Direct imports for pharma groups
The pharmaceutical market was aroused when French-invested Sanofi Vietnam received the certificate of eligibility for a pharmacy business from the Ministry of Health to directly import drugs to the country.
|Sanofi Vietnam is the latest group to meet the conditions as set out in Decree 54|
With Sanofi Vietnam becoming the newest foreign-invested enterprise joining the race to import drugs directly, pressures on local manufacturers are forecast to heat up in the months to come on the back of the landmark enforcement of the EU-Vietnam Free Trade Agreement.
“With the certificate, Sanofi Vietnam is among the multi-national corporations (MNCs) to get such a ticket in line with Decree No.54/2017/ND-CP dated 2017, guiding the implementation of the Law on Pharmacy 2016,” a senior MoH official told VIR.
“To get the certificate, Sanofi Vietnam and others have to meet the conditions regulated in Decree 54. Accordingly, the most important thing is to have qualified warehouses, or contracts with local Vietnamese companies to hire such warehouses,” he said.
Sanofi Vietnam has imported the first batch of vaccines of meningococcal meningitis – a serious disease in Vietnam.
The global healthcare leader, which is said to hold about 4 per cent of the Vietnamese pharmaceutical market, already has three factories in the country, supplying 80 per cent of its products sold in Vietnam.
According to Vaibhav Saxena, a lawyer at Vietnam International Law Firm, although the licence creates a “legal corridor” for Sanofi to import drugs in Vietnam, it is only applicable for drugs-importing activities. Meanwhile, other activities related to the distribution of drugs and medicinal ingredients in Vietnam are restricted in Decree 54. Such restrictions pose an obstacle for Sanofi Vietnam and other MNCs to access the pharmaceutical market as a wholesaler or join in other related activities such as tenders. Foreign-invested enterprises (FIEs) have to contract with local wholesalers to distribute imported products to hospitals, pharmacies, and retailers.
In spite of this, competition in local manufacturing is forecast to stiffen due to a significant increase in supply, putting high pressure on locally-made pharmaceuticals from domestic enterprises and FIEs who have been expanding manufacturing in Vietnam to benefit from the country’s supporting incentives.
Evidently, Vietnamese drugmakers are predicted to suffer from the competition. Even the biggest drugmakers such as Hau Giang Pharmaceutical JSC and Domesco and Imexpharm Pharmaceutical JSC (IMP) are not exceptions. They are investing in upgrading factories to GMP-EU standards to increase revenue from ethical drugs, meaning tenders of prescription drugs. In the meantime, FIEs’ imports often target brand name pharmaceuticals which are the subject to Group 1 as prescribed by doctors.
For example, IMP – the fourth-biggest drugmaker – is now operating three plants, including a high-tech plant recently put into operation, and is now developing a further high-tech facility, with its opening scheduled for 2020. IMP’s factories focus on manufacturing of western medicines, aiming to venture further into tenders of Group 1.
In fact, the volume of imported drugs in Vietnam has grown in recent times after more MNCs, including Zuellig Pharma Vietnam (ZPV) and DKSH Vietnam, got their certificates.
According to the MoH, the country’s total value of domestically-made drugs rose 10.2 per cent on-year in 2018 to $2.4 billion, making up 46.6 per cent of total drug spending, while the total value of imported drugs ascended 8.8 per cent to $3.7 billion. It is estimated that the country imports around 55 per cent of total demand.
The EU is now the largest importer of pharmaceuticals to Vietnam, from which Germany is the second-biggest importer. It is projected that the EU-Vietnam Free Trade Agreement (EVFTA) will bring more business and investment opportunities to EU pharmaceutical businesses in Vietnam and stiffening market competition.
“Together with the country’s open import policy, the deduction in import tax on EU pharmaceutical products will attract other investors to import such products in Vietnam which may push the competition up in Vietnam’s pharmaceutical market in an upright graph,” said Saxena from Vietnam International Law Firm.
According to the World Trade Organization Centre at the Vietnam Chamber of Commerce and Industry, pharmaceuticals imports from the EU into Vietnam will be more favourable, accessible, and direct under EVFTA commitments. Moreover, competition in tenders for groups of pharmaceuticals to open to EU bidders in ethical drugs will also be strengthened further.
HOT RACE BEGINS
According to the MoH, Sanofi Vietnam is not the first MNC to get the licence, with predecessors including ZPV, DKSH Vietnam, and others.
ZPV has already received its licence to import drugs, vaccines, and special controlled drugs in compliance with the new regulations. Marc Franck, chief executive at ZPV said, “Zuellig Pharma is already importing healthcare products of reputable multinational pharmaceutical companies for sale to local distributors. These include not only products currently being imported into Vietnam but also new products.”
“On top of importing directly, ZPV is also transferring new innovative technology to the MoH, such as its cold chain packaging solution, eZCooler, to maintain product quality during transportation and to deliver the best temperature-controlled vaccines under the expanded immunization program in Vietnam.”
Seeing huge growth potential of a market where drug spending per capita continues to rise, more MNCs are now in the race to make a similar move.
“Most of the MNCs in Vietnam are now applying to get such a licence to import drugs to Vietnam directly. Novartis and GlaxoSmithKline may be in the queue,” said the MoH official.
The fact that the MoH has given official permission to FIEs to implement their rights to import drugs is very positive progress and is also motivating Germany’s B. Braun Vietnam to make use of the import rights for pharmaceuticals in Vietnam.
Torben Minko, managing director of B. Braun Vietnam said, “We remain interested in investing in Vietnam while establishing long-term partnerships and bringing high-quality and affordable medicine to patients in Vietnam. Currently, we are closely following up on this matter to take further specific steps.”
The trend of seeking licences to make direct imports to Vietnam intensified after Decree 54 was made effective. Before that time, the right of the FIEs to import drugs was not recognised.
The full legal basis for an FIE to apply for the certificate of satisfaction of conditions for drug import activities comes with Decree No.155/2018/ND-CP dated November 12, 2018 amending Decree 54 (effective from November 2018), and Circular No.36/2018/TT-BYT dated November 22, 2018 on goods storage practice for drug and drug materials (effective from January).
Industry insiders attributed the trend to the huge growth potential in the market, with double-digit growth forecast in the next five years, reaching an estimated $7.7 billion in 2021 from the current $5 billion. Moreover, the EVFTA will add to its attraction. VIR
According to experts, the boost in attractiveness of the Vietnamese market comes at a time when the business environment for drugmakers in neighboring countries has not been favorable.
The new regulation on raising the foreign ownership ratio ceiling has made Vietnam’s pharmaceutical companies more attractive to foreign investors, especially those from the EU and Japan.