Vietnam is known as the Land of the Blue Dragon, even after being ravaged by decades of war. Despite the enormous human and economic costs of those years, Vietnam has been staging a return to normalcy for more than two decades. The U.S. finally lifted its prior trade embargo on Vietnam in 1994 and established diplomatic relations in 1995, opening the way for increased trade and investment. The international community has invested more than US$18 billion in Vietnam since 1986, and that trend has continued despite the Asian financial crisis. However, along with the promise of further growth and development there are significant problems, including: a crude legal system; tremendous government red tape; grossly inadequate infrastructure; and an underdeveloped financial and banking system.
As would be expected in a populous economy seeking to increase international involvement, develop and grow, the healthcare sector, especially pharmaceuticals and medical devices, is under pressure to serve a growing population and is growing quickly. This sector represents a substantial opportunity for foreign investment, but has the normal growing pains for such an emerging economy.
TABLE 1: Some Basic Demographic and Economic Data for Vietnam (1998)
|Life Expectancy||68 years|
|Per Capita Income||$350 per year|
Source: Vietnam Economic Times ( December 20, 1999)
II. VIETNAM’S HEALTHCARE SYSTEM
A. Background / Overview
Vietnam ‘s healthcare system is centralized, heavily regulated, and subject to a command-and-control hierarchical structure. The central government makes the decisions with input, depending on the subject, from provincial and city governments. Vietnam’s healthcare market focuses on curative rather than preventive medicine, not unusual for countries just beginning to improve their health care system.
At the beginning of 1999, Vietnam received two World Bank loans to improve healthcare services in indigent, rural areas. Since recognizing the need for private foreign medical investment in mid-1993, the central government has allowed private Vietnamese and foreign companies to establish clinics and hospitals, and private hospitals have been on the rise, especially since the public sector has been unable to satisfy the country’s healthcare needs. Some basic health care statistics are indicated in Table 2 below.
TABLE 2: Some Basic Healthcare Facts About Vietnam
|Persons per hospital bed||305|
|Hospital beds (managed by local health offices)||99,920|
|Hospital beds (in 31 larger hospitals run by MoHW)||10,410|
|Patients per physician||2,400|
|Government budget allocated||$230 million|
|Per capita government healthcare expenditure, annually||$3.00|
Source: U.S. Department of Commerce/US Foreign and Commercial Service Industry Sector Report, June 19, 1998
There are approximately 800 hospitals in Vietnam, with about 40,000 beds. Virtually all of these hospitals are public, but only 18% currently are under control of the Ministry of Health (MoH). The Ministry of Defense (MoD) and the Ministry of the Interior (MoI) have 30 hospitals which average 400 to 500 beds, although the largest MoD hospital, Number 108, is in Hanoi, and has 800 beds. These MoD and MoI hospitals and other healthcare facilities are the primary care providers for the country’s elite, the Central Leadership, and other important people and in effect are not available to average citizens. These agencies are very strong purchasers of medical equipment and have more money to spend on healthcare than the MoH.
In addition to the central government’s healthcare facilities system, the provinces operate some 270 hospitals, including hospitals in Hanoi and Ho Chi Minh City (HCMC). These provinces are purchasers of medical equipment, devices, and pharmaceuticals. There are also 500 district hospitals, which only purchase healthcare machinery and equipment when they have outside, overseas development financial assistance.
There is a trend today in Vietnam (and elsewhere in Asia) toward private hospitals and clinics, of which there are several in Hanoi and HCMC. In 1997, construction began on two new private hospitals, one in Hanoi and one in HCMC. These and other hospitals and facilities prefer US equipment because of reputation, high quality, technology and after-purchase service, even though such products tend to cost 20% more. US firms have experienced success in selling such equipment because of these factors.
B. Healthcare Delivery
In response to the central government’s overall healthcare needs, a five-year plan for healthcare and healthcare delivery established in 1995 is supposed to be completed by the year 2000. Under this plan, the number of hospitals, clinics, and the like are to be increased and modernized to reach all people.
C. Government Regulation of the Healthcare System
The key central government agency for healthcare is headquartered in Hanoi. The MoH manages the care of people’s health, including prevention and treatment, medical examinations, convalescence, and production and distribution of medicines and medical devices and equipment, as well as training and assignment of doctors, nurses and other medical personnel. The MoH’s basic powers, authority and responsibilities are set forth in the government’s 3/2/1993 State Decree No. 15/CP, assigning the MoH the following tasks:
• Prevention of, and efforts on: epidemics; medical examinations;, convalescence and family planning; medical practice; and health insurance (concerning which the MoH has developed a plan and is trying to implement it). The MoH has issued regulations on each of these subjects.
