The EU-Vietnam Free Trade Agreement (EVFTA) officially took effect in August 2020, opening tremendous prospects in the comprehensive partnership between the two. After a year of looking back amid a global pandemic, besides economic growth and trade and foreign direct investment with industries in general, the real impact of the EVFTA on the pharmaceutical industry remains to be seen, especially for European enterprises.
|Van Ho, Vice chairwoman of International Quality Medicines, Generic and Biosimilar Sector Committee EuroCham Vietnam |
The pharmaceutical industry is a specific business. Besides being governed by trade agreements, it is also subject to the strict management of the Ministry of Health (MoH), the Drug Administration of Vietnam (DAV), and the Law on Pharmacy, etc. The immediate impact of the EVFTA on the pharmaceutical industry needs efforts from many sides and requires more time to evaluate its effectiveness.
The commitment in the EVFTA on pharmaceutical tariffs has not created any significant changes in the short term for the export and import of drugs. This is because the previous regular Most Favoured Nation (MNF) tax was zero for all pharmaceuticals and medicinal materials exported to the EU. Meanwhile, the EVFTA eliminated tariffs on about 71 per cent of drugs and restorative materials imported into Vietnam at entry into force.
However, the previous MFN rate on these goods was already zero. The Vietnamese side will gradually phase out tariffs over the next 5-7 years for the remaining pharmaceuticals and medicinal herbs, which currently have an average MNF tax rate ranging from 5-8 per cent.
With commitments related to the pharmaceutical sector after the EVFTA comes into effect, pharmaceuticals from the EU entering Vietnam will in principle be more convenient, more accessible, and more direct. However, our members in particular, as well as pharmaceutical companies in general, face many difficulties. One of our major challenges concerns drug registration, including new registration, re-registration, and license renewal certificates.
On the one hand, European pharmaceutical companies acknowledge the efforts of the government, the MoH, and the DAV in enhancing dialogue and listening to the difficulties of businesses. However, many problems remain unresolved. In particular, the legal framework has not seen positive changes. These difficulties are mainly addressed only temporarily rather than in a sustainable and long-term way.
On the Vietnamese side, there have been some encouraging signs of a changing mindset. For instance, the role of EU businesses was considered when GMP-EU was selected as one of the evaluation criteria in the bidding tender packages for hospitals (in the group that has committed to open for EU contractors). This is being further maintained and consolidated.
For pharmaceutical supply and distribution chains, after the EVFTA, Vietnam is more open. Although Decree No.54/2017/ND-CP guiding implementation of the Law on Pharmaceuticals was issued, it has allowed foreign-invested enterprises to import drugs by converting their operating model from a representative office to a pharmaceutical limited company. This helps EU pharmaceutical enterprises to participate more deeply in the supply chain and distribute drugs in the Vietnamese market.
However, the decree introduced many other limitations, including the concept of drug distribution, warehousing, and transportation services. These have prevented European businesses from implementing investment plans and effective business operations, and they have not been giving drugs directly to hospitals for patients. Even in some non-commercial cases, foreign enterprises want to donate medicines to support the treatment of patients. However, the procedures are very complicated and roundabout, which increases costs and discourages businesses when they want to support hospitals.
As for attracting EU pharmaceutical enterprises to invest in production in Vietnam, there are still certain barriers. Foreign investment has not had the opportunity to thrive because of incomplete regulations and statutes, especially issues that require the participation of many ministries and sectors.
European pharmaceutical companies, with the support of EuroCham, wish to continue cooperating with the Vietnamese government in improving regulations quickly and effectively. In particular, we hope to improve the public procurement process transparently and plan according to the roadmap and have a bilateral dialogue so that companies are prepared for changes, if any. EU pharmaceutical enterprises also need to strengthen cooperation with the Vietnamese side through public-private partnership programmes, bringing more tangible benefits to the community.
Vietnam today is the driving force for the pharmaceutical industry to continue to grow. The government needs to continue reforming administrative procedures more strongly. It also needs to adjust and amend legal regulations in the pharmaceutical industry to approach international standards and be consistent with the EVFTA. It should continue to move towards openness and transparency, creating a stable and long-term investment environment, promoting European investment, and meet the increasing healthcare needs of patients.