According to the service commitments form of the WTO, Vietnam did not commit to allow foreign invested enterprises to conduct drug distribution services.
Though having import licenses, multi-national corporations are finding it hard to trade drugs in the Vietnamese market due to the country’s strict regulations.
Zuellig Pharma Vietnam (ZPV) is facing obstacles in renewing license for its preservation storage every three years as required by Decree No.54/2017/ND-CP, according to local media.
Vietnam’s drug imports increased by 8.8% year-on-year to US$3.7 billion last year.
According to Nguyen Thi Quynh Anh, founder and chairwoman of business, legal and intellectual property consulting firm InvestPro, this regulation makes multi-national corporations feel unsafe and causes them time and financial losses as they spend a lot of money on this kind of facility.
The corporations are getting a headache over this issue, Anh said, suggesting that the management agency can have regular inspections into whether foreign drug firms meet the preservation standards. If the corporations fail to meet them, they should have their license revoked.
Meanwhile, Sanofi Vietnam is facing challenge in ensuring drug quality standards due to the regulations on drug distribution restrictions in the decree.
According to Vaibhav Saxena, lawyer at ¬Vietnam International Law Firm, the challenge therefore comes as wholesalers of imported drugs and medicinal ingredients can distribute such items directly to the health facilities and drug-trading establishments without being controlled by the importing entity, which is not entitled to distribute them in Vietnam.
Despite moves to ensure good quality management during ¬distribution, concerns over quality are putting pressures on Sanofi and other multinational corporations who are seeking a license to import pharmaceuticals into Vietnam ¬directly.
Meeting WTO commitments
Though distribution restriction rules in Decree 54 have been a controversial issue and caused concerns among foreign firms such as ZPV, DKSH and Sanofi, the Ministry of Health (MoH) still keeps them unchanged as they are in line with the country’s WTO commitments.
The rules are related to the roadmap and regulations pertaining to Vietnam’s commitments to the World Trade Organization (WTO) on goods trading and foreign invested enterprises’ directly related activities in Vietnam.
The right to distribute pharmaceutical products is one of the rights not granted for foreign invested enterprises in Vietnam. Therefore, in order to distribute the drugs, foreign companies are required to work with local wholesalers that distribute drugs or medicinal ingredients in the local market.
Nguyen Thu Trang, director of the WTO Centre and Economic Integration under the Vietnam Chamber of Commerce and Industry, said that according to the service commitments form of the WTO, Vietnam did not commit to allow foreign invested enterprises to conduct drug distribution services.
In Vietnam’s WTO commitments, distribution services include transportation and storage, Trang said, explaining therefore, if Vietnam does not allow foreign-invested enterprises to conduct distribution services, Vietnam cannot allow transportation and storage services under distribution services.
The MoH’s Drug Administration of Vietnam (DAV) said in a recent document that some foreign-invested enterprises 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.
DAV took Zuellig Pharma Vietnam as a typical 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.
More foreign drug firms are entering the Vietnamese market to cash in on the country’s growing medicine demands. According to the MoH, drug spending per capita in Vietnam increased by 10.6% year-on-year to about US$53.5 last year.
The MoH’s data also showed that the country’s drug imports last year increased by 8.8% year-on-year to US$3.7 billion.
The Vietnamese pharmaceutical industry is forecast to continuously enjoy double-digit growth in the next five years, with the market scale reaching US$7.7 billion in 2021, according to the MoH. Hanoitimes
Although having import licenses in hands, the road for multi-national corporations to trade drugs in Vietnam remains tough because of legal limitations.
Although strong solutions exist, the biggest Vietnamese drugmakers reported poor performance in the first three quarters of 2019, putting their future targets at risk.
According to experts, the boost in attractiveness of the Vietnamese market comes at a time when the business environment for drugmakers in neighboring countries has not been favorable.