• With respect to traditional, non-western medicine, the MoH has developed an organization and implementation plan and has issued regulations for coordination of traditional and modern (western) medicine.
• For scientific research and medical and pharmacological training, the MoH is to develop a plan and implement it, encourage research and training throughout the country, direct the education and training of medical personnel, and the materials for such training, under regulations issued for that purpose, and to directly manage medical and pharmacological institutions also under the MoH regulations.
The MoH is a cabinet level department, the head of which is the Minister of Health. The following sub-agencies, with officials identified (with telephone numbers) where known, as of December 1999, are under the MoH. These officials are key contacts which any US company seeking to import pharmaceuticals and medical equipment into Vietnam should make.
Table 3: Key Contacts at the Ministry of Health
|Minister||Do Nguyen Phuong, Hanoi||Tel: 8453303 / Fax: 8464051|
|Administrative Office||Tel: 264416|
|International Relations Dept||Nho Van Hop, Dir.||Tel: 8463463|
|Finance Dept||Nguyen Kim Phong, Dir.||Tel: 246058|
|Personnel Dept||Nguyen Huu Hong, Dir.||Tel: 262526|
|Planning and Training Dept||Vuong Hoc, Dir.||Tel: 264918|
|Sanitary Environment Dept||Le Dien Hong, Dir.||Tel: 256255|
|Traditional Medicine Dept||Nguyen Duc Doan, Dir.||Tel: 264813|
|Pharmacy Dept:||Nguyen Di Van, Dir.||Tel: 259668|
|Pharmaceutical Mgmt Dept||Nguyen Vi Ninh, Dir.||Tel: 8235812|
|Health Dept||Dao Van Tram, Dir.||Tel: 262415|
|Family Planning Dept||Do Trong Hieu, Dir.||Tel: 262502|
Source: Vietnamese Ministry of Health Homepage
III. VIETNAM’S PHARMACEUTICAL MARKET
In 1998, the legal drug and pharmaceutical market in Vietnam was estimated at $350 million, and it has continued to grow in 1999. Approximately 10,000 pharmaceutical products are legally sold in the country to some 6,000 pharmacies, 900 hospitals and clinics and hundreds of private doctors. Effective per capital spending for drugs and pharmaceuticals in Vietnam is thought to be about $4.25, much lower than in the US, other western countries and Japan, but nevertheless representing a substantial growth in the last two years, bringing the spending level to three times the level of 10 years ago.
The market is fragmented and very competitive. Imports constitute 85% of all dollar sales, and domestic production is negligible and shrinking as imports expand. Most major international pharmaceutical companies have offices in Vietnam. Specialty drugs make up 70% of the overall market and represent the best opportunity for imports, especially since the government believes that domestic production cannot meet domestic demand in the specialty drug area.
The state owned central pharmaceutical monopoly is the Vietnam Pharmaceutical Corporation (Vinapharm) and reports directly to the MoH. The central government supports a broad range of products, distribution and sourcing for Vinapharm products. Even so, such companies are beset by inadequate capital and outdated machinery, equipment, productivity and marketing. These Vinapharm and provincial/municipal companies serve the so-called mid-level market. By contrast, companies of local governments are better in virtually all respects, but have poor product innovation and market penetration outside their local area. They serve the low-end market, but are seeking to move into the mid-level market.
Because of market failure from Vinapharm’s excessive bureaucracy, many of its companies have been unprofitable. The government has recognized this and Vinapharm has been relegated to an administrative role, overseeing some nine factories around the country. Vinapharm has listed 14 projects requiring outside investment through the first year of the new century, 2000. These projects are concentrated in Vietnam’s major cities: HCMC, Hanoi, Hai Phong and Da Nang.
Through 1998, the Ministry of Planning and Investment is said to have licensed 20 foreign pharmaceutical projects with capital totaling $182 million. Of those licensed in 1998, eight are 100% foreign owned and 12 are joint ventures, the majority of which are not yet fully operational. A number of other joint venture licenses have been issued, to ventures involving companies from South Korean, Canada, India, Bangladesh, Australia and the US. Thirteen US pharmaceutical companies have been issued licenses to operate in Vietnam, including: Abbot Lab, SA; Bristol-Myers Squibb Co.; Eli Lilly Inc.; Alpha Therapeutic Corporation; U.S. Summit Co.; Merck; United Pacifico, Inc.; Pharmaxx, Inc.; International Pharmaceutical Ltd., and Crown Laboratories.
