Zuellig Pharma on MoH’s drug radar

Zuellig Pharma on MoH’s drug radar

In a newly-released document, the Drug Administration of Vietnam (DAV) under the Ministry of Health (MoH) raised concerns about the ‘disguised’ distribution of drugs of some foreign-invested enterprises (FIEs) in Vietnam.

“Some FIEs investing in storage facilities and drug preserving services in Vietnam took advantage of the warehousing and logistics systems to distribute pharmaceuticals and benefit from it. Zuellig Pharma Vietnam (ZPV) is a prime example. The firm registered to do business in drug preserving services, but now holds a major market share in the distribution of imported drugs in Vietnam,” DAV stated.

DAV took Document No.81939/CT-Ttr1, issued in December 2017 by the Hanoi Taxation Department (HTD), as evidence. According to invoices and receipts made public in the document, ZPV spent VND96 billion ($4.26 million) in 2013 and VND105.5 billion ($4.79 million) in 2014 on paying drug introducers and financing the introduction of drugs.

The HTD is currently examining whether ZPV’s expenditures were reasonable. As per its argument, drug preserving is ZPV’s core business, while hiring drug introducers to introduce its pharmaceuticals is obvious marketing activity to promote drug consumption and sales in Vietnam, which in no way serves its preserving services business.

Out of the three FIEs licensed to provide drug preserving services in Vietnam before governmental Decree No.54/ 2017/ND-CP guiding the Pharmacy Law 2016 takes effect, two have already informed the local authorities that they stopped their drug preserving services and have submitted a proposal to be granted a certificate of eligibility for the pharmaceutical business and/or a certificate for drug imports for their storage facilities, in line with Decree 54.

The third licensed FIE, ZPV, was requested in Point C, Article 2 of Investment Certificate No.08/GPDDC3-KCN-HN licensed on February 6, 2002 by the Hanoi Management Board of Industrial Parks and Export Processing Zones, as well as in Document No.110/CV-BQL-DT dated on July 12, 2001 and published by the same board, to begin drug manufacturing after three years of conducting marketing activities as regulated in the investment certificate and the prime minister’s directions in Document No.2080/VPCP-HTQT, dated on May 15, 2001. ZPV has so far failed to do so.

DAV proposed the prime minister to direct the Ministry of Planning and Investment (MPI) to consider sanctions on the investor for not obeying the investment certificate and ask the Ministry of Finance to investigate and deal with the firm’s activities and expenditures on prescribers and drug introductions, as proposed by HTD.

At a March conference held by the American Chamber of Commerce in Vietnam (AmCham) and the Vietnam Association of Foreign-Invested Enterprises, Nguyen Huy Quang, head of MoH’s Legal Department, stated that FIEs that have clandestine activities to distribute drugs in Vietnam will be strictly punished.

“MoH is working with relevant ministries, including MPI, the Ministry of Industry and Trade, and the Ministry of Justice on how to deal with these violations,” he said.

According to the current rules, representative offices (ROs) of FIEs are not allowed to organise or recruit drug introducers. As regulated in Clause 2, Article 118 of the 2005 Commercial Law, representatives of traders shall not have the right to directly perform goods displays and introduce the services of traders that they represent.

What is more, Clause 6, Article 76 of the Pharmacy Law 2016 states that drug trading establishments shall introduce drugs to medical examination and treatment practitioners according to the current regulations. Under Clause 2, Article 32 of that law, pharmaceutical trading establishments shall not include ROs of foreign companies operating in the pharmaceutical industry in Vietnam.

In compatibility with international commitments and to prevent FIEs from engaging in drug distribution by using clandestine activities under the guise of preserving services and storage facilities, Decree 54 does not allow FIEs to provide preserving and transportation services, except to use said services for drugs manufactured by them or imported by them.