PHARMACEUTICAL IMPORTERS IN VIETNAM: Ensuring Compliance and Accountability

Note on Regulatory Updates: 

This article was prepared in mid-2024 based on the legal framework and regulatory guidance available at that time. As Vietnam’s pharmaceutical regulations are subject to amendments and evolving implementation practices, readers are advised to verify the most recent versions of relevant laws, decrees, and Ministry of Health guidance before relying on the information provided.

1. Overview of pharmacy distribution in Vietnam 

1.1 Market Outlook

The Vietnam pharmacy market is on the cusp of significant expansion, with a promising outlook for the coming years. The market is projected to grow from a revenue of US$4.93 billion in 2024 to an estimated US$5.99 billion by 2028, representing a steady annual growth rate (CAGR) of 4.99% during the period 2024-2028.

This growth is fueled by evolving customer preferences, with a growing demand for convenience and accessibility in healthcare products and services. Pharmacies in Vietnam are responding to this need by offering a comprehensive range of prescription and over-the-counter medications, as well as health and wellness products, serving as a one-stop solution for healthcare needs.

Furthermore, the government’s supportive initiatives, the rapid increase in healthcare expenditures, and the burgeoning medical tourism sector are key drivers propelling the expansion of the pharmaceuticals market in Vietnam. These factors are expected to continue to stimulate market growth during the forecast period from 2023 to 2029. 

The key players in the pharmaceutical distribution market in Vietnam include:

• DHG Pharmaceutical Joint Stock Company

• Traphaco Joint Stock Company

• Pymepharco Joint Stock Company

• Hatay Pharmaceutical Joint Stock Company

• Mekophar Chemical Pharmaceutical JSC

• Imexpharm Corporation

• OPC Pharmaceutical Joint Stock Company

Penetrating the Vietnamese pharmaceutical distribution market brings both opportunities and challenges. Therefore, it’s important for these companies to conduct thorough market research and understand the local regulatory environment to navigate these challenges and leverage the opportunities effectively.

1.2 Opportunities & Challenges:

These upcoming opportunities and challenges provide a comprehensive picture for foreign companies considering entering the pharmaceutical distribution market in Vietnam. It's important for these companies to conduct thorough market research and understand the local regulatory environment to navigate these challenges and leverage the opportunities effectively.

Opportunities for these key players to tap into include:

• Growing Population and Increasing Burden of Chronic Diseases: Vietnam's growing population and increasing burden of chronic diseases create a continuous need for medications.

• Improving Healthcare Infrastructure: Vietnam has made considerable progress in improving its healthcare system.

• Supportive Government Policies: The government has made several initiatives and policies, which provide a roadmap for the growth and development of the pharmaceutical sector. The government’s openness to foreign investment creates opportunities for international pharmaceutical companies to establish a presence in Vietnam.

• Increasing Healthcare Expenditure: The country's expanding healthcare infrastructure and improving access to medical services are increasing the demand for pharmaceutical products.

• Rapidly Growing eCommerce Channels: Rapidly growing eCommerce channels in the country providing pharmaceutical products at affordable rates and within the convenience of consumers' homes are driving the growth of the Vietnam pharmaceuticals market.

• EU-Vietnam Free Trade Agreement (EVFTA): The EVFTA provides foreign investors with preferential tariffs, making it more cost-effective for foreign pharmaceutical companies to operate in Vietnam.

Challenges that these key players could face include:

• Counterfeit and Substandard Medicines: The prevalence of counterfeit and substandard medicines can erode trust in the industry and endanger patient health.

• Significant Regional Divisions: There are significant regional divisions in Vietnam’s distribution landscape.

• Low Distributor Maturity: The maturity of distributors in Vietnam is relatively low compared to other major ASEAN countries.

• Regulatory Complexity: Vietnam's regulatory regimes and commercial law can be challenging for foreign businesses. The pharmaceutical industry, which directly affects people's health and lives, has strict regulations regarding the business operations of foreign pharmaceutical traders.

• Infrastructure and Resource Limitations: There are still areas to develop, including inadequate infrastructure, a shortage of staff and funding, and limited healthcare access in rural and isolated locations.

• Dependence on Imports: Vietnam's pharmaceutical industry relies heavily on imported ingredients. This reliance leaves the market exposed to price fluctuations and Accessories issues from manufacturers in China and India.

Overall, the Vietnamese pharmaceutical market presents exciting possibilities for both domestic and foreign companies. By understanding the market drivers, challenges, and opportunities, pharmaceutical companies can position themselves to thrive in this dynamic and growing sector.

PHARMACEUTICAL IMPORTERS IN VIETNAM: Ensuring Compliance and Accountability

2. Pharmaceutical distribution and import activities in Vietnam  

2.1 An overview of regulatory complexities

• Importation and Distribution Rights in Vietnam

Vietnamese regulations meticulously define distribution and importation activities. The importation right, integral to comprehending the legal framework, confers upon entities the privilege to import goods from foreign jurisdictions into Vietnam for subsequent sale to authorized distributors within the domestic market. It encompasses the entitlement to be identified on import declarations, thus assuming accountability for the requisite import procedures. Notably, this right is circumscribed, as it does not extend to the establishment or participation in a domestic distribution network, save for instances specifically sanctioned by Vietnamese law or international treaties to which Vietnam is a signatory.

