Vietnam’s pharmaceutical market has been experiencing rapid growth, attracting significant attention from foreign investors. However, navigating the complex regulatory landscape can be challenging. This comprehensive guide aims to shed light on the key aspects of foreign pharmaceutical investment regulations in Vietnam, providing valuable insights for companies looking to enter this promising market.
1. Introduction
Vietnam’s pharmaceutical industry has been growing at a remarkable pace, with its market size surpassing $7.7 billion by the end of 2023 and an anticipated annual growth rate of 8% between 2021 and 2026. This robust expansion is fueled by increasing healthcare spending, a rising population, and heightened awareness of health and wellness among consumers.
Foreign investments have significantly contributed to the sector’s development, introducing cutting-edge technologies, specialized expertise, and financial resources. However, for potential investors, navigating Vietnam’s intricate regulatory framework is essential to establish and sustain successful operations in this dynamic market. « Pharmaceutical imports surge in first nine months » here
2. Current State of Vietnam’s Pharmaceutical Industry
The Vietnamese pharmaceutical market presents a dynamic landscape marked by the interplay of domestic and international players. While local companies dominate the market in terms of production volume, foreign firms take the lead in value due to their emphasis on premium, innovative products. As of 2024, the market is divided, with domestic companies accounting for approximately 40-45% of the share, while foreign enterprises hold a larger portion, estimated at 55-60%, as reported by leading statistical research organizations according to reports and studies lead by statistics firm.
Key Drivers of Growth in the Vietnamese Pharmaceutical Market:
- Increasing Healthcare Expenditure:
Vietnam’s healthcare spending is projected to rise significantly, reaching 6.6% of its GDP by 2025. This trend reflects growing government prioritization of public health and private sector investment. - Rising Middle-Class Population:
The expanding middle class in Vietnam brings higher disposable incomes, resulting in increased spending on healthcare and premium pharmaceutical products. - Aging Population and Prevalence of Chronic Diseases:
With a steadily aging population and a rise in chronic diseases such as diabetes and cardiovascular conditions, the demand for long-term care and medication is on the rise. - Government Initiatives in Healthcare Infrastructure:
Strategic government programs aim to enhance healthcare facilities, strengthen regulatory frameworks, and foster partnerships between domestic and international pharmaceutical firms, further driving the industry’s growth.
3. Key Regulations for Foreign Pharmaceutical Investment
3.1 Foreign Ownership Limits
As of 2021, Vietnam allows 100% foreign ownership in pharmaceutical companies. Indeed, Appendix I of Decree 31/2021/ND-CP guiding the investment law and Vietnam’s WTO commitments Article 5 of the Investment Law 2020 allows foreigners to invest in sectors that are not prohibited by the government, the pharmaceutical sector is not part of it, and does not in any way limit the amount of shares held by the foreign investor.
However, certain activities, such as drug distribution, may still have restrictions or require additional licenses.
3.2 Licensing Requirements
Foreign pharmaceutical companies must obtain several licenses to operate in Vietnam:
- Investment Registration Certificate (IRC)
- Enterprise Registration Certificate (ERC)
- Certificate of Satisfaction of Conditions for Pharmaceutical Business (The conditions to obtain the certificate are prescribed in Article 33 and its exceptions at Article 35 of the Law on Pharmacy 2016)
- Good Manufacturing Practice (GMP) certificate for manufacturing facilities (Article 54.5 Law on Pharmaceutical Decree 54/2017/ND-CP and GMP-WHO’s guidelines)
3.3 Drug Registration and Approval Process
All pharmaceutical products must be registered with the Drug Administration of Vietnam (DAV) before they can be marketed. The registration process provided at the Article 56 of the Law on Pharmacy 2016, typically involves:
- Submission of a dossier including clinical trial data, manufacturing information, and quality control procedures
- Review by the DAV (usually takes 12-18 months)
- Issuance of marketing authorization upon approval
4. Investment Incentives and Opportunities
Vietnam offers several incentives to attract foreign pharmaceutical investment:
- Corporate Income Tax (CIT) exemptions or reductions for up to 15 years for high-tech projects (Article 15.1.a and 15.2.b of Law on Investment 2020)
- Import duty exemptions on equipment and materials for R&D activities (Article 15.1.b and 15.2.a of Law on Investment 2020)
- Land rent exemptions or reductions for pharmaceutical manufacturing projects (Article 15.1.c of Law on Investment)
High-tech zones and industrial parks dedicated to pharmaceutical production offer additional benefits such as streamlined administrative procedures and improved infrastructure.
5. Challenges and Considerations
5.1 Strengthening Intellectual Property Safeguards
While Vietnam has enhanced its legal framework for intellectual property (IP) protection, challenges persist in enforcement. Investors should adopt robust strategies to secure their intellectual property (IP). This includes promptly registering patents, trademarks, and copyrights, and partnering with local legal experts to effectively address potential violations.
5.2 Encouragement of Local Pharmaceutical Manufacturing
Vietnam actively promotes domestic production within the pharmaceutical sector. Companies establishing manufacturing operations locally may benefit from favorable policies, including prioritization in public procurement and a streamlined drug registration process. This approach aligns with the government’s goal to reduce reliance on imports and boost domestic capacity.
5.3 Navigating Price Controls and Healthcare Cost Regulations
The Vietnamese government regulates the pricing of essential medicines and employs various cost-control measures within the public healthcare system. For pharmaceutical companies, understanding these regulations is critical to developing viable pricing strategies and ensuring access to government-sponsored reimbursement schemes. Businesses should stay updated on policy changes to maintain market competitiveness.
6. Future Outlook and Regulatory Changes
The Vietnamese government is actively enhancing the regulatory framework to attract and support pharmaceutical investments. Key anticipated reforms include:
- Simplifying the Drug Registration Process: Efforts are being made to reduce procedural complexity and shorten approval timelines for pharmaceuticals.
- Promoting Research and Development (R&D): Greater incentives and support are expected to encourage innovation in drug development and medical technology.
- Strengthening Intellectual Property (IP) Protections: New measures aim to align IP regulations with global standards and improve enforcement mechanisms to safeguard pharmaceutical innovations.
- Aligning with International Standards: Vietnam is working towards greater regulatory harmonization with global benchmarks to facilitate international partnerships and trade in the pharmaceutical sector.
7. Conclusion
Vietnam’s pharmaceutical market presents significant opportunities for foreign investors, driven by favorable demographics, increasing healthcare expenditure, and supportive government policies. While regulatory challenges exist, companies that navigate these complexities effectively can position themselves for long-term success in this dynamic market.
As the regulatory landscape continues to evolve, it’s crucial for potential investors to stay informed about the latest developments and seek expert guidance when necessary. With careful planning and a thorough understanding of the regulatory environment, foreign pharmaceutical companies can tap into the immense potential of Vietnam’s growing healthcare sector.
For specific investment inquiries and up-to-date information on Vietnam’s pharmaceutical regulations, it is advisable to consult with local legal experts and regulatory authorities. Stay informed about the latest policy changes to ensure compliance and maximize your investment potential in Vietnam’s promising pharmaceutical market.
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