Vietnam’s population totals around 84 million and its economy boasted a 7.7 percent GDP growth rate in 2004. While Vietnam’s healthcare industry is still developing, it is one of the faster growing markets in the global healthcare industry. In 2003, Vietnam spent nearly $420 million on pharmaceutical imports, ten times the amount spent in 1993. Presently, more than 200 foreign pharmaceutical companies are registered in Vietnam, making up 90 percent of the country’s market share. Likewise, the medical device industry in Vietnam is also comprised mostly of foreign imports, with the U.S. holding close to 40 percent of the market; other countries with a large presence in the market include Japan and Germany. Vietnam’s medical device market, currently worth over $185 million, has been growing steadily at around 10 percent annually for the past several years.
Recently, the Vietnamese government has increased its efforts to improve and modernize the country’s healthcare system. In 2001, Vietnam’s Ministry of Health (MOH) released the Strategy for Protection and Care of the People’s Health (No. 35/2001/QD-TTg), proposing a number of new measures to improve the country’s healthcare sector between 2001 and 2010. In particular, the government stresses the need to upgrade medical services at hospitals, clinics and other healthcare centers. A budget of over $1.5 billion has been allocated to set up more than 50 new hospitals in Vietnam, with more than half of the budget going towards new medical equipment.
Entering the Pharmaceutical Market
Foreign pharmaceutical companies have several options when entering the Vietnamese pharmaceutical market. Some companies have established their own subsidiaries in Vietnam. In the past, foreign companies that established subsidiaries were forced into joint ventures with local pharmaceutical companies, but now 100 percent foreign subsidiaries are permitted. Subsidiaries allow for better overall control of the business and are often set up by companies that have established long-term goals in the country; not by companies looking for short-term gains.
A foreign company with a subsidiary in Vietnam can directly distribute its products in the country. However, establishing a subsidiary can be a long and pain-staking process. Local subsidiaries are required to have a manufacturing facility in Vietnam so, generally, only companies with considerable business set up subsidiaries.
A second option for foreign companies entering the Vietnamese market is to promote their products through an existing Vietnamese company. While a handful of foreign companies have chosen to work with foreign-owned distribution companies in Vietnam, most employ the services of local Vietnamese distribution companies.
Foreign companies should carefully consider their status in the Vietnamese medical market, as only the following types of entities are eligible for product registration in Vietnam:
- Pharmaceutical manufacturers established in Vietnam. This includes foreign-invested companies licensed to manufacture pharmaceuticals in Vietnam
- Domestic entities permitted to trade in pharmaceuticals
- Foreign entities, including manufacturers and distributors, that have been issued with a trading license
Direct Sales through a Vietnamese Importer/Distributor
Foreign companies who are not established in Vietnam (as a foreign-invested company in Vietnam under the Law on Foreign Investment in Vietnam), have the option of supplying their products to Vietnam via a local Vietnamese trading company. The foreign company is responsible for obtaining a License for Foreign Companies to Conduct Operations in Medicines and Raw Medicinal Materials in Vietnam, which is generally referred to as a company license or trading license. Additionally, this local company should be registered to conduct pharmaceutical trading activities in Vietnam.
Trading License Requirements
A foreign company should meet the following requirements in order to obtain a trading license:
- Possess a GMP certificate issued by the country from which products will be shipped, demonstrating that the firm is permitted to import, export, trade and store pharmaceuticals. If the certificate does not specify these functions, the MOH will inspect the site (at the applicant’s expense) and assess the work conducted there.
- Be established in its country of origin as a pharmaceutical manufacturer or trader.
- Have three years of experience operating as a pharmaceutical manufacturer or trader.
- Audited accounts for the past financial year must demonstrate annual turnovers of US$15 million for a pharmaceutical trader, US$5 million per year for a pharmaceutical manufacturer, and US$3 million per year for a traditional medicine manufacturer.
