IT IS TIME FOR FOREIGN-INVESTED PHARMACEUTICAL COMPANIES TO EXPANDED

With a large population and a growing demand for pharmaceuticals, Vietnam currently ranks among the top 17 countries with the highest pharmaceutical industry growth rates globally. According to the Pharmaceutical Industry Development Program, by 2025, domestically produced drugs are expected to account for 75% of consumption and 60% of market value. Additionally, it is projected that by 2045, the pharmaceutical industry will contribute more than $20 billion to Vietnam’s GDP. These figures paint a promising picture of a vibrant pharmaceutical market in the coming years.

However, the development of Vietnam’s pharmaceutical market is not without difficulties and challenges, including regulations that limit the scope of activities for foreign-invested pharmaceutical companies. These challenges pose unique obstacles to both domestic and international players in the industry, which must navigate a complex regulatory landscape.

Barriers to the development of the pharmaceutical industry
Foreign-invested pharmaceutical enterprises in Vietnam currently operate under the provisions of Circular 34/2013/TT-BCT, which outlines the roadmap for implementing activities related to buying and selling goods. While they have the right to import pharmaceuticals, they are not permitted to distribute them. To regulate these activities, various legal provisions have been introduced, including the 2016 Law on Pharmacy and Decree 54/2017/ND-CP.

First, First, under current laws, foreign-invested pharmaceutical enterprises (enterprises that are entitled to import pharmaceuticals but not to distribute pharmaceuticals in Vietnam) are not entitled to engage in activities directly related to the distribution of pharmaceuticals in Vietnam, except for pharmaceuticals produced by these enterprises in Vietnam. One of the activities directly related to the distribution of pharmaceuticals in Vietnam that foreign-invested pharmaceutical enterprises are not entitled to conduct is the transportation and storage of pharmaceuticals.

To obtain a certificate of eligibility for pharmacy business, especially for importing drugs, foreign-invested pharmaceutical enterprises in Vietnam must meet several specific conditions. These include having a physical location, a drug storage warehouse, appropriate storage equipment, vehicles, a quality management system, technical documentation, and personnel qualified with Good Storage Practices (GSP) for drugs and drug ingredients. Essentially, the conditions stipulated by the law for foreign-invested pharmaceutical enterprises are also sufficient for those seeking to engage in pharmaceutical storage services.

Foreign-invested pharmaceutical enterprises in Vietnam face limitations in their scope of activities compared to the conditions they are required and able to meet. Furthermore, as per the provisions of Decree 54/2017/ND-CP, even though these enterprises are qualified to transport pharmaceuticals, they are mandated to use the transportation services of qualified Vietnamese enterprises after importing and storing goods in their warehouses. This requirement can result in increased drug costs for consumers, as it involves multiple stages and additional expenses, while the resources of foreign-invested pharmaceutical enterprises remain underutilized.

Second, the limitations on distribution rights for foreign-invested pharmaceutical enterprises serve as a deterrent to their collaboration with Vietnamese companies, especially in technology transfer and pharmaceutical production. Consequently, foreign-invested pharmaceutical firms may be reluctant to invest in local production facilities due to factors such as their existing global business strategy, which may involve operations in other countries, or the substantial upfront costs and lengthy timelines associated with constructing manufacturing plants. Instead, they often prefer to partner with local enterprises to transfer pharmaceutical production technology and leverage available resources such as machinery, personnel, and raw materials for Vietnamese drug manufacturing. However, these aspirations are hindered by the current restrictions on pharmaceutical distribution rights in the Vietnamese market, a market perceived by foreign pharmaceutical investors as having substantial potential.

The need to expand the scope of activities of foreign-invested pharmaceutical enterprises
According to statistics, Vietnam currently lacks the capacity to produce specialized drugs and primarily focuses on manufacturing generic drugs to treat common and chronic diseases. As a result, most essential specialized drugs are imported from foreign-invested pharmaceutical enterprises. GMP-WHO certified pharmaceutical factories mainly produce generic drugs, which are copies of branded drugs.

Consequently, the pharmaceutical industry in Vietnam heavily relies on imported drugs, presenting an inherent weakness in the current domestic pharmaceutical production and distribution market.

To invest in research and development (R&D) activities for original brand-name drugs, pharmaceutical companies require significant financial resources and long-term commitments, which may be beyond the reach of domestic pharmaceutical firms with limited history and resources. On the other hand, domestic companies can leverage the research results of foreign-invested pharmaceutical enterprises through technology transfer and production collaboration.

However, the current regulations restrict the ability of foreign-invested pharmaceutical enterprises to transfer exclusive patents for original branded drugs to Vietnamese counterparts. These regulations limit foreign companies to registering manufactured drugs and transferring registration certificates to other entities for distribution in Vietnam, which may not provide sufficient incentives for them to transfer exclusive patents to Vietnamese companies for production.

If foreign-invested pharmaceutical enterprises opt for technology transfer cooperation, their enthusiasm might be limited if they can’t distribute the finished products in the Vietnamese market. This constraint has hindered the development of technology transfer and manufacturing in Vietnam recently.

The legal restrictions on the activities of foreign-invested pharmaceutical enterprises may stem from the nature of the pharmaceutical industry, which directly impacts human health and requires strict management to protect domestic enterprises. However, unlike many other fields, the pharmaceutical industry demands extensive technology, patents, and inventions from foreign enterprises, which can be challenging for domestic companies to develop independently in a short timeframe.

To achieve the goals of Vietnam’s pharmaceutical industry, it’s crucial to adjust current laws limiting the scope of foreign-invested pharmaceutical enterprises. Specifically, allowing these enterprises to distribute pharmaceuticals in Vietnam, including imports, acquisitions, or locally manufactured products, can promote the industry’s development and encourage the early diversification of domestically produced pharmaceuticals. This expansion of activities can also help foreign-invested pharmaceutical enterprises optimize their operations and prevent resource wastage, as mentioned earlier.

Expanding the production of specialty drugs in Vietnam not only increases access for consumers to previously imported medications but also fosters competition in the market. This competition necessitates improvements in pharmaceutical quality and pricing to benefit consumers.

Currently, the Ministry of Health is in the process of drafting amendments to the Law on Pharmacy 2016, set for submission to the National Assembly in 2024. However, the draft does not address the expansion of foreign-invested pharmaceutical enterprises’ activity limits. In light of this analysis, it is an opportune time for relevant authorities to review and consider amending the current provisions governing the scope of foreign-invested pharmaceutical enterprises’ activities. Such revisions could contribute to the overall development of Vietnam’s pharmaceutical industry in the foreseeable future.

Source: The Saigon Times

Stellapharm is one of leading generics pharmaceutical companies and strong producer of anti-viral drugs in Vietnam. The company established in Vietnam in 2000; and focuses on both prescription drugs and non-prescription especially in cardiovascular diseases, antiviral drugs, anti-diabetics drugs, etc. and our products are now used by millions of patients in more than 50 countries worldwide.

The company is globally recognized for its quality through our facilities have been audited and approved by stringent authority like EMA, PMDA, Taiwan GMP, local WHO and others.

Additional information for this article: Stellapharm J.V. Co., Ltd. – Branch 1
A: 40 Tu Do Avenue, Vietnam – Singapore Industrial Park, An Phu Ward, Thuan An City, Binh Duong Province, Vietnam
T: +84 274 376 7470 | F: +84 274 376 7469 | E: info@stellapharm.com | W: www.stellapharm.com