Distribution, on the other hand, encompasses a spectrum of activities including wholesaling, retailing, sales agencies, and franchising arrangements. Despite Vietnam's broad market openness to foreign investors in importation and distribution sectors, certain segments remain subject to restrictions. These include cigarettes and cigars, printed media, video recordings, precious metals and stones, pharmaceuticals, explosives, processed and crude oil, rice, and cane and beet sugar.

• Foreign Investment in Pharmaceutical Distribution

Of particular relevance to pharmaceutical distribution, Vietnamese regulations effectively preclude foreign-invested companies (FICs) from directly engaging in distribution activities within Vietnam. However, avenues for market participation persist through importation channels. FICs can navigate this regulatory landscape by importing pharmaceutical products and subsequently wholesaling them to licensed distributors operating within Vietnam. This strategic approach enables FICs to access the Vietnamese market while ensuring compliance with regulatory constraints.

• Representative Offices as a Market Entry Strategy

Given the constraints surrounding direct distribution, many foreign entities opt to establish representative offices (ROs) in Vietnam. ROs offer a pragmatic market entry strategy for entities seeking to navigate regulatory complexities while accessing the Vietnamese market. Importantly, ROs can facilitate pharmaceutical importation on behalf of their parent companies, thus serving as conduits for market penetration. The establishment of ROs is characterized by streamlined procedures, rendering them a time-efficient and cost-effective alternative to establishing fully-fledged foreign-invested enterprises. Moreover, ROs are subject to relatively less stringent compliance requirements, further enhancing their attractiveness as a market entry vehicle.

• Limitations on Pharmaceutical Distribution Activities for Importers

Vietnamese regulations impose clear limitations on the activities that facilities with importation rights can undertake within the domestic pharmaceutical distribution landscape.  These limitations are relaxed only in instances where the imported pharmaceuticals and ingredients are produced domestically in Vietnam.  Specifically, the following activities directly related to pharmaceutical distribution within Vietnam are prohibited for these facilities:

• Sales and Delivery Restrictions: Direct sale of pharmaceuticals and ingredients to healthcare facilities, retail establishments, individuals, or organizations that are not licensed wholesale pharmaceutical distributors.

• Order and Payment Restrictions: Accepting orders or receiving payments directly from entities other than licensed wholesale pharmaceutical distributors for pharmaceuticals and ingredients.

• Logistics Restrictions: Engaging in the transportation, receipt, or storage of pharmaceuticals and ingredients.

• Pricing and Policy Restrictions: Dictating or influencing the selling prices of pharmaceuticals and ingredients distributed by other entities within the pharmaceutical sector. Similarly, these facilities are prohibited from determining distribution strategies or business policies for pharmaceuticals and ingredients distributed by other businesses.

• Supply Chain Restrictions: Developing supply plans for pharmaceuticals and ingredients intended for Vietnamese healthcare facilities.

• Financial Support Restrictions: Providing any form of financial support to organizations or individuals purchasing pharmaceuticals and ingredients directly from them, with the intent to manipulate the distribution of imported pharmaceuticals and ingredients.

• Catch-All Provision: Engaging in any other activity deemed by law to be related to pharmaceutical distribution within Vietnam.

 2.2 Business conditions

Facilities engaging in pharmaceutical import activities must comply with stringent requirements. These prerequisites are outlined as follows:

• Physical Infrastructure: 

The facility must possess a designated physical premise equipped with a warehouse tailored for pharmaceutical storage. Adequate storage apparatus, transportation vehicles, a robust quality management system, comprehensive technical documentation, and personnel trained in Good Storage Practices (GSP) for pharmaceuticals and pharmaceutical ingredients are imperative.

• Qualifications for the Person Responsible for Pharmaceutical Expertise

  • General Requirements

The individual entrusted with pharmaceutical expertise responsibilities at a facility involved in pharmaceutical import or export activities must meet the following criteria:

• Possession of a bachelor's degree in pharmacy

• Accumulation of two years of relevant professional experience within a pharmaceutical facility

Exceptions to this requirement are delineated in Clauses 2 and 3 below.

• Specific Requirements for Vaccines and Biological Products

For facilities engaged in the import or export of vaccines and biological products, the individual responsible for pharmaceutical expertise must meet one of the following qualifications:

• Possession of a bachelor's degree in pharmacy

• Possession of a bachelor's degree in medicine

• Possession of a bachelor's degree in biology

Additionally, the individual must have garnered two years of pertinent professional experience within a pharmaceutical facility.

• Specific Requirements for Medicinal Herbs, Herbal Medicines, and Traditional Medicines

For facilities involved in the import or export of medicinal herbs, herbal medicines, and traditional medicines, the individual entrusted with pharmaceutical expertise must meet one of the following qualifications:

• Possession of a bachelor's degree in pharmacy

• Possession of a bachelor's degree in traditional medicine

Furthermore, the individual must have amassed two years of relevant professional experience within a pharmaceutical facility.

CONCLUSION: Overall, the Vietnamese pharmaceutical market presents exciting possibilities for both domestic and foreign companies. By understanding the market drivers, challenges, and opportunities, pharmaceutical companies can position themselves to thrive in this dynamic and growing sector. 

DISCLAIMER: This content provides business news and legal insights for information purposes only. It is not intended, and should not be construed as, legal consultancy. We make every effort to ensure the accuracy and completeness of the information presented, but the information may be subject to change without notice due to Government policies or updates beyond our control. For further and comprehensive advice, please do not hesitate to contact us.