In spite of its centralized system, Vietnam had no formal drug policy regulation until mid-1996. This resulted in too many products coming onto the market overall, including too many substandard pharmacological products. Since that time, laws and regulations have been made to protect domestic production and the general public, and to focus on price, license registration, distribution, and patent and trademark protection.
Three State-owned importers are approved for distribution of drugs to hospitals. These efforts at improvement to meet international standards have been only partially successful. While the MoH has established protection against product pirating, these standards are often not enforced and brands, including imports, are being undercut by copying.
Additional aspects of the Vietnamese market can be ascertained from the following data:
Table 4: Market Size
(in US/Millions; Exchange rate: $1=13,900 Dong; Est’d Future Inflation: 9%)
|Market||1997||1998||1999||Projected Avg. Annual Growth Rate Percentages 2000 – 2002|
|Imports from US||$30||$35||$40||20%|
Source: US Department of Commerce / US Foreign and Commercial Service Industry Sector Analysis, April 19, 1999
B. Import Requirements
To import drugs and pharmaceuticals into Vietnam, an importer must have a Bill of Lading, Certificate of Authority, and specific individual licenses, all from the government. The government is reported to have become strict about documentation, and approvals are delayed significantly if there are paperwork errors. All such products must enter through a state owned import company such as Yteco, Vimedimex I and II, Hapharco, CPV, or Sapharco. These import companies can also act as distributors and wholesalers.
Beginning several years ago, the Vietnamese government began to eliminate sub-standard drugs from entering the country, including developing and enforcing strict guidelines for importers. As a result of the then-new regulations that went into effect, several Thai and Indian pharmaceutical companies were forced out of business in Vietnam, and others, primarily generic drug companies, were placed under scrutiny. Nevertheless, sub-standard drugs have been able to enter the country because those drugs are checked by authorities only in the country of origin. Vietnamese officials usually perform laboratory tests on sample batches of drugs. Under the new policy, though, random drug testing has been intensified and more severe penalties for breach have been put in place. For example, penalties of up to $10,000 are imposed on sub-standard products. The government’s policy is that Vietnam is not to become a dumping ground for foreign drug companies. As a result, some 62 drugs have been effectively banned from importation, in part to support local drug production. It is believed that another 30 – 45 drugs may also be excluded.
C. Product Registration
To be marketed in Vietnam, drugs and pharmaceuticals must be registered. Each different product must be separately registered, at a cost of $2,000/product. The approval process usually takes from six months to one year, but can take longer. To register a product requires a Certificate For Sale (CFS), Good Manufacturing Practices (GMP) approval from the Institute of Quality Control, and sample testing from five different committees. All documentation must be complete and accurate. Medical documents and related material must be in both English (or French) and Vietnamese, and notarized. These materials should be prepared by a qualified Vietnamese individual, preferably a doctor.
Licenses are granted for varying periods, depending on the product and the demand for it. Generally speaking, a five-year license will be accorded a product which is in demand and not produced locally. A three-year license is likely to be granted to an imported product not produced in significant quantity domestically. A one-year license is will be granted for an OTC drug product in demand that is being produced under a Vietnamese joint venture.
To try to bring order out of chaos in the drug, pharmaceutical, and cosmetics field, especially with respect to imported products, the government created the Pharmaceutical Management Department within the MoH. This Department, together with the Ministry of Commerce, has the authority to grant or cancel pharmaceutical and cosmetic licenses, and is also charged with implementing national drug policy.
D. Advertising and Promotion of Pharmaceutical Products
The government regulates advertising for pharmaceuticals. For example, a special permit is required for TV advertising of OTC drugs. Prescription drugs can be advertised only in certain specified publications, usually medical journals and magazines aimed at doctors and pharmacists.
Promotion and marketing of products consists of seminars for medical and pharmaceutical representatives, some on-site training, overseas trips for doctors and pharmacists to attend medical conferences, educational materials promoting the product, store signage, magazine and journal advertising, and samples. However, samples are falling out of favor with pharmaceutical companies because such samples may be taxed and are often resold.
The “good manufacturing practice” (GMP) standard was introduced in 1998. Regulators of the pharmaceutical industry indicated that domestic makers would be shut down if their pharmaceutical products did not meet the ASEAN GMP standard. However, despite this caution, only eight factories overall received the GMP seal of approval – five of which are joint ventures.