In the past, foreign pharmaceutical companies were only permitted to supply their products to a Vietnamese importer/distributor that had applied for and held the product registration. But now, it appears that a foreign pharmaceutical company (with a trading license that “holds” its own product registration) can sell its pharmaceutical products to any Vietnamese importer/distributor that meets the necessary importing conditions. Therefore, it is generally best that foreign companies currently applying for product registration “hold” the product registration themselves. This will allow foreign companies to easily choose or change distributors. Moreover, a foreign pharmaceutical company planning to change its Vietnamese distributor will need to amend their product registration if the Vietnamese distributor “holds” the registration. It is unlikely that the distributor will be willing to sign the amendment application without some type of compensation.
Foreign companies that market their products through Vietnamese partners, but want to retain some control of the promotion of their products, can opt to establish a representative office. A representative office, which must be fully funded from overseas, can hold a product registration, promote products and oversee local distributors, but it cannot be directly involved in importing and selling products. The importing and selling of products can only be done by a Vietnamese-registered company.
Manufacturing and Distribution
Foreign Investment Overview
Foreign pharmaceutical companies have the option of applying for an investment license in order to establish a Foreign-Invested Enterprise FIE). The Law on Foreign Investment (LFI) in Vietnam allows foreign companies to establish FIEs in the form of 100 percent foreign-owned enterprises (FOEs), joint venture enterprises (JVEs) or business cooperation contracts (BCCs).
A FIE must operate in accordance with its investment license. FIEs are able to participate in profit-generating activities and can employ foreign and/or local staff in Vietnam. Importing, trading and distribution services by the FIE are restricted to products manufactured in Vietnam. Only in very special circumstances would it possible to obtain an investment license to engage in importing, trading and distribution services of products manufactured outside of Vietnam.
A 100 percent FOE is a separate legal entity and a limited liability company established under the LFI; the foreign investor owns 100 percent of the company. The legal capital of a 100 percent FOE should be equal to at least 30 percent of the total investment capital of the project.
A JVE is set up by means of a contract between one or more foreign investors and one or more Vietnamese parties. It is a separate legal entity in the form of a limited liability company. A JVE’s legal capital should typically be at least 30 percent of its total investment capital.
A BCC is a contract with one or more Vietnamese partners. A BCC does not create a separate legal entity and the investors have unlimited liability for the debts of the BCC.
Investment License Application
An application for an investment license in order to establish a FIE should include:
- Investment license application
- Charter (for the 100 percent FOE or JVE) or Business Cooperation Contract (for a BCC)
- Documentation verifying legal and financial status of the involved parties
- Joint venture contract (only required for JVEs)
- Feasibility Study
- Documents relating to land or premises leasing
- Documentation relating to technology transfers
- Preliminary designs of proposed architecture
- Environmental impact evaluation report, if required
The investment license approval will be issued within 45 working days from the date of receipt of the completed application. However, it is not uncommon for the application review and approval process to exceed the 45 day time period. Currently, there is no licensing fee to establish a FIE in Vietnam.
Licensing a Vietnamese Company to Manufacture and Sell Your Products
A foreign pharmaceutical company can choose to grant a license to a Vietnamese (foreign-invested or domestic) pharmaceutical company to manufacture and sell their products in Vietnam. Depending on the rights owned and licensed by the foreign company, the license may be granted in the form of a patent license, trademark license and/or technology transfer agreement. In order for a patent or trademark license to be effective in Vietnam, it should be registered with the National Office of Intellectual Property (NOIP); technology transfer licenses should be registered with the Ministry of Science and Technology (MOST).
The validity term of a patent or trademark license is agreed to by the parties, but cannot exceed the remaining duration of protection of the patent or trademark license. (A patent for an invention in Vietnam is protected for 20 years; a trademark is protected for 10 years. The protection period of a trademark may be renewed for additional terms of 10 years each, but the term of a patent cannot be extended.) The term of a technology transfer is seven years.
A foreign pharmaceutical company that has obtained product registration in Vietnam (or elsewhere) can grant the license to another pharmaceutical manufacturer in Vietnam. This transaction is termed pharmaceutical manufacture under license. The application for this transaction requires a licensing agreement between the foreign and Vietnamese companies, agreeing that the product be registered and distributed in Vietnam. The Vietnamese manufacturer will hold the product registration and title to the products manufactured under the license.
