Opportunities of Vietnam Pharmaceutical Industry

Development situation of Vietnam Pharmaceutical market

In general, pharmaceutical manufacturing in Q1/2020 prospered over the same period last year. In particular, the group with the strongest increase over the same period in 2019 is “Other unallocated pharmaceutical products” reaching 4.7 million kg, up 81.17% over the same period in 2019; followed by “Other Pharmaceutical group containing vitamins and vitamin products and pre-vitamins” with the output of 227.14 thousand kg, an increase of 68.35% compared to Q1/2019; Pharmaceutical production service also increased by 3.02% over the same period, reaching 696,577 million VND. There is only the “Pharmaceutical group containing hormones but without the tablet antibiotic” had the output reduced to 15,068 million tablets, decreased 99.06% compared to Q1/2019.

 

Domestic pharmaceutical production value, 2013 – 2019e

Net revenue and profit before tax of the industry group also increased significantly in the period of 2010 – 2017, but decreased both targets over the same period, respectively 0.9% and 27.2%. In 2019, the domestic pharmaceutical increasing profit reached about US $ 3.4 billion, an increase of 16.1% over the previous year. In general, domestic pharmaceutical production has continuously increased over the years with CAGR in the period of 2013-2019e reaching 14.11%.

 The market value of the pharmaceutical industry, 2013 – 2019e

Since 2015, the value of the pharmaceutical industry continues growing, and in 2019 it reaches 6.6 billion USD, of which mainly comes from imported drugs. According to statistics from the General Department of Customs, by the end of December 31, 2019, Vietnam imported from US $ 3.07 billion of pharmaceutical products, which did not include nearly US $ 389.68 million of pharmaceutical raw materials.

 

The difficulties faced by the pharmaceutical industry

Production technology is underdeveloped

Although the scale of the pharmaceutical market has reached nearly 6 billion USD (2018), Vietnam still does not have a National Pharmaceutical Research Institute to be able to research high-value products and not yet develop pharmaceutical technology while it usually takes 10-20 years for developed countries to transfer technology to third countries for production. In fact, most of the facilities and equipment of medicine manufacturers as well as research facilities to deploy production are still lacking and asynchronous, so applying advanced technology to production faces many obstacles.

Currently, 50% of machinery and equipment for pharmaceutical production are imported. The companies mainly import them from developed countries (Europe, America, Japan), with the price about 40-60% higher than locally assembled machines. As for devices from countries with lower technical standards such as India, South Korea, Taiwan, the price is only 25-35% higher than domestic machines, but the brand and quality are also relatively good. Hence, domestic companies still have to import equipment from these average technical standard countries because domestic supplies have either not been manufactured or in shortage.

Depends on imported materials

Vietnam only supplies 25% of the materials itself to serve the domestic pharmaceutical production. The remaining 75% depends on imported sources. In particular, China and India are the two largest export pharmaceutical markets of Vietnam in many years. Vietnam used to be an exporter of  herbal medicines in the 1960s and 1970s, but up to now, it is completely dependent on China because Chinese medicines are easy to approach and have a much cheaper price than domestic substances.

The quality of imported raw pharmaceutical materials is difficult to manage, often facing risks such as failing to reach moisture requirements and active ingredient content. The group of fake herbal medicines commonly used is same-shaped with the real ones or the fakes are mixed with authentic medicines and named after the real ones. Besides, the dependence entirely on the supply of abroad pharmaceutical materials has made enterprises lose control of their production activities, lack of competitiveness and manufacture unsatisfactory medicine.

Post-influence of COVID-19

In early 2020, the COVID-19 pandemic took place affecting many economic sectors of Vietnam, including the pharmaceutical industry. COVID-19 is considered to disrupt the supply of raw materials of domestic pharmaceutical enterprises.

Source of pharmaceutical materials imported from China and India, which accounts for more than 80% of the total value of imported raw materials, is currently in short-term shortage. The wide spread of disease in some provinces with specialized pharmaceutical manufacturing facilities in China such as Hubei, Jiangsu and Shandong, causing many businesses to temporarily shut down. Meanwhile, the Government of India has implemented emergency measures to restrict the export of 13 active ingredients of the analgesic – antipyretic and vitamin group due to failure to import materials from China in Q1/2020. The progress of cooperation between Vietnamese pharmaceutical enterprises and foreign partners was delayed due to the restricted movement of experts and partners between countries caused by the COVID-19 pandemic. This hinders the progress of cooperation activities such as the evaluation of good manufacturing standards (GMP) and the approval of the technology transfer from partners in Europe and South Korea.

 

Oriented development

The pharmaceutical industry has a common goal of providing adequate, timely, quality and reasonably priced medicines corresponding to each stage of socio-economic development and ensuring safe use of drugs. Pay attention to provide medicine to social policy beneficiaries, ethnic minorities, the poor, remote and isolated areas. Specifically by 2020: producing 20% raw materials demand for domestic drug production, domestically produced drugs account for 80% of the total medicine values consumed in the year, of which herbal medicines account for 30%, domestically produced vaccines meet 100% of the need for expanded immunization and 30% of the demand for service immunization. 100% of drug business premises of drug distribution system meet the standard, 50% of testing establishments and 100% of establishments of testing vaccines and medical biologicals meet good practice standards (GPs).

 

Research and Development of special products

In addition, the trend of increasing R&D costs in order to move to a special product segment is a new and great step forward of Vietnam’s pharmaceutical industry.

 

M&A trend

M&A of pharmaceutical manufacturing group, 2016 – 2019

The M&A trend between domestic pharmaceutical enterprises and foreign enterprises took place strongly in both manufacturing and distribution. The implementation of M&A helps Vietnamese businesses not only in possessing capital, technology and high-quality human resources towards higher standard product lines (such as EU-GMP, PIC/S …), but also improving management skills, expanding market share, looking for opportunities in new areas, developing distribution networks, etc.

 


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