IV. MEDICAL EQUIPMENT
Vietnam has a small medical device market, at about US$105 million. According to the MoH, 80% of the healthcare sector’s equipment is from 1990 and has not had regular maintenance or been updated. State funding for upgrading equipment has been limited in the past and reached only US$11 million in 1998. Local production of such equipment is pretty well limited to basic medical instruments and hospital furnishings, and the government is pushing for increased investment in medical equipment. The market has responded and is increasing its activity substantially, with diversified products from such manufacturers as GE Medical, Siemens, Philips, Toshiba, Shimadzu, and others. However, while the government budget for procurement is increasing, it is modest at best and has not kept pace with demand.
There are two major medical equipment markets in Vietnam, Hanoi and HCMC. Together, they account for 80% of the market. As in other respects, the market is centrally controlled and the MoH makes the decisions, especially with respect to large medical equipment procurement. Below is an unofficial estimate of the Vietnam medical equipment market for 1997 – 1999:
TABLE 5: Vietnamese Medical Equipment Market
|(In $US Millions)|
|Type||1997||1998||1999||Projected Average Annual
Growth Rate Percentage
|Imports from US||$15||$20||$27||40%|
Exchange Rate: $1=13,000 Dong; Estimated Future Inflation Rate: 5% – 6%.
Source: US Department of Commerce / US Foreign and Commercial Service Industry Sector Analysis, June 19,1998
Provincial hospitals purchase 60% of all medical equipment. For purchases of US$8,000 and under, local hospital officials have procurement authority. Above that, a competitive international procurement is necessary. Other hospitals and healthcare facilities purchase another 30% of medical equipment. Medical educational and research institutions account for about 5% of the market, and private clinics and hospitals purchase another 5% – 10% of the market. These figures are approximations, and do not add up neatly to 100%.
B. Importing Medical Equipment
All the equipment in foreign owned hospitals and clinics is purchased directly from foreign manufacturers. Vietnamese facilities, though, for the most part must purchased through a Vietnamese trading company. Such purchasers ask for the highest quality equipment, but usually have to settle for lower quality because of limited funding.
Because the Vietnamese government recognizes that the country does not manufacture the medical equipment it needs, it has opened its doors to importation of such equipment. There are no quotas or shipment license requirements imposed on such imported equipment, but there is an annual list of imported medical equipment that must be registered. To date, the government has not imposed any inspection requirements on imported equipment except for operating room lighting systems, but such requirements are expected soon. All imported medical equipment must go through a government owned trading company that has a license for direct importation.
There are 10 such licensed companies, including YTECO, SAPHACO, VIMEC 2 in the south of the country, and VIMEC 1, VIMEDIMEX 1 in the north. These companies normally charge the equipment purchasers or distributors 1% – 2% of the total value of the imported goods as a commission for services. In general, importation procedures take about 2 – 3 weeks, and there often major difficulties that delay the process.
C. Registration Requirements for Imported Medical Equipment
In accordance with the 12/12/1995 government Decree 89/CP, the MoH, in consultation with the Ministry of Trade (MoT), each year issues a list of medical equipment that must be registered with the MoH to be imported. The current list includes: CT and gamma scanners; cobalt and accelerator equipment; magnetic resonance equipment; blood filter/sterilizing equipment; ultra- sound color Doppler equipment; and X-ray equipment.
If a foreign company does not have a representative office in Vietnam, such a company’s local distributor/agent is responsible for registering the imported medical equipment with the MoH. If there is a representative office, that office is responsible for registration.
Registration procedures for imported medical equipment are as follows:
1. Submission of a Permit Certificate application to sell medical equipment, including:
a. The application form itself;
b. Legal documents from the country of origin certifying that that foreign country has permission to sell the medical equipment in question; and
c. Documents certifying the foreign company is a Vietnamese legal entity; and
2. Submission of an application for a License for Circulation of Medical Equipment in Vietnam, including:
a. The application form;
b. A list of the medical equipment to be circulated;
c. A certificate of product quality, issued by the country of origin;
d. A catalogue with detailed use instructions for each product; and
e. The results of clinical tests for each product.
Under current Vietnamese law, the MoH or the appropriate provincial department of health is to process and respond to the overall application for registration. If approved, the resulting license is valid for two years. Most private companies and local state owned companies will be familiar with registration requirements, procedures and paperwork, and can handle applications easily. It is strongly recommended that US companies seeking to import and market medical equipment in Vietnam arrange to have a local partner with strong technical skills and good connections with the MoH, hospitals and other healthcare facilities.
