The Vietnamese Government is aiming to attract overseas investment to encourage domestic drug development, manufacturing, and commercialisation through the latest amendment of its 2016 Law on Pharmacy. This will lift part of the restrictions on foreign-invested enterprises (FIEs), increasing their involvement in Vietnam. The amendment to the Law on Pharmacy is outlined in the Law Number 44/2024/QH15 (dated November 21, 2024) and will take effect on 1 July 2025.
Following the amendment to the law, FIEs will have more business opportunities to directly engage in the pharma business in Vietnam. The amendment to Article 53 of the Law on Pharmacy explains the rights of FIEs to conduct business in Vietnam. These include the right to:
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- Repurchase drugs and active pharmaceutical ingredients (APIs) manufactured via technology transfer in Vietnam back to the same FIE
- Import API supply for drug manufacturing conducted by local manufacturers that have technology transfer agreements with the same FIE
- Distribute drugs and APIs that are imported, outsourced, or licensed-out by the same FIE to wholesalers
- Import and distribute drugs for humanitarian or disease prevention/control programs
- Deliver imported drugs or APIs used for clinical trials sponsored by the same FIE from the warehouse to the companies that will conduct the clinical trials under technology transfer agreements
Under the revised Law on Pharmacy, drug developers will be able to import a drug without marketing authorisation and their imported licence if the product is used only in government-approved clinical trials.
Vietnam is well known for its protectionism in the pharma industry. Although Vietnam extended import rights for foreign drug manufacturers to import their products into the country since 2009, as part of Vietnam’s commitments to the World Trade Organization (WTO), foreign investors still needed to set up local wholly foreign-owned enterprises (WFOEs) or representative offices and had a complex set of arrangements between their local business units and parent companies to import pharmaceutical products. In 2019, the Ministry of Health (MoH) agreed for the first time to grant an overseas drug manufacturer an import licence right to directly introduce their products into the country. This change from the MoH to allow overseas manufacturers to expand their business in 2019 was triggered by the European Union-Vietnam Free Trade Agreement (EVFTA). However, restrictions remained for FIEs conducting a drug distribution business in Vietnam. Overseas manufacturers are still required to only sell their products to local wholesalers or manufacturers.
The latest amendment to the Law on Pharmacy clarifies the rights of a FIE to conduct its business in Vietnam. It is expected to strengthen the role of overseas investors in the drug supply chain and to encourage technology transfer and other types of drug development collaborations among foreign and local manufacturers. Additionally, with the streamlining of logistics regulations, the efficiency of the drug distribution chain is also likely to be improved.
However, the Vietnamese Government also showed its ambition to boost drug development led by local firms, setting the medical industry as one of Vietnam’s pioneer industries. Several domestic drug development initiatives are planned to be introduced alongside the implementation of the new Law. For example, manufacturers with over VND300bn ($11.75m) in investment capital that invest more than VND100bn ($3.92m) within three years in drug R&D activities will be eligible for government funding or other types of support. Large domestic drug developers such as Imexpharm have shared their goal to develop new treatments with affordable prices to replace imported products. To achieve this, Vietnam will need to advance both its research and manufacturing facilities. At the end of October 2024, the Drug Administration of Vietnam (DAV) reported that only a few drug manufacturing facilities with local Good Manufacturing Practice (GMP) certification also met the EU or Japanese GMP standards.
Furthermore, the amendment to the Law on Pharmacy covers reforms from several other perspectives, including simplified drug registration to accelerate the drug approval process and the management of maximum wholesale prices. The country already reformed its national health insurance reimbursement regulations in 2024 and has plans to update its reimbursement drug list in 2025 to satisfy local medical needs. Although uncertainty remains about the country’s drug reimbursement procedures, the 2024 reforms formalised the system to some degree, improving the predictability of the market.
Despite its strict business environment for overseas investors, Vietnam remains an attractive market for the pharma industry. GlobalData estimates that Vietnam is the most rapidly growing market in the Association of Southeast Asian Nations (ASEAN) member states, in terms of pharma market sales. This growth is likely to be driven by improving macro-economic performance and increasing medical needs with a high national health insurance covered population. The government hopes to achieve sales of $20bn in the domestic pharma market in 2045, compared to market sales of $8bn in 2023.
This article is produced as part of GlobalData’s Price Intelligence (POLI) service, the world’s leading resource for global pharmaceutical pricing, HTA and market access intelligence integrated with the broader epidemiology, disease, clinical trials and manufacturing expertise of GlobalData’s Pharmaceutical Intelligence Center. Our unparalleled team of in-house experts monitor P&R policy developments, outcomes and data analytics around the world every day to give our clients the edge by providing critical early warning signals and insights. For a demo or further information, please contact us here.
