Vietnam pharmaceuticals healthcare report q3 2015

Q3 2015
www.bmiresearch.com
VIETNAM
PHARMACEUTICALS & HEALTHCARE REPORT
INCLUDES 10-YEAR FORECASTS TO 2024
ISSN 1748-2305
Published by:BMI Research
Vietnam Pharmaceuticals & Healthcare
Report Q3 2015
INCLUDES 10-YEAR FORECASTS TO 2024
Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: June 2015
BMI Research
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
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© 2015 Business Monitor International Ltd
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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 Ltd 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 Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.
Vietnam Pharmaceuticals & Healthcare
Report Q3 2015
INCLUDES 10-YEAR FORECASTS TO 2024
Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: June 2015
BMI Research
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:
© 2015 Business Monitor International Ltd
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor

International Ltd, 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 Ltd 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 Ltd 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
Operational Risk 14
Industry Forecast 16
Pharmaceutical Market Forecast 16
Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019) 18
Healthcare Market Forecast 19
Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 21
Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 22
Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 22
Prescription Drug Market Forecast 23
Table: Prescription Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 24

Patented Drug Market Forecast 25
Table: Patented Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 26
Generic Drug Market Forecast 27
Table: Generic Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 28
OTC Medicine Market Forecast 29
Table: Over-The-Counter (OTC) Medicine Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 31
Pharmaceutical Trade Forecast 32
Table: Pharmaceutical Trade Data And Forecasts (Vietnam 2013-2019) 33
Table: Pharmaceutical Trade Data And Forecasts local currency (Vietnam 2013-2019) 34
Key Risks To BMI's Forecast Scenario 34
Macroeconomic Forecasts 35
Economic Analysis 35
Table: Economic Activity (Vietnam 2010-2019) 40
Industry Risk Reward Indices 41
Asia Pacific Risk/Reward Index 41
Vietnam Risk Reward Index 47
Rewards 47
Risks 47
Market Overview 49
Industry Trends And Developments 51
Epidemiology 51
Healthcare Sector 53
Vietnam Pharmaceuticals & Healthcare Report Q3 2015
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Hospital Sector 56
Table: Healthcare Resources (Vietnam 2009-2014) 56
Table: Healthcare Personnel (Vietnam 2009-2014) 56
Table: Healthcare Activity (Vietnam 2009-2014) 57
Private Healthcare Sector 59
Healthcare Insurance 61

Healthcare And Pharmaceutical Reform 62
Research And Development 63
Biotechnology Sector 64
Clinical Trials 66
Regulatory Development 69
Pharmaceutical Advertising 70
Intellectual Property Issues 71
Corruption 74
Pricing Regime 75
Reimbursement Regime 80
Pricing And Reimbursement Developments 81
Competitive Landscape 83
Research-Based Industry 83
Domestic Industry 84
Foreign Industry 85
Traditional Medicines 87
Pharmaceutical Distribution 88
Pharmaceutical Retail Sector 89
Table: Key Aspects Of Good Pharmacy Practice In Developing Countries 90
Company Profile 91
DHG Pharmaceutical 91
GlaxoSmithKline 93
Merck & Co 95
Novartis 97
Pfizer 99
Sanofi 101
Traphaco Pharmaceutical 104
Vietnam OPV Pharmaceutical Co 106
Vietnam Pharmaceutical Corporation (Vinapharm) 108
Vietnam Pharmaceutical Joint Stock Company (Ampharco) 111

