SECTOR BRIEFING HEALTHCARE IN VIETNAM
Updated: Jun 18, 2019
Credit by Business Centre of The British Business Group Vietnam (BBGV)
This report was produced by the Business Centre of The British Business Group Vietnam (BBGV) with references from sources believed to be accurate and reliable at the time of publishing. Individuals, companies and organisations are required to acknowledge BBGV when using this work for any papers or publishing purposes. We are not responsible for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
I. Overview:
1. Pharmaceuticals:
Due to changes in government policies and development in the domestic regulations of imported drugs, Vietnam’s pharmaceutical sector has grown significantly in the last decade. At a per capita level, spending is expected to double from USD170 in 2017 to USD400 in 2027. Meanwhile, the country’s pharmaceutical market had an estimated a revenue of USD5.9 billion in 2018, an 11,7% increase from the previous year, which makes Vietnam the second largest medicine market in the South East Asia. The market is set for double digit growth within the next five years, according to Vietnam Report Company .
The average spending of Vietnamese people on drugs rose from USD22.25 in 2010 to USD37.97 in 2015, and doubled to USD56 in 2017 . The average growth rate of spending on drugs was 14.6% during 2010-2015 and is set to maintain a rate of at least 14% until 2025.
In recent years, the authorities have stepped up their efforts to reduce the country's reliance on imports. As part of their 2020 strategy, authorities intend to have 80% of domestic pharmaceutical demand met by local drug manufacturers through measures such as tendering preferences.
2. Medical devices:
Medical products from these markets make up 55% of Vietnam’s total medical equipment imports. Meanwhile, domestic enterprises, currently comprising of 50 medical equipment manufacturers, which are licensed by the MOH, account for only 10% of the local market share.
II. Opportunities
This can be seen through Vietnam’s gross domestic product increasing to 7.08% in 2018, the highest in the past 11 years. Strong economic growth, enhanced personal income and rising health awareness both favourable conditions for increased spending on healthcare in general. Additionally, over the last two decades, Vietnam population has expanded from 72 million people in 1995 to over 95 million people in 2019 which has increased the market size. According to the World Bank, urban areas in Vietnam have developed spatially at 2.8% per year, among the fastest growth rates in the Asian region.
In these contexts, the growth of a new urban middle-class will induce changes in community behaviours and consumption patterns and will positively affect the demand for healthcare and pharmaceutical products. Such developments are creating new opportunities not only for medical devices but also pharmaceuticals producers in Vietnam. However, the local production of medical equipment and pharmaceuticals have not been able to meet demand. In terms of pharmaceuticals, domestic drug firms focus mostly on producing generic products and other simple areas of drug production, as they lack research and development capabilities as well as the ability to invest in new compounds.
The MOH data shows that the country’s drug imports last year increased by 8.8% year-on-year to US$3.7 billion.
III. What are the challenges?
1. Pharmaceuticals
As part of the WTO membership, foreign enterprises have been given the right to open branches in Vietnam and to import medicines directly. However they are prohibited from distributing their products without a license and need to cooperate with a domestic wholesaler. Part of the problem is because the government has few resources to tackle the problem. Therefore, the majority of drug sales in Vietnam are achieved not through regulated pharmacies but through private dealers that handle drugs worth an estimated USD450mn per year.
Decision 2019/1997/QD-BKHCNMT which stipulates that The Ministry of Science and Technology must inspect and certify all imports of used medical equipment. Because of the restriction, local companies are generally not willing to deal with foreign suppliers of used and refurbished equipment. However, MOH will approve the used equipment for donation purposes only. Under Vietnamese law, only business entities registered in Vietnam that have an import license are eligible to distribute medical devices within Vietnam.
Therefore, when entering Vietnamese market, foreign medical device suppliers must establish a local office or appoint a local distributor. The Ministry of Health has recently issued Decree No. 155/2018/ND-CP, which has many positive changes towards cutting procedures and creating favourable conditions for businesses in tenders, drug imports,and others. 01/NQ-CP on cutting business conditions, which will ease the business of trading medical equipment.
According to the MoH’s Department of Medical Equipment and Works, this will create a legal framework for the management of medical equipment, in the new development period, increase international integration while meeting international norms. Additionally,the Vietnam government also encourages foreign investment by putting forward a wide range of incentives for private healthcare sector, such as incentive tax rates and zero tariff. Thanks to the government’s new policies, MOH expects that more and more foreign companies to enter the Vietnam market to cash in on the country’s growing medicine demands. Prescription drugs are expected to dominate over the coming decade, with the biggest focus being on drugs for the treatment of infectious and chronic diseases.
On April 2019, the MOH has ordered that all drugstores should be connected to the national medicine database via the Internet. This aims to prevent the sales of drugs without prescription, which has always been common practice in Vietnam. Currently, 61% of over 6000 drugstores in Ho Chi Minh City and 90% of over 4600 drugstores in Ha Noi have linked up to the national database. A growing chronic disease burden and rising resistance to antibiotics will continue to be the central driver of Vietnam's healthcare expenditure.
In terms of medical devices, Vietnamese healthcare organizations are in great demand for advanced technology, and advanced laboratory and clinical equipment and information systems for research, diagnostics and treatment are attracting the most interest.
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