VOV.VN - The Vietnamese Government's continued support of the local pharmaceutical industry will remain steadfast, according to a report released by Fitch Solutions, a macro research unit of Fitch Group.
This comes after the UK-based financial information group said in a report released last week that this is in part driven by efforts by the authorities to meet domestic healthcare needs. In addition, the economic potential of the pharmaceutical sector will serve to incentivise continued Government support for the domestic industry.
Despite the Government aiming to increase the share of locally produced pharmaceuticals to 80%, an average of 55% of medicines in the nation are imported each year.
One of the major factors in the country’s reliance on imports is that most domestic companies lack research and development capabilities, and therefore do not meet the European Union Good Manufacturing Practice (EU-GMP) or Pharmaceutical Inspection Co-operation Scheme Good Manufacturing Practice (PIC/S-GMP) standards that are required to manufacture high-quality generic drugs. As such, the nation imports more than 90% of drug inputs, half of which come from China.
According to the report published by Fitch, partnerships with local firms are an integral part of the industry. Due to Government initiatives, local pharmaceutical firms will therefore play an increasingly dominant role in the domestic sector.
“This accentuates the need for multinational pharmaceutical companies to partner with local drug makers to adapt to this trend. Finding a local company to start such a joint venture is an important first step to enter the market in Vietnam,” Fitch said.
Furthermore, foreign companies often work alongside domestic companies, such as Diethelm Vietnam, Zuellig Pharma Vietnam, and Mega Lifesciences, in an effort to fill in various needs in the supply chain.
In line with this, Fitch believe a shift from pharmaceutical production to a more research-based industry to be a likely development moving forward. The boost in attractiveness of the Vietnamese market comes simultaneously as the business environment for drug makers in neighbouring countries appears to be unfavourable. This can be seen as in December, 2018, Indonesia enacted a regulation regarding the compulsory licensing of every medical product that is not made locally.
“This is expected to have significant negative consequences for foreign direct investment in the country, with Vietnam being the one of the beneficiaries of pharmaceutical companies shying away from Indonesia. This, combined with the geopolitical position of Vietnam, places the country in a favourable position to become a regional pharmaceutical research and export hub,” the report by Fitch outlines.
In July, 2019, Pharma Group, the Pharmaceutical Sector Committee of the European Chamber of Commerce in Vietnam, highlighted that the country has the ability to reach a higher position in relation to the value chain of the science and life sector in comparison with other ASEAN countries. Despite this, it was noted that further deliberation is required before positive steps taken by the nation can eventually materialise.
Although there is plenty of potential for further development, Fitch note that the Vietnamese pharmaceutical industry is also facing challenges in terms of foreign investment.
“We note that despite our positive outlook on the pharmaceutical market, significant risks remain. There are a number of shortcomings, including underdeveloped infrastructure, lack of staff and finance, and low healthcare access among people in rural and remote areas. Access to medicines will remain a key challenge for pharmaceutical companies seeking to capture the commercial prospects in Vietnam as the population is highly ruralised. Patients will continue to face challenges over medical access and rising out-of-pocket healthcare costs,” Fitch states.
Moreover, there exists large regional variations with regards to the number of healthcare facilities, doctors, and beds when comparing rural and urban regions nationwide, which therefore further exacerbates these access issues.