Vietnam Update: WTO Accession to Speed GMP Implementation and Distribution Market Access

On January 1, 2007, Vietnam will officially enter the World Trade Organization (WTO). Several new rules will apply to the country’s medical industry as a part of accession. The Drug Administration of Vietnam (DAV) has stated that from that date, all drug manufacturers who do not meet GMP-ASEAN standards must cease operation. The DAV describes the new standards as intended to help domestic pharmaceutical companies export their products and secure business from foreign companies. Currently, however, only about a third of pharmaceutical manufacturers in Vietnam meet Vietnamese GMP standards, and only 70 percent of those meet GMP-ASEAN standards (from the Association of Southeast Asian Nations). Implementing GMP standards can be costly, averaging over $1 million per site. As a result, many domestic Vietnamese drug companies may soon be out of business.

Another challenge for domestic drug and device companies is that WTO accession will also liberalize the local distribution market. Currently, foreign companies selling medical products to Vietnam must do so through a locally-owned distributor, unless they are distributing products that they manufacture in Vietnam. From January 1, 2007, foreign companies will be allowed to set up joint ventures with local companies to distribute medical products. Then, from January 1, 2009, wholly foreign-owned distribution companies will be permitted.

This opening-up comes as Vietnam’s markets are rapidly growing. The medical device market is currently worth about $200 million, growing at 11% annually, while the pharmaceutical market is about $800 million, growing at 15% annually. As government spending increases in an effort to catch up to Western standards of medical care, foreign firms have a significant market advantage in perceived efficacy and reliability.