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Dinh Vu

Economic Sector

Last updated: Friday, October 19, 2018


Development Potential of Vietnam Pharmaceutical Industry

Posted: Wednesday, January 03, 2018

Among the Top 10 pharmaceutical companies in Vietnam, Traphaco Joint Stock Company and DHG Pharmaceutical Joint Stock Company have the strongest financial strength and achieve the highest communication scores. According to experts, the two industry-leading drug-makers have positioned their brands in the pharmaceutical market in Vietnam.

According to the Top 10 Prestigious Vietnam Pharmaceutical Company Report 2017 released by Vietnam Report Joint Stock Company, the prestige of pharmaceutical companies is based on research on impacts of financial performance, corporate image in the media and valuation by industry specialists. Financial capacity is shown on the latest financial statement (total assets, total revenue, profit after tax and capital performance); communication prestige is assessed by Media Coding methodology - encoding the company's articles on influential media channels; specialist surveys; pharmacist/drugstore surveys; and business surveys conducted in December 2017 on capital, market, labour, sales growth, profitability and business plans in 2017 among others.

Strong magnet to investors
The Vietnamese pharmaceutical market is on a positive growth momentum. In 2017, domestic sales were expected to reach US$5.2 billion, an increase of about 10 per cent over a year earlier, and expected to maintain a double-digit growth over the next five years, according to Business Monitor International (BMI).

The faster the population grows, the higher the income per capita rises and the higher people knowledge improves, the higher people’s demand for drugs is. Per capita spending on drugs in Vietnam increased from US$9.85 in 2005 to US$22.25 in 2010 and nearly doubled to US$37.97 in 2015. The average annual growth of drug expenses was 14.6 per cent in the 2010 - 2015 period and maintained an annual growth of at least 14 per cent until 2025. Drug expense per capita is forecast to double to US$85 in 2020 and US$163 in 2025.

According to financial statistical data, Phytopharma Joint-Stock Company and Vimedimex Medi - Pharma Joint Stock Company lead the Top 10 distributers and traders of medicines, medical equipment and supplies by revenue. In addition, according to general feedbacks from pharmacists and specialists, Phytopharma secured the highest share of choices for distributors and traders of pharmaceuticals, medical equipment and supplies in Vietnam.

According to results into pharmaceutical companies in Vietnam on current situations and growth potential of the pharmaceutical industry, nearly 75 per cent of respondents projected the sector growth of over 10 per cent while the rest saw the likelihood of a less than 10 per cent growth. No companies chose for “unchanged” or “worse than 2016”, showing that they believe in business growth potential in 2017-2018.

The pharmaceutical market is being regarded as a “profitable ground” for foreign investors and multinational corporations in the world, even domestic investors, to play. In 2018, the pharmaceutical landscape is expected to change drastically, driven by the participation of big retailers and distributors such as Mobile World, FPT Retail, Digiworld and Nguyen Kim. In addition, the massive influx of foreign pharmaceutical corporations into Vietnam-based manufacturing such as Sanofi, Taisho and Abbott is creating a considerable pressure on domestic pharmaceutical companies. Competition in the pharmaceutical market in the coming years is expected to be fiercer than in most market segments.

Bidding and material resources: Two top challenges
Remarking on current difficulties and challenges of the pharmaceutical industry, more than 90 per cent of respondents noted that “The process of hospital drug procurement - ETC channel” and “Dependence on imported input supplies” are the biggest barriers.

Accordingly, current policies and drug bidding scale are still inappropriate for many enterprises. Companies scoring 70-100 points are qualified for joining bids. This causes pharmaceutical companies investing in high technology to surrender those with simple technology. And, better medicines have narrower access to hospitals.

In addition, the Vietnamese pharmaceutical market is seen volatile since inputs are highly dependent on foreign imports. Inputs are mainly imported from China and India. According to data on the current state of pharmaceutical industry released by the Ministry of Industry and Trade, as our basic chemical industry and petrochemical industry are underdeveloped, more than 90 per cent of inputs are imported from foreign countries. This reliance poses the pharmaceutical industry to external volatility and vulnerabilities such as exchange rate volatility or supply shocks. Due to import expenses, export prices of Vietnamese drugs are 20 - 25 per cent higher than those in China and India.

In particular, Vietnam currently lacks research capacity on shortage of financial resources and high-quality human resources. Domestic drugmakers are focusing on manufacturing generic drugs of low value and weak competitiveness. They have to compete with each other on the one hand and vie with foreign generic medicines imported from many countries in the world. Feedbacks from pharmacists and pharmacies showed that consumers still prefer foreign drugs to domestic lines although they have similar specifications and properties.

Strategies of Vietnamese drug-makers support roles from the Government
In 2018, up to 83 per cent of respondents said new medicine research will be a top priority. Obviously, when the Vietnamese pharmaceutical market is increasingly diverged, the study and introduction of quality, reasonable drugs to fight against foreign rivals are top concerns of pharmaceutical firms. In addition to improving pharmaceutical quality, drug-makers aim to expand and occupy market shares. 67 per cent believed in growth in expansion into OTC channels in 2018, thus fostering strength via retail distribution systems.

Top 10 Prestigious Vietnam Pharmaceutical Companies 2017
1. Traphaco Joint Stock Company
2. DHG Pharmaceutical Joint Stock Company
3. Pymepharco Joint Stock Company
4. Domesco Medical Import-Export Joint Stock Company
5. Imexpharm Pharmaceutical Joint Stock Company
6. Binh Dinh Pharmaceutical and Medical Equipment Joint Stock Company
7. Ha Tay Pharmaceutical Joint Stock Company
8. OPC Pharmaceutical Joint Stock Company
9. Mekiphar Chemical Pharmaceutical Joint Stock Company
10. Nam Ha Pharmaceutical Joint Stock Company

Source: Vietnam Report, Top 10 Prestigious Vietnam Pharmaceutical Companies 2017, December 2017

To be stronger and expand into global markets, the coordination between enterprises and the Government is very necessary. From the perspective of pharmaceutical companies, more than a half of respondents said that the procurement process and legal corridor system are being perfected and made transparent or a well-developed macro economy is the most urgent goal now.

In particular, according to industry experts, in the context of rapidly spreading technologies, encouraging enterprises to apply technology, improve labour productivity and output efficiency will be the ‘leverage’ to lift the national pharmaceutical industry in the future.

Quynh Chi

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