Vietnam’s New Pharmaceutical Law Takes Effect in October 2005

Vietnam ’s new Pharmaceutical Law, approved by the Vietnamese National Assembly in May 2005, will go into effect October 1, 2005. The Pharmaceutical Law addresses the development of the domestic pharmaceutical industry and State control over drug pricing, in addition to other issues such as advertising and drug testing. The new law prioritizes the transformation of the pharmaceutical industry into a key industry for the Vietnamese economy.

One of the most significant issues addressed by the Pharmaceutical Law is the increased regulation of drug prices. All pharmaceutical importers and distributors must submit their price lists to the Drug Administration, and any plans to increase prices must first be approved by the Drug Administration. In addition, the Drug Administration intends to deny approval of any price increase exceeding those prices in “comparable neighboring states.” Unauthorized price increases will be “severely punished.” Responsibility for overseeing the drug pricing policy will be shared jointly by the Ministries of Health and Finance, in addition to other state authorities.

Drug pricing has been a highly contentious issue between the Vietnamese government and pharmaceutical companies. Drug prices in Vietnam increased by almost 10% between 2003 and 2004, and have risen again in 2005, by anywhere from 5 to 50%. Price stabilization measures have been undertaken by the government in the past to control the rise of drug prices, but they have continued to rise.

The Pharmaceutical Law aims to develop the competitiveness of the domestic drug industry. Former Minister of Public Health, Deputy Do Nguyen Phuong, stated that local production supplies only 40% of domestic demand, leaving 60% to be met by imports. All pharmaceutical companies in Vietnam, domestic and foreign, will be subject to the Pharmaceutical Law.