Vidipha Central Pharmaceutical Joint Stock Company 113
Demographic Forecast 115
Table: Population Headline Indicators (Vietnam 1990-2025) 116
Table: Key Population Ratios (Vietnam 1990-2025) 116
Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 117
Table: Population By Age Group (Vietnam 1990-2025) 117
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Table: Population By Age Group % (Vietnam 1990-2025) 118
Glossary 120
Methodology 122
Pharmaceutical Expenditure Forecast Model 122
Healthcare Expenditure Forecast Model 122
Notes On Methodology 123
Risk/Reward Index Methodology 124
Index Overview 125
Table: Pharmaceutical Risk/Reward Index Indicators 125
Indicator Weightings 126
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BMI Industry View
BMI View: Counterfeit and substandard medicines will remain highly pervasive in Vietnam's
pharmaceutical market. While this reflects the limited capacity of regulators to address the problem, its
persistence also illustrates the presence of a sizeable market for manufacturers of counterfeit and low
quality medicines. We highlight that pharmaceutical products most affected by this practice are small
molecule medicines.
Headline Expenditure Projections
■
Pharmaceuticals: VND80,731bn (USD3.81bn) in 2014 to VND92,719bn (USD4.32bn) in 2015; +14.9%
in local currency terms and +13.4% in US dollar terms.

■
Healthcare: VND234,889bn (USD11.08bn) in 2014 to VND258,648bn (USD12.05bn) in 2015; +10.1%
in local currency terms and +8.7% in US dollar terms.
Risk Reward Index
Vietnam's Pharmaceutical Risk Reward Index score for Q315 is 47.9 out of the maximum 100. The country
scored above average for some indicators and sub-indicators, including overall market expenditure, sector
value growth and pensionable population. Consequently, with this moderate score, Vietnam is ranked 11th
out of the 19 key Asia Pacific markets, level with Thailand and Indonesia.
Key Trends And Developments
■
Vietnam has met international vaccine-management standards and is eligible for exporting its
domestically produced vaccines, according to World Health Organization (WHO) representative
Lahouari Belghabi. The country's National Regulatory Authorities has scored more than 90% in its
critical control functions during an assessment carried out by 14 WHO specialists. The functions include
surveillance of vaccine performance in the field, regular inspections for good manufacturing practice and
evaluation of clinical performance. The country is among 39 countries that meet WHO's strict vaccine
standards, and is expected to become one of the world's leading vaccine producers in 20 or 30 years,
Belghabi noted (Vietnamnet).
■
The Drug Administration of Vietnam has imposed fines and a two-year drug import ban on two foreign
firms after they were found to be selling unqualified medicines and pharmaceutical products from unclear
origins, reports Thanhnien News. The DAV ordered Hong Kong-based Austin Pharma Specialties and
China-based CSPC Innovation Pharmaceutical to submit, from the profits made from these illegal
products, USD30,625 and USD29,750 respectively. On top of this, the agency fined the companies
VND160mn (USD7,300) each. The alleged materials were used to manufacture omeprazole and
pantoprazole, both 'proton pump inhibitors', commonly used to treat acid reflux and ulcers of stomach.
■
Vietnam Social Insurance (VSI) is set to implement numerous measures in order to simplify health
insurance procedures to encourage more people to buy insurance. The development comes after the
number of people buying health insurance in Q115 decline by 1.4mn, compared with Q414. The

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measures are aimed towards achieving 75% health insurance coverage in 2015. Under the plan, the VSI
will work with the health ministry to spread awareness of the benefits of health insurance. These
measures will be taken in provinces and cities, where currently only 60% of the population is covered
under health insurance. Furthermore, health insurance will be allowed to be collected two times in a year,
instead of just once as in previous years (Viet Nam News).
BMI Economic View
While the Vietnamese banking sector remains burdened by bad debts and the still-strong presence of state
enterprises, sustained rapid economic growth momentum and ongoing banking reform efforts by the
government should gradually strengthen the local banks. The retail banking segment will be a key growth
engine over the coming years owing to the relatively under-banked nature of the country.
BMI Political View
Despite increasing political and international pressures, China will continue to hold a firm stance on its
nine-dash line claims to the South China Sea. Therefore, there remains no end in sight to the ongoing
maritime dispute between Vietnam and China. That said, we believe Vietnam will not want to strain ties
with China given the latter's increasing economic importance.
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SWOT
Pharmaceutical 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 Southeast Asian Nations harmonisation initiative, including the
adoption of Western regulatory standards such as International Conference on
Harmonisation and World Health Organization guidelines.

