With incomes rising among its rapidly aging population of 96.7 million, Vietnam is a booming market for pharmaceuticals. Long one of the least-developed pharmaceutical markets in Asia, with relatively low per capita spending on drugs, Vietnam has tremendous potential.
According to the World Bank, Vietnam’s economy grew by 6.8% in 2017, compared to growth rates over the same period of 2.3% in the U.S. and 2% in the European Union. With that growth comes the emergence of a new urban middle class. In 2015, 33.5% of Vietnamese were estimated to live in cities. That share is expected to grow to 40% in 2020 and 50% by 2030. At the same time, the share of the Vietnamese population older than 65 is projected to triple to 18.4 million – 17% of the population – by 2040, according to the United Nations. As life expectancy improves, more Vietnamese will suffer from chronic diseases related to old age, boosting demand for pharmaceuticals.
Despite the demand, domestic production of needed drugs is still nascent. Vietnamese remain largely reliant on imported drugs, particularly when it comes to sophisticated, high technology products and active pharmaceutical ingredients.
Per capita spending on pharmaceuticals in Vietnam is projected to increase dramatically from $37.97 in 2015 to $85 in 2020. That spending by individuals is driving rapid growth in Vietnam’s pharmaceutical market as a whole. The market size was $4.6 billion in 2017, and is projected to reach $6.6 billion by 2020.
With domestic drug firms focused mostly on producing generic products and other simple areas of drug production, they lack research and development capability and the ability to invest in new compounds. As a result, much of Vietnam’s spending on pharmaceuticals is on imports. In 2017, Vietnam spent about $2.1 billion on imported pharmaceutical products for local consumption. In the same year, Vietnam exported only $113 million worth of pharmaceutical products.
The health of the Vietnamese population has improved significantly over the past three decades, with mortality rates down for mothers, newborns and children under five. The incidence of both communicable and noncommunicable diseases is also falling.
At the same time, heavy pollution and persistent problems with the quality of the food and water supply continue to have adverse impacts on health. Urbanization is driving increasingly sedentary lifestyles and many Vietnamese have adopted unhealthy Western diets. Around 10% of Vietnamese suffer from diabetes, and the incidence of the disease is growing at an alarming rate, the highest in Southeast Asia. Each year, 116,000 Vietnamese die from cancer.
Noncommunicable diseases account for 73% of total deaths in Vietnam. Between 2005 and 2017, the top four causes of death in the country were cerebrovascular disease, coronary heart disease, Alzheimer’s disease, and lung cancer. Cardiovascular disease is the most prevalent form of noninfectious disease in the country, accounting for 30% of deaths nationwide.
PHARMACEUTICAL REGULATIONS AND LAWS
Pharmaceuticals in Vietnam are regulated by The Drug Administration of Vietnam (DAV), an agency of the Ministry of Health. In order to be offered for sale in Vietnam, pharmaceutical products require registration with the DAV, which issues market authorization numbers. Acquiring a drug market authorization number takes from 12 to 30 months on average.
Typically, foreign companies enter the Vietnamese pharmaceuticals market by contracting with domestic distributors, establishing a joint venture with a local partner or by setting up their own wholly foreign-owned enterprise.
In a bid to ease entry by foreign firms into the Vietnamese drug market and to keep Vietnam’s pharmaceutical laws in line with international standards, in 2016 the country’s National Assembly updated its Law on Pharmacy. The revision of the law, which went into effect in January 2017, waives requirements for clinical trials of new drugs, except vaccines. In lieu of the trials, drug manufacturers must provide sufficient safety and efficiency clinical data for products they plan to introduce to the Vietnamese market, and have marketed them in at least one other country.
Under the updated law, over-the-counter (OTC) drugs can be sold in businesses that do not have a certificate of eligibility for the pharmaceutical business. This includes establishments that have drug counters or cabinets.
As a member of the World Trade Organization and the World Intellectual Property Organization, Vietnam’s laws on pharmaceuticals comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). But on the ground in Vietnam, counterfeit drugs and intellectual property compliance problems persist.
WESTERN PHARMACEUTICAL COMPANIES IN VIETNAM
Vietnam’s pharmaceuticals sector holds tremendous promise for Western drug companies. Foreign firms have wasted no time seizing opportunities.
- Chicago-based Abbott Laboratories recently bought a 51.7% stake in Domesco Medical Import-Export Joint-Stock Corporation, based in Cao Lanh City. That followed its acquisition in August 2016 of Glomed Pharmaceutical Co., Inc, a leading Vietnamese pharmaceutical manufacturer based in Thuan An.
- Over the past 20 years, Bayer HealthCare Pharmaceuticals, s subsidiary of Bayer Group, has expanded its presence in key cities, including Hanoi, Ho Chi Minh City, Can Tho and Da Nang. It offers Vietnamese consumers a broad range of products for infectious and cardiovascular diseases, cancer treatments and women’s healthcare.
- Sanofi, a French multinational pharmaceutical company headquartered in Paris, France, has been doing business in Vietnam for 50 years. It has three manufacturing facilities in Ho Chi Minh City, producing biopharmaceuticals. The most recent, worth $75 million, opened in late 2015 in Saigon High-Tech Park. But even running at maximum capacity, the company reports it has not been able to meet demand.
Vietnam’s pharmaceutical sector has grown significantly over the last decade, driven by changes in government policies and an increase in domestic regulations of imported drugs. The expanding and maturing pharmaceutical market is supported by programs designed to attract more foreign direct investment. Regulations on clinical trials are falling, while a fast-growing, urbanizing and aging population means opportunities for growth are high. Barriers remain. But with the right guidance, Vietnam offers many opportunities for potential drug suppliers.