VietNamNet Bridge – Though the Vietnamese drug distribution market is competitive with both foreign and domestic companies, the real power is in the hands of authorized importers.

According to the Vietnam Industry and Trade Information Center (VITIC), Vietnam this year imported $963.3 million worth of drugs as of June 2014, an increase of 8.27 percent over the same period last year.

Imports account for over 70 percent of the drug market value, and nearly 100 percent of high-technology drugs available in the market are imports.

According to Business Monitor International, Vietnam ranks 13th out of 175 countries and territories in terms of growth rate of spending on medicine.

The 10 main import markets for Vietnam include India, France, Germany, South Korea, the UK, Italy, Switzerland, the US, Belgium and Thailand, all of which provide $680.1 million worth of drugs to Vietnam.

Only when the police began a probe of VN Pharma, a drug manufacturer and distributor, were the ticklish problems involved in drug imports exposed to the public.

It is difficult to export drugs to Vietnam. However, under Vietnam’s WTO (World Trade Organization) commitments, since January 1, 2009, foreign firms have been allowed to import drugs directly.

Prior to 2009, drugs were sent by foreign manufacturers to Vietnam, then to authorized importers in the country, and then to wholesalers and retailers in Vietnam. Since 2009, the authorized importers have not been necessary.

Under Vietnamese law, foreign enterprises can set up 100-percent foreign-invested drug companies, which can help them cut costs and better control business performance.

However, a lawyer noted that it takes time and complicated procedures to set up subsidiaries in Vietnam, because of the government’s regulation that foreign manufacturers must set up production workshops in Vietnam.

Therefore, only the foreign companies which plan to seek long-term benefits in Vietnam want to set up workshops in the country, she said.

The lawyer went on to say that even if foreign companies set up production in Vietnam, they would still face many limitations, i.e., they would not have all the rights that businesses need to have.

“The regulations often are unclear and they are interpreted differently in specific cases,” he said. “This is a big barrier preventing foreign companies from penetrating the Vietnamese market.”

Many multinational drug groups have set up subsidiaries in Vietnam, but their operations remain limited. The “power of life or death” is believed to be in the hands of authorized import companies.

The foreign companies which have representative offices in Vietnam only carry out marketing activities in Vietnam. In order to export products, manufacturers have to work with multinational distribution companies.

The multinational distribution companies then have to assign the distribution of products to the Vietnamese companies which have the import-export licenses, because only Vietnamese companies have sufficient legal status to sign commercial contracts, issue invoices and collect money.

TBKTSG