A foreign pharmaceutical company also has the option of enlisting a Vietnamese pharmaceutical company to carry out some or all stages of the manufacturing process of a product. Only foreign pharmaceutical companies that hold a trading license may enter into contract manufacturing in Vietnam. If the products have been issued with a Vietnamese product registration, the foreign company can arrange for the sale of the products via a Vietnamese distributor. If the products have not been granted product registration, they should be exported from Vietnam.
Pharmaceutical and drug registration is regulated by the MOH in Vietnam, though the regulatory environment can often be unclear and inconsistent. Regulations are frequently implemented on a case-by-case basis, with little overall coordination. Partially-regulated situations, or regulations that are clearly contradictory, are not unheard of. Moreover, it can be difficult to determine what is permitted in Vietnam and what is illegal. Therefore, foreign companies can face numerous challenges when attempting to navigate the pharmaceutical sector in Vietnam. Foreign companies are more likely to succeed in the market when paired up with a company or personnel who have previous experience in this sector.
The definition of “pharmaceutical products” is somewhat ambiguous under Vietnamese law. The MOH only states that pharmaceutical products are products intended for human consumption for the purpose of prevention, treatment, relief or diagnosis of diseases, or for the modification of physiological functions. Any pharmaceutical products manufactured, sold or distributed in Vietnam must first be registered with the MOH.
The majority of the product application can be completed in English. The following documents and information are required with the application package:
- Free Sale Certificate from the country of origin. The product to be sold in Vietnam must have the same specifications as the product on sale in the country of origin.
- GMP Certification of the manufacturing facility from the country of origin.
- Product information including indication for use, dosage, drug interactions, management of overdose, shelf life and storage conditions.
- A detailed description of the product manufacturing process and the in-process control procedures.
- Real time stability data from three batches.
- Quality specifications and the relevant analytical methods for the finished product, raw materials and excipients.
- Three samples of the finished product with the Certificates of Analysis for the finished product, active ingredients and excipients.
- Packaging material for the finished product including a Vietnamese language insert leaflet.
The MOH reviews the application and if approved, will issue the approval license (locally known as a visa). Generally, the review and approval process takes three to four months. Additionally, in April 2004, the MOH established a drug review panel to review applications for the approval of drugs not yet registered for distribution in Vietnam. The MOH intended for this panel, which meets once a week, to help speed up the application review process. Product registration is valid for five years.
Some product approval processes will also include product sample analysis, though this occurs only in about ten percent of all application processes. In this case, the product application and sample will be forwarded to the Vietnam Institute of Quality Control. The Institute will analyze the sample and compare the results with the Certificate of Analysis included in the registration application. The applicant is responsible for paying the testing fee; the amount depends on the number and complexity of the test(s).
All advertising activities in Vietnam should comply with the country’s general advertising regulations. These regulations lay out the basic framework for advertising in Vietnam, and specify the accepted types of advertisements. Pharmaceutical advertising is restricted and certain types of pharmaceuticals are prohibited from advertisements, including toxins, addictive drugs, pharmaceuticals that are not registered in Vietnam and psychotropic medicines. Prescription drugs cannot be directly advertised to consumers, but can be marketed to health officers.
Advertisement Registration Process
Advertising materials should be registered with the Drug Administration of Vietnam (DAV), under the MOH. The approval/non-approval decision is made within 15 days of application submission. Unless the DAV rejects the proposal or requests that the advertisement be modified within the 15 day period, one can assume that the advertisement has been approved. Registered advertising material should be renewed on a yearly basis.
Advertisement Requirements and Restrictions
Most non-prescription drugs can only be advertised to the public via magazine and newspaper advertisements, leaflets, etc. A designated list of pharmaceuticals issued by the MOH can be advertised to the public through television, radio, and other media on occasion. Printed advertisements are required to provide the registration number of the advertisement and the date of printing on the front page of the advertisement.
Pharmaceutical advertisements should contain the following information:
- Pharmaceutical name as given by the manufacturer and the names of active substances
- Name and address of the product manufacturer and distributor
- Formula(s) and information relating to the interaction of pharmaceuticals
- Instructions for use and indications
- Instruction: “Read the instructions carefully before use.”