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Pharmaceutical 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 World Trade Organization 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 the poor and
therefore limit market volume growth.
■

Legalisation of parallel imports negatively impacting performance of patented drugs.
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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 coming 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

■
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.
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Economic
SWOT Analysis

Strengths
■
Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 6.5% annually between 2000 and 2014.
■
The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 17.2% in 2012.
■
Vietnam has been strengthening its trade and aid ties in a bid to increase exports and
diversify its export sector.
Weaknesses
■
Vietnam still suffers from 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.

Opportunities
■
WTO membership and the ASEAN economic integration in 2015 should give Vietnam
greater access to both foreign markets and capital, while making Vietnamese
enterprises stronger through increased foreign competition.
■
The government has continued to move forward with market reforms, including
privatisation of state-owned enterprises, addressing the high level of bad loans in the
banking sector as well as liberalising the banking sector.
■
Urbanisation will continue to be a long-term growth driver. The UN forecasts the
urban population rising from 32% of the population in 2013 to more than 50% by the
early 2040s.
Threats
■
Although inflation has subsided in 2014, complacency by the State Bank of Vietnam
on this front could result in a decline in investment.
■
The potential for an escalation of political tensions with China over sovereign claims
to parts of the South China Sea could have a negative impact on the economy.
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SWOT Analysis - Continued
■
Market reforms could progress at a much slower pace as the government remains
cautious about ceding ownership to foreign investors.
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Operational Risk
SWOT Analysis

Strengths
■
Vietnam has a high number of university graduates with skilled degrees and a high
literacy rate for its income level.
• In addition to a number of regional and international flight options, Vietnam has an
extensive inland waterway system.
• Growing levels of foreign investment encourage further trade and spin-off industries.
• Vietnam's rate of violent crime is generally low, and foreigners are unlikely to be
targeted.
Weaknesses
■
High labour costs increase overall operating costs, and difficulty in hiring foreigners
creates shortages of skilled labour.
• Underdeveloped rail capacity overburdens the road network.
• An underdeveloped banking sector decreases the options for keeping money in the
state.
• Vietnam's military forces are only a quarter the size of China's, meaning that Beijing
would probably prevail in any naval battle over maritime disputes in the South China
Sea.
Opportunities
■
Explosive growth in demand for tertiary education will increase the number of highly
skilled graduates in the medium term.
• Vietnam is easily accessible from the main shipping routes, and growth in the number
of port facilities will provide adequate capacity.
• Increased foreign participation in the banking sector will increase the availability of
funds for loans.
Threats
■

Dysfunctional labour-management relations increase the risk of disruption and strike
action.
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SWOT Analysis - Continued
• Vietnam's reliance on imported oil poses risks in the form of energy and fuel
shortages.
• Corruption and inefficiency in the legal system.
• Anti-Chinese violence, as seen in May 2014, could be a harbinger of wider political
and social unrest.
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Industry Forecast
Pharmaceutical Market Forecast
Vietnam's pharmaceutical market was valued at
VND80,731bn (USD3.81bn) in 2014, a 16.5% year-
on-year increase in local currency terms. Over the
forecast period to 2019, BMI expects
pharmaceutical consumption to reach
VND151,609bn (USD7.27bn) equating to a
compound annual growth rate (CAGR) of 13.4% in
local currency and 13.8% in US dollar terms. Over
the extended forecast period to 2024, the CAGR will
be slightly lower, but will remain in double-digit
figures.
Inflation will be a major factor in these high nominal
market growth rates. However, we highlight that
there is considerable scope for increased
pharmaceutical consumption in a country where per
capita drug expenditure is just USD41.1 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 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 performed through
interviews with 140 people in rural and urban areas who had visited public and private hospitals over the
Pharmaceutical Market Forecast
2010-2024 (2010-2024)
Pharmaceutical sales constant exchange rate, USDbn (LHS)
Pharmaceutical sales, USDbn (LHS)
Pharmaceutical sales, % of GDP (RHS)
2010
2011
2012
2013
2014
2015f
2016f
2017f
2018f
2019f
2020f
2021f

