Foreign drug firms selling more imported products

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After working for Swiss-backed Roche Diagnostics Vietnam for over one year, Nguyen Thanh Tung, a Hanoi-based Roche branch medical representative, said his sale revenue from Roche products during this year’s first quarter doubled to $260,000 from $129,800 in last year’s corresponding period.

“My revenue for the whole 2013 is expected to climb 70 per cent against 2012,” Tung said.

With all of its products imported into Vietnam, Roche has targeted revenue growth rate of 29 per cent from pharmaceutical sales in Vietnam this year—up from 26 per cent growth in 2012.

Before working for Roche, Tung worked for US-backed pharmaceutical Merck Sharp and Dohme (MSD), whose on-year revenue growth rate was 30 per cent last year – the highest growth rate among foreign pharmaceutical firms in Vietnam. Not directly producing in Vietnam, MSD only distributes imported products here.

Le Kinh Quoc, a senior consultant in the healthcare and pharmaceutical industry, said not only Roche and MSD, but also many other foreign pharmaceutical firms in Vietnam like the Philippines’s United International Pharma, Britain’s GlaxoSmithKline or Thailand’s Mega Lifesciences had also reaped “impressive growth” over the past few years, through their distributing imported products in Vietnam.

“The Vietnamese pharmaceutical market last year was valued at $2.94 billion, up 25 per cent on-year due to growing demand, and is expected to increase to $3.34 billion this year,” Quoc said.

According to the London-based world-famous market analyst Business Monitor International, Vietnam has a pharmaceutical risk/reward rating score of 49.3 out of 100, making it the 11th most attractive pharmaceutical market in Asia Pacific.

Under World Trade Organisation (WTO) commitments, Vietnam has since 2009 opened doors to foreign pharmaceutical firms to establish branches and manufactories.

However, according to the Ministry of Health (MoH), only nearly 40 out of more than 600 foreign pharmaceutical firms operating in Vietnam have established joint ventures to build medicine making factories here, and the rest only import drugs from foreign countries to distribute in the country. Only several foreign firms have built their own factories like France’s Sanofi (three factories) and Japan’s Rhoto Pharmaceutical (two factories).

“Some $1.75 billion out of the said $2.94 billion was for foreign firms’ imported products,” Quoc said. “90 per cent of medicines in central-level hospitals are foreign ones, while the rate is 65 and 50 per cent at provincial-level and district-level hospitals, respectively.”

Quoc said competitiveness of the local pharmaceutical market remained weak as compared to other regional markets like the Indonesia, Philippines, and Singapore. Thus, foreign firms did not receive much benefit from building pharmaceutical factories in Vietnam.

For instance, when making medicines, they needed local materials most as ingredients occupied 60 per cent of production costs, but in Vietnam, 90 per cent of pharmaceutical ingredients must be imported.

Meanwhile, the average import tariff rates of materials and medicines ranged 5-10 per cent, which were too high.

Furthermore, according to EuroCham in Vietnam, the MoH’s Circular 06/2006/TT-BYT regulates the export and import of pharmaceutical and cosmetic products. But this circular does not allow foreign invested firms to import finished pharmaceutical products into Vietnam. Therefore this circular is not in line with the WTO commitments. However, guidance to replace Circular 06 has not yet still to be released. Meanwhile, though many foreign firms are highly motivated to establish legal entities in Vietnam, and increase their investment in the pharmaceutical sector under WTO commitments, they remains hesitant to invest much in Vietnam. 

For example, Roche currently has representative offices in Vietnam without any production factory. GlaxoSmithKline is also cooperating with local pharmaceutical firms instead of manufacturing on its own.

In January 2013, Singapore-based Inviragen out-licensed its Japanese encephalitis (JE) technology to Vietnam-based Company for Vaccine and Biological Production No1. Under the agreement, Vabiotech can exclusively develop and commercialise JE vaccines in Vietnam, Cambodia and Myanmar.

Taiwanese-backed TTY Biopharm is also finding local pharmaceutical factories to transfer technologies and produce anti-cancer drugs. Hong Kong’s Aloha Medicinals Asia is also looking for local partners to distribute its mushroom-extracted products in Vietnam.