United States: Pharmaceutical Sector In Vietnam – Outlook On The European Union Vietnam Free Trade Agreement (EVFTA)

Vietnam has made great progress in the quality of the pharmaceutical and medical sector. By dedicating 5 – 6 % of Gross Domestic Product to healthcare expenses, Vietnam is among countries with the best outcomes in ASEAN. The adoption of Resolution 19/NQ-CP/2015 on national competitiveness, Resolution 35/NQ-CP/2016 on supporting the development of enterprises and the new Pharmaceutical Law dated June 4, 2016 effective from January 1st 2017, improves the healthcare industry in terms of improved access to medical care. Agreements such as the EU-Vietnam Free Trade Agreement (EVFTA), the ASEAN Economic Community (AEC) or the Trans-Pacific Partnership (TPP) to which Vietnam is a member, will further enhance positive progress in the sector. Besides, guiding documents to implement the Pharmaceutical Law will be completed in the following months to resolve remaining issues in both local and foreign industries.

Ensuring a fast and sustainable access to innovative medicine

The expectations arising from the new legislation concern the sustainable access for Vietnamese patients to innovative medical products and the Government procurement ensuring high-quality medicines. The establishment of Foreign Invested Enterprises (FIEs) in Vietnam must be supported in order to guide the local industry into being a core pharmaceutical industry in ASEAN.

The new pharmaceutical law favors the establishment of FIEs in the pharmaceutical sector since it is necessary for accessing the most innovative drugs and techniques. Nevertheless, some grey areas remain as to ensure same access to the pharma market for foreign companies and local ones. Indeed, representative offices, the most common form of presence for pharmaceutical companies, are not given the same rights as other entities.

Depriving representative offices of their rights to contract, to import pharmaceutical drugs and vaccines and to sell them domestically, and even to conduct any profit-generating activities in Vietnam, inevitably impedes financial investment, development of local facilities and technology transfer. In order to greatly increase the number of FIES, clear and practical guidelines should be implemented.

Facilitating administrative procedures

The Vietnamese Government also exempted Local Clinical Trial requirements for some pharmaceutical products such as drugs or medical equipment. Local Clinical Trials required a 2.5 to 5 year-time to obtain a market authorization and their suppression in part is a great step to a faster access to innovative medicines. However, the text is unclear as to whether biologics and vaccines are entitled with this exemption especially when such an exemption would be contradictory to the EVFTA. Vietnam should respect what it has committed in international agreements to promote investors' trust and companies' establishment.

Another obstacle for Pharma companies' establishment deals with license and visas registration taking place every five years; a heavy procedure when the renewal process can take from 18 to 24 months and must be started only 12 months prior to the expiry of the existing visa.

Circular 09/2016/TT-BYT issued by the Ministry of Health on May 5 2016 and effective from July 1 2016, establishes lists of drugs which must be procured through tender process. If clearly implemented and added to exclusion of the ban on foreign products in Government Procurement for originator medicines, this would help reach the goal of a universal access to medical care and quality medicines for all Vietnamese patients.

Solving Intellectual Property rights issues

The counterfeit medicine is a grave issue that needs to be embraced urgently. Vietnamese legislation is insufficient in terms of regulations on intellectual property and data protection rights. International standards have set up many mechanisms to preserve a safer environment for investment such as adoption of patent protection, an enforcement system or Regulatory Data Protection (RDP). Therefore, Vietnam should set up a mechanism of automatic granting of RDP as well as real raise fines and sanctions in case of infringements.

In Vietnam, rights holders (intellectual property, data protection) bear the burden of proof when claiming an infringement. Besides when submitting an application for patent protection, secrecy is not automatically ensured and must be explicitly added in the drug registration form. The Drug Administration of Vietnam receives the applications and is often quite reluctant to grant data protection for FIEs. Those issues constitute a drag for investment in the pharmaceutical Research and Development sector for both foreign and domestic investors.

Encouraging Health insurance development

Development of health insurance is quite new and launched thanks to Government's initiatives. This explains the importance of public funds in the development of the healthcare sector and yet they represent a decreasing part in the funds. Indeed, private funds are taking the lead in investment in health sector as they are expanding along with the market. The agreements signed by the Vietnamese Government will attract more foreign private investors and accentuate private funds dominating facet over the industry.

Nevertheless health insurance system in Vietnam mostly relies on contribution of the people and, since a part of the population entrusts natural and traditional medicine over western medicine, this goes against a universal health cover for all Vietnamese people.

Outlook on the EVFTA

The EVFTA signed on December 5, 2015 and expected to entry into force by January 2018, is establishing new requirements and opportunities for both the European and Vietnamese market. It includes a specific part on the import and export of pharmaceutical products. For instance Article 14.2 Chapter 2 of the agreement requires Vietnam to create and implement legal instruments to allow FIEs' establishment in Vietnam. In addition, this Article also requires Vietnam to allow FIEs to sell pharmaceuticals legally imported by them directly or through distributors or wholesalers who are not required to have a Good Storage Practice (GSP) certificate or directly.

If the Vietnamese legislation is responsible for certification requirements and process, the EVFTA creates a real influence as it encourages establishment of FIEs and their extended scope of activities. Therefore we can expect that Vietnamese Regulations will be adjusted to meet with EVFTA requirements thus creating a more liberalized pharmaceutical market in a foreseeable future.

Most important issues

  • Restrictions on the rights of representative offices together with the complex registration process are likely to restrain the inflow of pharmaceutical FIEs.
  • Regulations on Intellectual Property Rights protecting applicants and their patents would encourage the Research and Development sector and accelerate the creation of innovative pharmaceutical products in Vietnam. Besides, the question of counterfeit medicine must be solved urgently.
  • Development of health insurance is limited by its financing system and by the mistrust some people put in the western medicine. Implementing reimbursement of some medicines and medical acts would help encourage it.

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This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer

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