Vietnam is one of the most attractive pharmaceutical markets in Southeast Asia. Increasing affluence, a rapidly ageing population and the steady expansion of public health insurance are some of the main factors driving demand for pharmaceuticals. Vietnam’s healthcare sector is forecast to continue to grow, than many other countries.
Vietnam represents a potentially very large health care, pharmaceutical, medical equipment and device market. Identified as one of the national development priorities, the Vietnamese public health care sector has received increasing budget allocations along with incentives for investment.
Vietnam has set an ambitious goal to achieve universal health coverage by 2015, since over 30 per cent of the population is still not covered by any form of health insurance.
The attractiveness of the healthcare sector can be proved by the fact that the spending on healthcare services keeps increasing steadily year after year, despite the big economic difficulties, which have forced people to fasten their belt. Of the $12 billion spent in 2013, 50 percent came from people’s pockets.
Vietnam has one of the world’s top growth rates in pharmaceutical spending. It is estimated that spending for 2013 would exceed US$ 3.3 billion, an increase of 17 per cent from 2012. Vietnamese consumers have additionally demonstrated that they are willing to pay more for the reliability of a foreign brand. According to Business Monitor International, Vietnam ranks 13 of 175 countries for the fastest growing global markets in drug spending.
Vietnam is a large and fast growing population, which is expected to reach 96 million by 2019 from an estimated population around 93 million today making the country the 14th most populous on the planet. Vietnam is the third most populous country in Southeast Asia and remains an important emerging market for multinational drug manufacturers looking to expand in the region.
One of the key factors contributing to this market growth is the increasing life expectancy of people. The pharmaceutical market in Vietnam has also been witnessing the trend of an increase in the number of awareness campaigns. However, poor regulatory standards in healthcare in Vietnam could pose a challenge to the growth of this market.
Though Vietnam has been one of the poorest countries in the world, it has advanced to become classified as a lower-middle income country by the World Bank since 2010.Over the last decade GDP growth averaged eight per cent and is forecast to average six per cent per year for 2014-2017. A member of the WTO since 2007, Vietnam’s import demand is expected to grow by around 250 per cent between 2010 and 2020 – faster than any other emerging power, including China.
The majority of pharmaceuticals are imported making Vietnam dependent on external supplies to meet demand. Although cost remains a key factor, within the government’s current five year health sector development plan there is an emphasis on improving the technology and quality of available drugs and vaccine production.
Vietnam's reliance on imported drugs (both generic and patented) will continue to provide ample commercial opportunities for foreign drug makers. However, the population's concerns over drug quality means that only companies with relatively positive branding are likely to succeed in the Vietnamese pharmaceutical market. In addition, downside risks for foreign generic drug manufacturers include free trade agreements and the government's aim to promote locally produced drugs.
Although most of the medicines and generic drugs are imported in Vietnam, there has been a growing interest in the domestic pharmaceutical sector as well. Local pharmaceutical production accounted for nearly half of Vietnam’s drug needs in 2012. However, those products were almost all low-cost generics. Imports accounted for more than 70 percent of the pharmaceuticals market by value during the same year. The most sophisticated drug products in Vietnam are imports.
In 2012, there were about 170 pharmaceutical companies in Vietnam. Almost ten percent were owned by foreign investors, with another four percent operating under joint venture agreements. The largest drug companies in terms of market share include GlaxoSmithKline, Bristol Myers Squibb and Novartis. Leading Vietnamese companies include Savipharm and Imexpharm.
To boost domestic production of higher-quality drugs, Vietnam has recently encouraged manufacturers to obtain Good Manufacturing Practice (GMP) certification. However, only about one-third of Vietnamese pharmaceutical companies have GMP certification today.
A plan to develop and restructure Vietnam’s pharmaceutical industry is underway, which includes boosting the production of essential drugs in order to cut prices, stabilize the market and reduce the country’s dependence on foreign pharmaceutical imports. Other targets include increasing investment in scientific research & technological application and expanding co-operation with foreign pharmaceutical companies.
According to Vietnam’s Ministry of Health (MoH), the country has 140 private hospitals and close to 900 public hospitals. Of the private hospitals, six have foreign investments totalling close to $95 million.
The Vietnamese government is making its own investments in healthcare infrastructure. In its 2013 budget, the MoH established funding for new facilities in rural and disadvantaged areas. According to the MoH, it has invested $2.5 billion in healthcare infrastructure improvements since 2009.
It is a market with big challenges when it comes to drug production. The biggest obstacle for Vietnam in attracting new drug manufacturing is the cost of raw materials. The country still imports 90 per cent of what it needs for manufacturing. That is one reason only about 30 per cent of the drug companies selling in the country have manufacturing capacity there, according to some reports.
Still the potential is significant when other markets are growing so slowly. At $104 per person annually, per capita drug spending is already twice that of India. That will increase with an expanding economy and health system. By 2020, 80 to 90 per cent of Vietnamese are expected to be covered by the national health system. Still, most of the drugs used in the country are imported.
According to BMI, the size of the Vietnamese healthcare market was estimated at US$9 billion in 2012, of which 60 per cent is private expenditure and 40 per cent government-related. The expected CAGR 2012-2017 is 12 per cent. Overall, the quality of the healthcare services can be regarded as poor, with overcrowded hospitals and limited facilities.
Out of total pharmaceutical sales, ethical drugs make up 23 per cent, generic drugs 51 per cent, and OTC 27 per cent. The generics segment is by far the largest segment and shows the most interesting growth prospects, with a 2012-2017 CAGR of 17 per cent compared to 14 per cent for both ethical and OTC. Most generic drugs are of unproven bioequivalence as there is no such requirement for locally manufactured generic medicines. The generics segment is expected to continue on its growth path given its affordability and the government’s preference.
The medical device market is estimated at approximately US$800 million, with more than 90 per cent imported. The market has an anticipated CAGR of more than 18 per cent from 2012-2017, with an expected market size of US$1.5 billion by 2017. The fastest-growing categories are forecast to be consumables and orthopaedics & prosthetics.
Most equipment is imported as Vietnam does not have an established manufacturer that meets national and international standards. Local production accounts for less than five per cent of the market. As the demand for healthcare increases, along with demand for a broader range of sophisticated and specialist treatment, the need for quality medical devices will increase.
The future outlook of Vietnam pharmaceutical industry is quite optimistic as companies in the country are investing huge amounts of money in healthcare. With the increase in population, hospital and health system development becomes a necessity. Being a fast-growing economy, Vietnam provides a tremendous opportunity for foreign healthcare firms to consolidate and establish a high quality patient-centric tertiary hospital network and develop healthcare as an area of interest for foreign investors.