Q2 2010 www.businessmonitor.com VietNam pharmaceuticals & Healthcare Report INCLUDES 10-YEAR FORECASTS TO 2019 ISSN 1748-2305 Published by Business Monitor International Ltd. VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT Q2 2010 INCLUDING 5-YEAR AND 10-YEAR INDUSTRY FORECASTS BY BMI Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Publication date: February 2010 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2010 Business Monitor International. All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Pharmaceuticals & Healthcare Report Q2 2010 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 CONTENTS Executive Summary .5 SWOT Analysis .6 Vietnam Pharmaceutical And Healthcare Industry SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT . Vietnam – Business Environment Ratings 10 Table: Asia Pacific Pharmaceutical Business Environment Ratings For Q210 . 10 Limits Of Potential Returns 10 Risks To Realisation Of Returns 11 Market Summary 12 Regulatory Regime .14 Pharmaceutical Advertising . 14 Intellectual Property Environment . 15 IP Shortcomings . 15 Counterfeit Drugs 17 Other Regulatory Issues . 17 Pricing And Reimbursement Regime 18 Industry Trends And Developments 22 Epidemiology . 22 Healthcare Financing 26 Healthcare Insurance 27 Healthcare And Pharmaceutical Reforms 28 Foreign Partnerships . 29 Domestic Pharmaceutical Sector . 30 Foreign Pharmaceutical Sector . 33 Traditional Medicines 34 Retail Sector 35 Table: Key Aspects Of Good Pharmacy Practice (GPP) In Developing Countries 37 Research And Development . 37 Biotechnology Sector . 38 Industry Forecast Scenario .42 Overall Market Forecast 42 Key Growth Factors – Industry 44 Macroeconomic Activity 46 Vietnam – Economic Activity . 48 Prescription Drug Market Forecast . 49 OTC Medicine Market Forecast 51 Patented Product Market Forecast 53 Generic Drug Market Forecast 54 Pharmaceutical Trade Forecast 55 Medical Device Market Forecast . 57 Other Healthcare Data Forecasts 58 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Key Risks To BMI’s Forecast Scenario 60 Competitive Landscape .61 Company Profiles .63 Indigenous Manufacturer Profiles 63 Vietnam Pharmaceutical Corporation (Vinapharm) 63 Vietnam OPV Pharmaceutical Co 65 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 67 Vidipha Central Pharmaceutical Joint Stock Company . 69 Leading Multinational Manufacturers 70 Pfizer . 70 Sanofi-Aventis 71 Novartis . 73 Merck & Co . 75 Country Snapshot: Vietnam Demographic Data .76 Section 1: Population . 76 Table: Demographic Indicators, 2005-2030 76 Table: Rural/Urban Breakdown, 2005-2030 . 77 Section 2: Education And Healthcare 77 Table: Education, 2002-2005 77 Table: Vital Statistics, 2005-2030 77 Section 3: Labour Market And Spending Power 78 Table: Employment Indicators, 1999-2004 78 Table: Consumer Expenditure, 2000-2012 (US$) 78 BMI Methodology .79 How We Generate Our Pharmaceutical Industry Forecasts . 79 Pharmaceutical Business Environment Ratings Methodology 80 Ratings Overview . 80 Table: Pharmaceutical Business Environment Indicators . 81 Weighting . 82 Table: Weighting Of Components 82 Sources . 82 Forecast Tables 83 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Executive Summary Vietnam’s pharmaceutical market was valued at around VND27,265bn (US$1.53bn) in 2009. Over the next five years, BMI forecasts that the market should grow at a compound annual growth rate (CAGR) of 15.8% in local currency terms to reach a value of VND56,706bn (US$3.29bn) in 2014. BMI’s long-range forecast is for the market to reach VND89,509bn (US$6.07bn) in 2019, equating to a CAGR of 12.6%. Our forecast for GDP-beating drug market growth underlines our view that there is considerable scope for increased pharmaceutical consumption in a country where per-capita drug expenditure is currently just US$17. Access to healthcare remains a key concern in a country where per-capita GDP is a little over US$1,000. In January 2010, Vietnam introduced a new Law on Health Insurance that would see around 90% of patients subject to some form of co-payment, raising concerns that access to healthcare for people on low incomes may be restricted. The legislation states that certain patients – ethnic minorities, welfare recipients and people who contributed to the revolution – must pay 5% of medical services costing more that VND97,500 (US$5.28). Students, employees and others not obliged to buy health insurance will have to pay 20% of healthcare costs out-of-pocket. In BMI’s Asia Pacific Pharmaceutical Business Environment Ratings for Q210, Vietnam was ranked 13th of the 15 markets surveyed. The country’s pharmaceutical market is growing rapidly, but low per-capita spending limits potential returns. Meanwhile, an uncertain pricing environment creates the largest risks for pharmaceutical firms operating in Vietnam. Some pharmacies registered a 10-30% increase in drug prices in a period of less than two weeks in December 2009, despite warnings from the Vietnam Drug Administration (VDA) against outlets not to raise prices. There have been a number of positive developments in Vietnam’s pharmaceutical industry in recent months. The Hanoi University of Pharmacy is to produce Fludon H1 (arbidol) in 2010 to combat H1N1 influenza. Once manufacturing of arbidol in Vietnam has been scaled up, the medicine is expected to be more than four times cheaper than Tamiflu, the first-line treatment for swine flu. Meanwhile, the country’s biotechnology sector has continued to demonstrate the ability to develop new vaccines with an announcement by Company for Vaccine and Biological Production No. (Vabiotech) that commercial batches of a vaccine against H1N1 influenza were ready for testing by the National Institute for Control of Vaccine and Biologicals (NICVB). © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 SWOT Analysis Vietnam Pharmaceutical And Healthcare Industry SWOT Strengths Weaknesses Opportunities Threats Significant growth