond current estimates. By
2023, we expect the patented drug sector to reach
VND42,723bn (US$2.0bn), but represent a lower
percentage (18.04% versus 22.3% in 2013) of the
total market. Over the 2013-2023 period, patented
drugs are expected to post a CAGR of 10.7% in local
currency (11.7% in US dollars term), slightly below the rate of the overall market development.
Counterfeit drugs will continue to have a detrimental impact on patented drug sales over the forecast period,
despite the government's efforts to the contrary. The global economic slowdown has fuelled demand for
cheaper drugs, and counterfeit medicines are prospering as a result. Supported by the WHO, police, customs
and regulatory officials in the country have begun to coordinate their activities, although little can be done
in terms of enforcement without greater commitment to IP rights as well as more stringent penalties for
violators.
Corruption also has a role to play in drug prices, with commissions paid to pharmacists and doctors by sales
representatives and distributors to persuade them to prescribe their product to push up the retail price of
medicines. Such practices can only damage the industry as a whole, putting many patented products beyond
the budgets of the majority of the Vietnamese population.
Patented Drug Market Forecast
2010-2023
Patented drug sales, US$bn (LHS)
Patented drug sales, % of total (RHS)
2010
2011

2012
2013
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
0
1
2
3
20
17.5
22.5
25
f = BMI forecast. Source: BMI, Drug Administration of
Vietnam (DAV), Vietnam Ministry of Health, domestic
companies, local press
Vietnam Pharmaceuticals & Healthcare Report Q2 2014
© Business Monitor International Page 24
Speciality medicines, such as central nervous system (CNS) and cardiovascular drugs, are expected to be
the key growth area, while an increase in cancer, diabetes and hypertension will also generate product
demand. However, the basic nature of consumption is illustrated by the continued strong showing of
antibiotics and alimentary/metabolism products. The need to contain the HIV/AIDS epidemic and related
health problems will boost the antiretroviral sector, while the prevention of swine flu and similar diseases

continues to drive the growth of anti-flu drugs.
Table: Patented Drug Market Indicators, 2010-2018

2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Patented
drug sales
(US$bn) 0.48 0.56 0.64 0.74 0.86 0.99 1.13 1.28 1.43
Patented
drug sales
(US$bn), %
chg y-o-y 18.3 16.2 15.0 14.3 17.0 15.2 13.9 13.2 12.2
Patented
drug sales
(VNDbn) 9,209.95 11,560.38 13,437.90 15,473.92 17,701.95 20,154.14 22,820.78 25,560.85 28,385.62
Patented
drug sales
(VNDbn), %
chg y-o-y 27.1 25.5 16.2 15.2 14.4 13.9 13.2 12.0 11.1
Patented
drug sales,
% of
prescription
sales 32.18 31.58 30.95 30.35 29.72 29.09 28.45 27.79 27.13
Patented
drug sales,
% of total
sales 23.43 23.08 22.69 22.33 21.94 21.54 21.14 20.72 20.30
f = BMI forecast. Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies,
local press
Vietnam Pharmaceuticals & Healthcare Report Q2 2014

© Business Monitor International Page 25