TPP poses problems for local pharma companies

Tariffs on pharmaceuticals imported into Vietnam will be cutfrom 2.5 per cent to 0 per cent when the TPP comes into effect, puttingdomestic enterprises under intense competitive pressure.

TPP poses problems for local pharma companies

Vietnamese people generally have a preference for foreignpharmaceuticals, according to Mr. Le Van Truyen, former Deputy Minister ofHealth. The arrival of major global pharmaceutical companies in Vietnam willcreate problems for local enterprises, with some likely to be forced out of themarket.

Market research released recently by Business MonitorInternational shows that Vietnam ranks 13th among 175 countries with thehighest growth in medicine spending; evidence of the sector’s potential.Foreign pharmaceutical enterprises dominate the market, accounting for 60-70per cent.

Pharmaceuticals produced by local enterprises used incentral hospitals account for about 12 per cent in value terms and around 40per cent nationwide, Mr. Truyen said.

According to the United Nations Industrial DevelopmentOrganization (UNIDO), Vietnam’s pharmaceutical industry is around Level 3 inits five-level rating scale for development.

Local pharmaceuticals account for only 0.11 per cent of thetotal revenue in the industry. There are 121 domestic pharmaceutical productionplants, 61 local companies producing herbal medicines, and 130 local facilitiesregistered as household businesses producing herbal medicines. Almost all aresmall-scale in terms of both financial resources and human resources.

Pharmaceutical procurement will be publicly organized whenthe TPP begins, according to Mr. Nguyen Thanh Binh, General Director of theHanoi CPC1 Pharmaceutical JSC (CPC1 Hanoi). Foreign pharmaceutical enterprises,therefore, will have equal status at auctions. “Local enterprises will lose outas the country’s pharmaceutical industry is weak and heavily dependent uponimported raw materials,” Mr. Binh said.

The TPP will also boost growth in Vietnam’s pharmaceuticalsector by some 20 per cent per year from now to 2017, with pharmaceuticalspending per capita of about $200 per year, Mr. Binh added.

It will also extend copyright protection for drugs (fromfive to ten years) and after that restrict local businesses from accessing andproducing new medicines. This will present a major challenge for localenterprises as most of their existing products are generic drugs.

The major challenge for local enterprises is that Vietnamesepeople prefer imported pharmaceuticals, according to Ms. Tran An Khanh, DeputyHead of the Business Department of Central Pharmaceutical Company No. 1 (CPC1).In addition, per capita incomes are likely to increase, creating a greatershift towards foreign pharmaceuticals.

Its heavy dependence on imported raw materials is also amajor issue for the domestic industry. Imports of raw materials in the firstseven months of this year reached $199.4 million, primarily from China, whichaccounted for 56.6 per cent. 

“This is a big challenge for local enterprises,which have not paid sufficient regard to investing in advanced technologies anddepend heavily on imports,” Mr. Binh said. 

“If Vietnam does not adopt specialmeasures, foreign pharmaceutical companies will gain an even larger marketshare.”

The risk of losing market share is exacerbated by the factthey do not work together.

To seize the opportunities brought by the TPP domesticpharmaceutical enterprises need to upgrade their manufacturing plants to reachinternational standards such as PIC/S-GMP and EU-GMP.

The DHG Pharmaceutical JSC has completed the construction ofa new pharmaceutical manufacturing plant, and Imexpharm has also built a newpenicillin factory in southern Binh Duong province. Hanoi Pharma JSC,meanwhile, has invested tens of millions of dollars in a production line forplastic injection tubes and distilled water with Blow-Fill-Seal (BFS)technology.

Although local enterprises see many disadvantages headingtheir way, Mr. Truyen believes they are ready for the upcoming race. 

Most haveplans for feasible production and business and have invested in advancedproduction lines to produce high-quality products, he added. 

This alsocontributes to realizing the target contained in the National Strategy for thePharmaceutical Industry Development to 2020 and Vision to 2030, approved by thegovernment, of local manufacturers accounting for 80 per cent of the market.

VN Economic Times

TPP poses problems for local pharma companies