With a population of close to 90 million, Vietnam has one of the least-developed pharmaceutical markets in Asia, with relatively low per capita spending on drugs. However, there is significant growth potential in the country. While Vietnam’s healthcare industry is still developing, it is one of the faster growing markets in the global healthcare industry. It is expected that the Vietnam pharmaceutical market will continue its strong growth of about 20% a year. It is very likely the drug market will surpass $2 billion in 2012. These growth factors will attract foreign investors to invest in the pharmaceutical market in Vietnam.
The Vietnam pharmaceutical market is generally import-reliant, especially in terms of high-tech products and active pharmaceutical ingredients. Pharmaceutical consumption only occupied about 1.56% of Vietnam’s GDP in 2011. In addition, domestic firms are investing in enhanced production facilities and manufacturing sites in order to comply with government demands to meet international Good Manufacturing Practice (GMP) standards and to boost export orders. The Vietnamese government is increasing its efforts to improve and modernize the country’s healthcare system.
Pharmaceutical Distribution Channels:
Vietnamese pharmaceutical distribution channels are divided into two main channels:
- Treatment and
Bidding and selling through hospitals is considered a treatment channel, while selling through distribution centers and pharmacies is considered a commercial channel. Currently, some firms are building up their distribution systems by establishing distribution centers, pharmacies and through cooperation with regional pharmaceutical firms. Some companies also try to penetrate hospital precincts through bidding.
Entering the Vietnam Pharmaceutical Market:
Foreign pharmaceutical companies have several options when entering the Vietnamese pharmaceutical market. Some large drug 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% 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 their own subsidiaries.
A second option for foreign companies entering the Vietnam pharmaceutical market is to promote their products through an existing Vietnamese company. Most employ the services of local Vietnamese distribution companies.
Foreign drug 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 that are licensed to manufacture pharmaceuticals in Vietnam
- Domestic entities permitted to trade in pharmaceuticals
- Foreign entities, including manufacturers and distributors, that have been issued a trading license
The main regulatory authority in Vietnam is the Ministry of Health (MOH) and the Drug Administration of Vietnam (DAV). Drug approval times vary although long delays are the norm. Regulations governing the pharmaceutical industry have traditionally been unclear and often implemented on a case-by-case basis, sometimes representing a market entry barrier to foreign companies.
After country’s adoption of WTO rules in 2009, 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 without a license. Currently, foreign-owned distribution companies in Vietnam must be licensed by the MOH and prove that they comply with international standards. As part of its WTO membership application, Vietnam also pledged to set import duties at less than 5% for pharmaceutical products. Drug tariffs are expected to average 2.5% in the next three years.
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 the Vietnam pharmaceutical market. 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, 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 called a pharmaceutical manufacture license. The application for this transaction requires a licensing agreement between the foreign and Vietnamese drug 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 this 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 a contract manufacturing agreement 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.
The MOH also regulates pharmaceuticals 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. The majority of the product application can be completed in English. The following documents and information are required with the drug 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 about six months. Product registration is valid for five years.
Pharmaceutical advertising remains restricted in Vietnam. Prescription drugs cannot be advertised directly to consumers, restricting the potential Vietnam pharmaceutical market. However, these products can be promoted to health officers via qualified representatives of pharmaceutical companies and through product conferences and health seminars. Foreign firms are required to obtain permission from a provincial health department before holding a conference and the department must be made aware of any pharmaceutical displays. Meanwhile, all advertising materials must be registered with the DAV.