2022f
2023f
2024f
0
5
10
15
0
0.5
1
1.5
2
2.5
f = BMI forecast. Source: National Sources/BMI
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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 World Trade
Organization 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 good manufacturing practice (GMP)
standards by the start of 2010, the deadline was extended to the end of 2010. However, 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.
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Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019)
2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Pharmaceutical sales,
USDbn 2.4 2.8 3.3 3.8 4.3 4.9 5.6 6.4 7.3
Pharmaceutical sales,
USDbn, % y-o-y 17.9 17.0 16.2 15.6 13.4 14.2 14.5 13.8 13.2
Pharmaceutical sales,
VNDbn 50081.5 59213.7 69297.5 80730.9 92718.7 105798.3 119976.7 135251.2 151609.5
Pharmaceutical sales,
VNDbn, % y-o-y 27.4 18.2 17.0 16.5 14.9 14.1 13.4 12.7 12.1
Pharmaceutical sales
constant exchange
rate, USDbn 2.4 2.8 3.3 3.8 4.4 5.0 5.7 6.4 7.2
Pharmaceutical sales,
USD per capita 27.0 31.2 35.9 41.1 46.2 52.4 59.5 67.1 75.4
Pharmaceutical sales,
% of GDP 1.8 1.8 1.9 2.1 2.2 2.2 2.3 2.3 2.3
Pharmaceutical sales,
% of health
expenditure 29.0 30.5 32.5 34.4 35.8 37.1 38.2 39.1 39.8
f = BMI forecast. Source: National Sources/BMI
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Healthcare Market Forecast

In 2014, healthcare expenditure reached VND234,889bn (USD11.08 bn) which corresponded to year-on-
year growth of 10.1% in local currency terms and 9.2% in US dollar terms. We now forecast that the sector
will reach a value of VND619,411bn (USD31.2bn) by 2024. Through to 2019 and 2024, the sector is
projected to grow at local compound annual growth rates of 10.1% and 10.2% respectively (10.5% and
10.9% 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.
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
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 2024.
In the meantime, the government has outlined plans for the investment of up to USD1.5bn 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 good manufacturing practice
standards, the development and expansion of the pharmaceutical supply network to poor and remote areas,
the establishment of joint ventures 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.
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To help make further progress, the government has outlined plans to invest USD241mn 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
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
hospitals 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.
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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
2019, we forecast that private health expenditure will increase at a compound annual growth rate of 10.9%
(11.3% in US dollar terms). This growth rate is higher than government health expenditure (9.0%, 9.5% in
US dollar terms). We highlight that the government may spend savings generated elsewhere to boost health
services, such as improving health infrastructure.
Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Health
spending,
USDbn
8.346 9.286 10.146 11.080 12.048 13.280 14.766 16.421 18.265
Health
spending,
USDbn, % y-o-y
16.27 11.27 9.25 9.21 8.73 10.23 11.19 11.21 11.23
Health
spending,
VNDbn 172398.0 193834.4 213353.2 234889.2 258648.2 284857.1 313766.7 345654.3 380826.9
Health

spending,
VNDbn, % y-o-y
25.60 12.43 10.07 10.09 10.12 10.13 10.15 10.16 10.18
Health
expenditure
constant FX
rate, USDbn
8.132 9.144 10.064 11.080 12.201 13.437 14.801 16.305 17.965
Health
spending, USD
per capita
92.8 102.3 110.7 119.7 129.0 141.0 155.5 171.6 189.5
Health
spending, % of
GDP
6.20 5.97 5.95 5.96 6.05 6.02 5.94 5.87 5.80
f = BMI forecast. Source: World Health Organization (WHO)/ BMI
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Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019)
2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Govt. health spend,
USDbn
3.775 3.953 4.250 4.573 4.907 5.345 5.881 6.482 7.157
Govt. health spend,
USDbn, % y-o-y
12.97 4.71 7.52 7.62 7.29 8.93 10.03 10.22 10.42
Govt. health spend,
VNDbn 77975.7 82501.7 89365.4 96948.7 105340.2 114640.3 124963.9 136442.3 149225.6
Govt. health spend,