potential, given a population of approximately 88mn in 2009, which will grow to 100mn by 2019. The government’s commitment to developing the health sector. Sizeable local generics sector, which is being encouraged by the government. Strong traditional medicines segment with potential to improve the non-prescription drugs market in the longer term, as long as sufficient investment in extraction technologies can be found. One of the least developed pharmaceutical markets in Asia, with low per capita spending on drugs. Counterfeit drugs account for a significant amount of market consumption. Little distinction made between prescription and over-the-counter (OTC) drugs, with most medicines available without a prescription. Complex drug pricing policy biased towards local drug producers. Import-reliant market, especially in terms of high-tech products and active pharmaceutical ingredients (APIs), which makes it vulnerable to international currency movements. Underdeveloped primary care services and shortage of trained pharmacists continuing to hamper access to medicines and improved product market penetration. Population concentrated in rural, rather than urban areas, preventing access to modern drugs and encouraging dependence upon traditional medicines. The ASEAN harmonisation initiative, including the adoption of Western regulatory standards such as ICH and WHO guidelines. Introduction of five-year exclusivity for clinical dossier data encouraging researchbased multinationals. If investment can be found for technological improvements then there is great potential in the TCM market. Improvements in pricing and regulatory environment to boost foreign companies interest and investment in the country. Full WTO membership will improve the trading climate and potentially, in the longer term, redress pharmaceutical trade issues. Domestic companies being forced to comply with international Good Manufacturing Practices (GMP) should boost exports. Government resistance to aligning patent law fully with international standards deterring multinational sector expansion. The government increasingly interfering in the industry, protecting indigenous firms through the use of legal trade barriers, which will affect competitiveness. With a notably fragile regional economy, Vietnam is increasingly susceptible to regional and global economic fluctuations. The legalisation of parallel imports negatively impacting performance of patented drugs. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Vietnam Political SWOT Strengths Weaknesses Opportunities Threats The Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress. The one-party system is generally conducive to short-term political stability. Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent. The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system. The slowdown in growth in 2009 and 2010 is likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocratic rule. Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable. Relations with China have deteriorated over the past year due to Beijing’s more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Vietnam Economic SWOT Strengths Weaknesses Opportunities Threats Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.6% annually between 2000 and 2007. The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004. Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy continues to suffer in 2010. The fiscal picture is clouded by considerable ‘off-the-books’ spending. The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures. WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector. Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population to rise from 29% of the population to more than 50% by the early 2040s. Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis. Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Vietnam Business Environment SWOT Strengths Weaknesses Opportunities Threats Vietnam has a large, skilled and low-cost workforce that has made the country attractive to foreign investors. Vietnam’s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond. Vietnam’s infrastructure is still weak. Roads, railways and ports are inadequate to cope with the country’s economic growth and links with the outside world. Vietnam remains one of the world’s most corrupt countries. Its score in Transparency nd International’s 2009 Corruption Perceptions Index was 2.7, placing it in 22 place in the Asia-Pacific region. Vietnam is increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan. This offers the possibility of the transfer of hightech skills and knowhow. Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector. This should offer foreign investors new entry points. Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern. Labour unrest remains a lingering threat. A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2010 reach as much as 15% for imported drugs. Additionally, foreign drug makers are not permitted to freely import and distribute their products in the country. Sanofi-Aventis – which is one of the world’s largest vaccine manufacturers – is also affected by regulations in the country that require foreign manufacturers to conduct clinical trials in Vietnam before being able to release their vaccines. In Q409, the Ho Chi Minh City based Pasteur Institute announced it had produced its first batch of domestically produced swine flu vaccines. The vaccine is soon to be tested in preclinical trials. Vietnam is the site of several clinical trials of pipeline products. Product Portfolio The company manufactures products and acts as a distributor for imported medicines. Its main products include Plavix, Aprovel, Lovenox, Tritace, Taxotere, Eloxatin, Xatral, Amaryl, Lantus, Stilnox, and Actonel. Sanofi-Aventis’s production facilities are GMP and ISO 9002 certified. Main export destinations include other Asian countries and the former USSR. A rabies vaccine made by Vaccine