- Contraindications, side-effects, adverse reactions, special warnings and precautions
Advertising to Health Officers
Pharmaceutical companies are permitted to advertise pharmaceutical products to health officers using any of the following methods:
- Via medical representatives of pharmaceutical companies that have a university degree in pharmacy or medicine
- Through advertising and information materials
- Introducing products at conferences
- Displaying pharmaceuticals at conferences and seminars for health officers
Foreign pharmaceutical companies are required to obtain permission from a provincial health department prior to holding a conference. In particular, the provincial health department must be aware of any pharmaceutical displays at the conference. With approval from the MOH, unregistered pharmaceuticals can also be introduced at a conference. However, it is not entirely clear to what extent scientific information may be provided to health officers for toxic, addictive and psychotropic pharmaceuticals.
Under Vietnam’s Commercial Law, promotion is defined as a business activity aimed at enhancing the sale of goods and/or services, whereby certain benefits are given to customers. In the case of pharmaceuticals, the definition of customer also includes hospitals and consumers of pharmaceutical products. In Vietnam, pharmaceutical promotion is limited to Vietnamese enterprises, foreign-invested enterprises, and branches of Vietnamese and foreign enterprises. Foreign enterprises without a branch in Vietnam, as well as both domestic and foreign representative offices, are not permitted to promote their products and services. Oftentimes, pharmaceutical companies allow their distributors or trading partners to carry out promotion activities, as these types of local entities are not subject to such restrictions.
Some forms of promotional activities include:
- Giving gifts or providing free services to customers
- Giving free trial samples to customers
- Selling goods or services at reduced prices during a promotional period
- Selling goods or services with coupons or other types of vouchers for prize-winning games
- Selling goods or services with contest forms for customers; winners will be chosen in accordance with procedures
Promotion Material Approval and Requirements
The Information and Advertising Division of the DAV is responsible for approving all promotion material prior to distribution. The promotional material should include general prescribing information of the product, the name of the product license holder, the name and address of the manufacturer and distributor, the Vietnamese registration number, indications, side effects and precautions. All promotion material should be in Vietnamese, though additional languages can also be included in the material. Approved promotional material is assigned a registration number and can be distributed to medical professionals.
Other Regulatory Issues
New GMP Regulations
In order for Vietnam to better ensure the standards of their pharmaceutical products, the MOH has begun implementing new regulations for Good Manufacturing Practice (GMP) requirements based on World Health Organization GMP standards. The first regulation for GMP compliance went into effect in November 2004. This regulation stipulated that all pharmaceutical manufacturing sites built after November 2004 must meet WHO GMP compliance before they are eligible to obtain a manufacturing operator’s license. Pharmaceutical manufacturing sites will be required to meet GMP standards in 2006; pharmaceutical material companies should comply by 2010.
Vietnam’s Department of Pharmaceutical Management (DPM) will be responsible for GMP inspections and granting GMP certificates. These licenses will be valid for two years. Pharmaceutical manufacturing sites which have already met the Association of Southeast Asian Nations (ASEAN) GMP standards may continue production with the ASEAN GMP certification. However, once their ASEAN GMP certification expires, the factory will be required to obtain WHO GMP certification. These new regulations should increase export opportunities for pharmaceutical companies in Vietnam, since a large number of countries only accept internationally-recognized GMP pharmaceutical standards.
Drug Price Controls
As more and more foreign companies enter Vietnam’s pharmaceutical market, the country faces an increase in drug prices. Moreover, the Vietnamese pharmaceutical regulations do not provide price controls or restrictions. Drug prices in Vietnam had increased nearly 10 percent from 2003 to 2004, and many Vietnamese citizens were struggling to pay these higher prices. Therefore, the MOH has been taking measures to increase drug price controls in Vietnam.
Therefore, in January 2005, Vietnam’s Drug Administration Department released a new regulation stating that foreign drug companies could not raise their drug prices without prior permission from the MOH. The regulation also encourages foreign companies that are manufacturing and trading drugs in Vietnam to keep their drug prices stable. Even in an urgent case, foreign companies will still be required obtain permission from the MOH and provide specific details of their planned price increase before it may be implemented.