VNDbn, % y-o-y
22.04 5.80 8.32 8.49 8.66 8.83 9.01 9.19 9.37
Govt. health spend,
% total health spend
45.23 42.56 41.89 41.27 40.73 40.24 39.83 39.47 39.18
f = BMI forecast. Source: World Health Organization (WHO)/ BMI
Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Private health
spend, USDbn
4.571 5.334 5.896 6.507 7.141 7.936 8.885 9.939 11.108
Private health
spend, USDbn,
% y-o-y
19.14 16.69 10.54 10.36 9.74 11.13 11.96 11.86 11.76
Private health
spend, VNDbn 94422.3 111332.7 123987.8 137940.5 153308.0 170216.8 188802.8 209212.0 231601.3
Private health
spend, VNDbn,
% y-o-y
28.70 17.91 11.37 11.25 11.14 11.03 10.92 10.81 10.70
Private health
spend, % total
health
expenditure
54.77 57.44 58.11 58.73 59.27 59.76 60.17 60.53 60.82
f = BMI forecast. Source: World Health Organization (WHO)/ BMI
Vietnam Pharmaceuticals & Healthcare Report Q3 2015
© Business Monitor International Ltd Page 22

Prescription Drug Market Forecast
The market figures for the 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 over-
the-counters 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 recommendations established in 2011.
By 2019, we forecast that prescription medicines will be worth VND113,807bn (USD5.46bn) at consumer
prices, posting a compound annual growth rate of 13.8% in local currency terms (thus somewhat above the
wider pharmaceutical market). In percentage terms, at this point, prescription drugs will account for 75.1%
of the total market, up from 73.8% in 2014, 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 are on the rise, including asthma and chronic obstructive pulmonary
disease, 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
2010-2024 (2010-2024)
Prescription drug sales, USDbn (LHS)
Prescription drug sales, % of total sales (RHS)
2010
2011
2012
2013
2014
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
2023f
2024f
0
5
10
15
0
25
50
75
100
f = BMI forecast. Source: National Sources/BMI
Vietnam Pharmaceuticals & Healthcare Report Q3 2015

© Business Monitor International Ltd Page 23
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 Ho Chi Minh City authorities conducted
an investigation into the practice, with findings revealing that a number of doctors were in receipt of more
than VND500mn (USD26,300) 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 (USD315,000). In September 2012, Nguyen Thi Kim Tien echoed a
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' relationships 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.
Table: Prescription Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019)

2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f
Prescription drug sales,
USDbn
1.772 2.080 2.424 2.811 3.199 3.665 4.210 4.807 5.458
Prescription drug sales,
USDbn, % y-o-y
18.38 17.39 16.55 15.95 13.78 14.59 14.85 14.19 13.55

Prescription drug sales,
VNDbn 36603.2 43419.9 50982.2 59591.2 68668.6 78618.4 89454.7 101184.3 113806.8
Prescription drug sales,
VNDbn, % y-o-y
27.88 18.62 17.42 16.89 15.23 14.49 13.78 13.11 12.47
Prescription drug sales, %
of total sales
73.1 73.3 73.6 73.8 74.1 74.3 74.6 74.8 75.1
f = BMI forecast. Source: National Sources/BMI
Vietnam Pharmaceuticals & Healthcare Report Q3 2015
© Business Monitor International Ltd Page 24