Vietnam’s Pharmaceutical Market Set for Healthy Growth
HANOI – The next six years look to be very interesting for the pharmaceutical industry in Vietnam. Recent economic forecasts have predicted a US$5 billion increase in value over the next six years, reaching a net worth of US$8 billion by 2020 – a compound annual growth rate (CAGR) of 15.4 percent.
Driving this market growth is the Vietnamese government’s goal of achieving universal health coverage by 2015. Thirty percent of the country’s population still have no form of public health insurance. Additionally, private health expenditures remain high at 57 percent of the country’s total health spending.
Another key factor spurring growth in this market is the increasing life expectancy of people in Vietnam.
However, poor regulatory standards in healthcare could pose a challenge to the growth of this market. For example, it takes 180 days to submit an application to register a new drug to the Drug Administration of Vietnam. Although this process is much quicker than in the U.S. and UK, it is in line with other countries in Southeast Asia.
About 171 pharmaceutical companies operate in Vietnam. Nine percent are foreign invested enterprises (FIEs) and four percent are joint ventures (JVs). Around 28 percent of these companies have the Global Manufacturing Practice (GMP) certification – this states the minimum requirements that a pharmaceutical manufacturer must meet in order to prove that their products are of high quality and do not pose any risk to consumers.
Statistics from Vietnam’s Health Ministry show that the value of the country’s total medicine consumption was more than US$2.43 billion in 2011, of which only US$1.14 billion came from domestic medicine. The average drug expense per capita was US$27.6 in 2011; this is projected to rise to US$40.8 by 2016.
Currently, the country is affected by the scarcity of low-priced generic drugs. This is caused in part by the belief of many Vietnamese doctors that patent-protected branded drugs are more effective. As a result, foreign pharmaceutical companies dominate the market and maintain a revenue premium.
To encourage more foreign investment in the healthcare sector, the government has granted investors a low corporate income tax rate of 10 percent for the life of the project. Additionally, investors will receive a tax exemption for four years and a lower land leasing fee for at least seven years.
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