A land of Opportunity for Pharmaceutical Businesses

A land of Opportunity for Pharmaceutical Businesses

At a recent meeting with foreign pharmaceutical enterprises, the Vice Minister of Health, Le Ngoc Trong, pointed out that foreign investment of US$214 million in 30 projects remains modest in light of the meagre domestic spending on medicines of US$7.6/person/year. Vietnam should therefore be regarded as a land of opportunity for foreign pharmaceutical businesses.

Investment far below potential

Mr. Trong said that the weak pharmaceutical sector of Vietnam is very much dependent on imported materials and medicines. Vietnam imported 90 per cent of materials and produced 35-40 per cent of its medicines using 4,000 pharmaceutical substances while the treatment needed over 10,000. Ninety per cent of medicines produced in Vietnam are for basic treatment and involve simple manufacturing. Imported medicines account for 60-65 per cent of the demand focusing on special kinds of treatment.

According to Ms. Mai Thi Thu, The Deputy Head of the Department of Foreign Investment (Ministry of Planning and Investment), there are 30 foreign invested projects involved in the pharmaceutical sector with registered capital of over US$210 million. At present, 18 projects are already operational, attaining GMP status (ASEAN recognised manufacturing quality) with investment of US$8.3 million and supplying special medicines that would be otherwise unavailable in Vietnam.

Currently, foreign invested enterprises make up 32 per cent of GMP enterprises in Vietnam, with some even meeting international GMP standards. Their products have substituted some imported medicines, and with increased capacity in the future and the development of local enterprises, domestic demand will be met.

The present investment in the pharmaceutical sector is still far below the potential of major groups from France, the USA, Switzerland, Russia and Japan. India ranks first in the business with 45 out of 249 licenses granted, followed by France, the Republic of Korea and China. However, the supply of medicines is mainly concentrated in three big distributors, namely Zuelling Pharma (Singapore), Diethlm & Co., Ltd (Switzerland), and Mega Product Ltd (Thailand) with the turnover of US$12 million in 2003, 30 per cent of the import value of medicines. Therefore, the most pressing issues concern measures against monopoly domination and for stable prices. The Ministry of Health calls on more investment from foreign pharmaceutical enterprises, especially in fields of research for local materials and the application of new technology through designated production or the transfer of trademarks.

Opening the door

To attract investors into the pharmaceutical sector, Vietnam must offer an attractive legal framework. Preferential treatment for pharmaceutical projects have already been provided by Decisions 24/2000/MD-CP and 27/20-03/ND-CP of the government. As stipulated in these decisions, projects will experience a reduction in enterprise income tax and projects in industrial zones or disadvantaged regions will have even greater preferential treatment. The National Assembly will consider and approve a Pharmaceutical Law to facilitate foreign investment and in 2006, Vietnam will abolish the registration of medicines in the region.

• H.C