V. INTELLECTUAL PROPERTY PROTECTION
Vietnam has developed a fairly good network of legal protection for intellectual property including patents and trademarks (both passed in 1988), service marks, copyright (a new copyright law was passed in 1994), and industrial design and licensing agreements.
Such intellectual property regulation is in accord with the government’s heavy regulation of all aspects of trade and commerce, including healthcare. The government actually does seek to protect these rights, especially if violations or apparent violations are brought to its attention. This attitude and these laws have served to help create a more favorable business environment than has been the case in the past, however Vietnam does need to strengthen protection of technology transfer, which is less well established.
Administration, regulation, and enforcement of Vietnam’s intellectual property protection laws are under the authority of the National Office of Industrial Property (NOIP). NOIP’s responsibility is to register intellectual property rights, disseminate information about registration, settle disputes that arise, consider applications for license agreements, and enforce this law.
Foreign importers and their agents who wish to register must do so through a licensed industrial property agent, which submits to and works with NOIP to achieve the appropriate approval. However, if a foreign trademark owner has an established operation in Vietnam, it may file directly with NOIP.
Vietnam is a party to the Paris and Stockholm Conventions, and accepted the Patent Cooperation Treaty in 1993. This puts Vietnam in the mainstream of nations with respect to patents, and offers protection for foreign importers.
In Vietnam there are two kinds of patents, one for inventions and another for innovations. The term for both is 15 years. Apparently, though, if the patent is for a “utility solution,” the term may be for only seven years. Vietnam also issues “certificates” rather than full patents for some filings relating to national defense and health.
Licenses must be approved by the Ministry of Science, Technology and the Environment (MSTE) and registered with NOIP before becoming effective. Such a license lasts seven years from the date of its MSTE approval. If a patentee does not use its patent or license it for use in some other invention which depends on such patent, the government may issue what it calls a “compulsory license” so that it can be put to use by someone else. This appears to be a government requirement to insure that patents are not acquired and then wasted. This is important for a country like Vietnam, where healthcare needs are great and not met. Generally the time required to obtain a license is one and half to two years.
Vietnam has a fairly advanced trademark law. Under that law, a trademark must be registered to exist. While lengthy, the process is not especially costly. It is urged that trademarks be registered as soon as possible by importers of pharmaceuticals and medical equipment. A trademark may be in the form of a word, image (or picture or design), number, letter, or a combination. Apparently, though, some basic generic and product names cannot be trademarked. Examples might include milk and metal. Basic geographic names, such as Ho Chi Minh City, Vietnam, and Hanoi cannot be registered either. Vietnam is a signatory to the Madrid Agreement concerning the international registration of trademarks, providing foreign importers some protection.
The term of a trademark, once in force, is ten years from filing and is renewable for additional ten-year periods. Filing requirements include 15 specimens of the trademark and a list of the goods and services bearing the mark in English, French, German or Russian, and, of course, Vietnamese. As would be expected and as is the case the world over, appropriate government officials then examine the filed trademark application for “registrability” and normally issue a certificate of registration within six months, if the application is accepted. If rejected, further work must be done.
A trademark, once registered, is to be enforced by the government. Such enforcement is the responsibility of the “economic police.” If it is discovered that there is counterfeiting, one should alert the police, which can shut down such operation and confiscate the goods and equipment involved. The offending party is subject to criminal sanctions. In some cases, however, it has been reported that simply approaching the offending party to explain that what is being done is illegal is often sufficient to end the illegal activity.
In Vietnam, there is a copyright law. It is administered and enforced by the Office of Copyright Protection, which is part of the Ministry of Culture. This law covers copyrights, including copyrights on material relating to pharmaceuticals and medical equipment. A recent ordinance extends copyright protection to computer software, architecture, choreography, dictionaries and even folklore! This ordinance also distinguishes between economic and moral rights conveyed by copyright. For example, while an author can sell economic rights, “moral rights” are retained.
Vietnam’s market for imported pharmaceuticals and medical equipment is growing at an impressive rate, and will continue to grow as the country and government seek to improve healthcare facilities and healthcare for the people. US companies interested in exporting such products to Vietnam should be prepared for a market that is anxious to upgrade, but one that is also heavily regulated by the government at all levels and under-funded. US manufacturers got into Vietnam late, but have established a foothold and can continue to gain ground if they develop contacts within the government, especially the MoH, and pay attention to government practices and requirements.
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