Vietnam's Pharmaceutical Industry Keeps Staging High Growth

11:45:18 AM | 31/12/2019

According to BMI Research, in 2018, Vietnam’s pharmaceutical market value reached US$5.9 billion, 11.5% higher than a year ago, to rank second in Southeast Asia. This growth was among the 17 highest-growing pharmaceutical markets in the world.

Strong and stable growth

Despite robust industry growth, the domestic pharmaceutical production is still weak, meeting only 52.5% of the demand - the rest is filled by imports. In 2018, Vietnam spent US$2.791 billion to import pharmaceuticals (the value reached US$2,144 billion as of September 15, 2019, growing more than 10% from a year-ago period or an increase of US$200 million.

Data from the Drug Administration of Vietnam (DAV) show that Vietnam has about 180 drug-makers and 224 GMP-standard domestic pharmaceutical factories as of May 16, 2019. Domestic pharmaceutical companies mainly produce simple dosage medications, functional foods, and generic drugs (pharmaceutical drugs that contain the same chemical substances as drugs that were originally protected by chemical patents).

By distribution market share, ethical drugs (ETC - markets for medicines sold by prescription drugs and distribution channels represented by hospitals) currently account for about 70% of the market share and only 30% is sold by retail pharmacies or the OTC (over the counter) channel. The country has about 57,000 pharmacies and drugstores.

In spite of production and technology difficulties, with a young but fast-aging population, rising income and worsening environmental pollution are fueling health concerns of over 97 million people. According to many experts, this is motivational for the pharmaceutical industry to keep growing. Over the next five years, Vietnam's pharmaceutical industry is expected to be among 20 fastest and most stable markets in the world.

According to the forecast by market research firm BMI, Vietnam's pharmaceutical market value will reach US$7.7 billion by 2021 and US$16.1 billion by 2026, with a compound growth rate of 11% in Vietnamese dong. Market research firm IMS Health also estimated that per capita spending on pharmaceutical in Vietnam will rise to US$50 by 2020.

In addition, many large pharmaceutical manufacturers such as Hau Giang Pharmaceutical, Bidiphar, Imexpharm and Pymepharco have invested in upgrading their factories, expected to be completed by the end of 2019 or early 2020, to elevate the position of domestic pharmaceutical products and sharpen their competitive edge against imported products.

According to a survey by Vietnam Report, all experts said that Vietnam's pharmaceutical industry will continue to double digit growth in 2019-2020, with nearly 80% anticipating growth of 10-15%.

5 main business trends

Although the pharmaceutical industry still has huge potential for development, current investment expansion, capacity increase, research and development, and marketing strategy are still weak. Besides, the fierce competition with imported drugs, dependence on foreign material sources and irrational policies are challenging local drug-makers.

In the coming time, according to Vietnam Report, the pharmaceutical industry will see five major business trends in the coming time. The first one is OTC channel expansion - sold directly via retail pharmacies. However, the ETC channel is dominant, businesses are gradually switching from the ETC channel to the OTC channel because new regulations on selection of winning medicine tenders in hospitals give priority to low-value medicines. The development of OTC channel will help businesses consolidate their position, ensure competitiveness in the market and stay away from impacts of health policies.

Besides, the pharmaceutical retail chain will be developed. The double-digit growth of the drug retail industry, currently held by individuals and non-branded pharmacies, is attracting many domestic retailers from other industries such as Mobile World, FPT Retail and Nguyen Kim. The construction of a GPP drugstore chain will be a trend of the future because increasing living standards will lead to changed consumer habits. Consumers will find reliable drugstores that meet standards to get counsel and buy drugs.

In addition, information technology application to expand online pharmaceutical market will be a trend. Driven by IT expansion, especially in the face of the burgeoning Industry 4.0, Vietnam’s pharmaceutical market has witnessed online pharmacy chains and home healthcare applications in Vietnam. The online business market has great potential to develop and create opportunities for online retailers to grow an online counselling and marketing model.

Particularly, M&As in the pharmaceutical industry will be still vibrant. The pharmaceutical industry will keep growing while many businesses, being restructured and divested by the government, along with priority policies and support for domestic consumption, have caught the fancy of many investors, especially foreigners. According to industry experts, the M&A trend is expected to be more exciting in the coming time. M&As will help Vietnamese companies not only improve their corporate governance skills but also expand market share, seek opportunities in new areas and develop distribution networks.

With rising income, a majority of people in cities pay more attention to healthcare and appearance, with natural products, functional foods and pharmaceuticals expected to boom and account for a larger share of pharmaceutical sales in the next 5-10 years as happened to developed countries where these products will account for 50-60% of the OTC market.

Anh Mai (Vietnam Business Forum)