Negotiations on the Trans-Pacific Partnership (TPP) Agreement have concluded. According to experts, this will open up plenty of new opportunities and challenges for the economy. Fishery, steel, wood, pharmaceutical and public investment are reportedly among the most vulnerable to TPP impacts. However, with its high growth rate in the region, the pharmaceutical industry of Vietnam is expected to confront and surmount any adverse impacts of this agreement.
Increased competition
According to experts, Vietnam is the biggest beneficiary among 12 signatories to the TPP. But, not all sectors enjoy absolute positive impacts from this pact and the pharmaceutical industry is an example.
When the TPP takes effect, duties on pharmaceuticals will reduce from the current 2.5 percent to 0 percent. As this tariff barrier is quite low, the abolition does not have major impacts. Nevertheless, this reconfirms increased competition from foreign firms.
According to Business Monitor International (BM), a consulting firm, Vietnam ranks 13th out of 175 countries on medicine spending growth but imported drugs currently account for about 60-70 percent of the market. When Vietnam enters into the TPP, medicine auctions will be made public. Drug companies in the world can participate on equal terms with local ones, thus the competition will be very fierce. Domestic players are projected to see a disadvantage as our pharmaceutical industry is weak and dependent too much on imported materials.
Ms Tran An Khanh, Deputy Sales Director of Central Pharmaceutical Company 1 (CPC1), said a growing number of domestic consumers will tend to shift to imported medicines because of their inherent keenness on foreign items and their higher incomes. This will affect the market share of local firms, especially when the TPP takes effect.
Besides, the TPP will restrict local businesses from accessing and manufacturing new drugs. The expiry time for patent drug protection is 5-10 years and producing such medicines requires a long time to wait. Meanwhile, quality medicines of foreign pharmaceutical companies will overflow into Vietnam, resulting in a very strong competition.
Mr Le Van Truyen, Former Health Deputy Minister, said, each country has a patent recognition system for inventing companies. Such companies can exclusively patent medicine for some time until the patent monopoly expires. Then, other companies can produce generic versions at cheaper prices. In Vietnam, generics are solving a lot of problems, especially to groups using drugs for chronic diseases like diabetes, heart disease and tuberculosis. In fact, when five generic drugs hit the market, prices of patent medicines will fall by 20 percent,” he said. But, when the TPP comes into force, this agreement may hinder the emergence of this drug because, on a common level playing field, Vietnam must put itself out of the position of a poor country and comply with copyright protection of pharmaceutical products.
Opportunities for domestic firms to change
According to the United Nations Industrial Development Organisation (UNIDO), the Vietnam pharmaceutical industry is only at the level of 3-4 out of a 5-level scale. Domestic pharmaceutical manufacturing accounted for only 0.11 percent of total domestic industrial revenue in 2011 although it had 121 medicine production plants, 61 medicinal material production companies, and over 130 small-scaled registered business makers.
To play on a new playground like the TPP, not only domestic pharmaceutical companies have to change but the entire pharmaceutical industry of Vietnam also needs to actively move around. They not only need GMP-WHO factories but they also need to expand production facilities to meet EU and GMP-FDA standards so as to compete with strong competitors in the world.
According to experts, the TPP will be an opportunity and a wide door for Vietnam's pharmaceutical industry to promote investment, innovation and standardisation of production standards and quality products to serve not only the domestic demand but also exports to foreign markets.
Mr Nguyen Thanh Binh, General Director of CPC1 Hanoi Pharmaceutical Joint Stock Company, affirmed that joining trade agreements, technical barriers will be the key for countries to protect domestic production and product quality reputation.
Remarking on opportunities and challenges from the TPP, he said that the quiz for the domestic pharmaceutical industry is to invest in technologies to cope with stiff competition in recent years. Investments for upgrading factories and standards will help them enhance the possibility of winning bids and restore the market share in the country.
"Our pharmaceutical production companies we have prepared for this game for many years by investing in modern production machines and technologies of the world. Hanoi CPC1 invested US$3 million to build production lines, powered by BFS technology, to manufacture distilled water, injection and paraffin in plastic pipes. This move has enabled us to manufacturing outstanding products, secured the market leadership in this segment and created a new trend of replacing glass pipes with plastic pipes. We not only meet the domestic market but also export to other markets,” he explained.
In fact, many Vietnamese companies with good foundations like Mediplantex, Traphaco and DHG are seizing TPP opportunities. These businesses have focused on accessing new technologies, improving production lines and production processes to turn out high-quality products, not only for domestic but also for export.
Mr Le Van Truyen said, by investing in manufacturing high-quality products, domestic companies are showing a good signal and taking another stepping stone to the goal of increasing domestic drugs to 80 percent of the market share as specified in the Pharmaceutical Industry Development Strategy to 2020, with a vision to 2030.
This shows that Vietnam's pharmaceutical industry is not afraid of disadvantages brought by the TPP while taking very good advantage of opportunities that historic agreement brings in.
Besides, according to many experts, intellectual property rights protection generally generates short-term negative impacts, but if intellectual property rights protection laws are implemented well they will provide opportunity for the pharmaceutical industry to compete on the world market based on their unique ideas. This is a weakness all businesses must face in order not to lose the market.
Giang Tu-Thu Ha
Vietnamese