and Biomedical Product Company No. was removed from the market in September 2007 due to safety fears. The withdrawal was not wholly unexpected as adverse events related to the product have been known about for over a decade and Vietnam was one of only three countries that still used the Fuenzalida-Palacios vaccine. To fill the market void, the health ministry allowed Sanofi-Aventis’s semi-finished rabies vaccine, Verorab, to be imported. Company Address Sanofi-Aventis Vietnam 10 Ham Hghi, District Ho Chi Minh City, Vietnam Tel: +84 82 98 526 Fax: +84 91 44 801 www.sanofi-aventis.com.vn © Business Monitor International Ltd Page 72 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Novartis Strengths Well-established presence through its subsidiary Novartis Vietnam, which directly manufactures in the country. Benefits from the advantages given to locally produced drugs. Diverse manufacturing presence, including antibiotics, vitamins and OTC pharmaceuticals, consumer, generic and healthcare products. Weaknesses Opportunities Government drug-pricing policy. Low purchasing power of the majority of the population. Demand for branded products to rise with sector modernisation and regional harmonisation. Positive economic performance – with an increase in spending power – to underpin the development of pharmaceutical demand. Developing the potential of the generic sector to open up commercial opportunities for Novartis. Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a focus on increasing the level of foreign investment. Threats Country remains heavily reliant on imported drugs. Government resistance to aligning patent law fully with international standards. As a part of its plan to overhaul the pharmaceutical sector, the government is planning to increase intervention and protect local companies through legal trade barriers, potentially affecting margins. Vietnam’s susceptibility to economic fluctuations, with currency depreciation recently forcing price rises. Company Overview Legalisation of parallel imports negatively affecting performance of patented drugs. Novartis Vietnam was established following the merger of Sandoz and Ciba-Geigy in 1997. The company is active in the distribution of speciality pharmaceuticals, consumer healthcare and generics. In Q409, Novartis applied to DAV for an import licence for swine flu vaccines. Product Portfolio Novartis’ portfolio includes medicines in transplantation and immunology, cardiovascular diseases, diseases of the central nervous system, Parkinson’s disease, skin allergies, OTC and ophthalmic medications. The following Novartis products maintain a leadership position in their respective segments: Lamisil (terbinafine), Clozaril (clozapine), Diovan (valsartan), Lescol (fluvastatin), Aredia (pamidronate), Navoban (tropisetron), Sandostatin (octreotide), Neoral (cyclosporine), Simulect (basiliximab), Femara (letrozole), Sandoglobulin, Miacalcic (calcitonin) and Lentaron (formestane). © Business Monitor International Ltd Page 73 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Led by Novartis, Swiss investment in Vietnam has been growing in recent years, with bi-lateral trade between the countries reaching US$500mn in 2007. Company Address rd Novartis Pharma Floor E-Town 364 Cong Hoa St 13 Ward Tan Binh District Ho Chi Minh City, Vietnam Tel: +84 3810 1111 Fax: +84 3812 5801 www.novartis.com © Business Monitor International Ltd Page 74 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Merck & Co Strengths Weaknesses Opportunities Threats One of the leading global producers of medicines. Considerable product portfolio, including consumer medicines. Merger with Schering-Plough will further strengthen MSD’s presence in Vietnam. Strict government drug-pricing policy. No direct manufacturing or R&D presence in the country. Rising demand for branded products following healthcare sector modernisation. Pending overhaul of the regulatory climate, aiming to boost foreign investment. Strong regional experience and connections. Sizeable counterfeit drug trade and lax patent protection. Legal trade barriers protecting local players and disadvantaging multinationals. Country susceptible to economic fluctuations, with Merck recently forced to hike drug prices due to currency depreciation. Company Overview Legalisation of parallel imports negatively impacting performance of branded drugs. The US drug major Merck & Co operates in Vietnam through its regional division, Merck, Sharp & Dohme (MSD) Asia Pacific, which was established in Vietnam in 1994. The company employs around 100 staff, who are mostly engaged in sales and marketing activities. Merck does not operate any manufacturing or R&D activities in Vietnam. The company is affected by regulations in Vietnam that require all state companies wishing to import foreign pharmaceutical products to apply for annual quotas. These activities are set to be phased out under the US-Vietnam Bilateral Trade Agreement. Recent Activities In March 2009, MSD said it regretted a label mistake on its measles, mumps and rubella vaccine. MMRII was labelled with instructions saying ‘for intramuscular injection’ rather than ‘for subcutaneous injections’. No adverse reaction had been reported. At the end of May 2009, distributor Diethelm Vietnam Corp increased the prices of 14 speciality drugs – manufactured by US-based Merck – by 7.3%-10%. Local distributors claim that they had no choice as the prices of imported drugs have been increasing as a result of currency depreciation and the growing price of raw materials. Company Address Merck, Sharp & Dohme (MSD) Asia Vietnam Branch th Floor, R.810 Sun Wah Tower, 115 Nguyen Hue Boulevard District 1, Ho Chi Minh City, vietnam Tel: +84 382 78100 Fax: +84 3827 8101 www.msd-vietnam.com © Business Monitor International Ltd Page 75 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Country Snapshot: Vietnam Demographic Data Section 1: Population Population By Age, 2005 (mn) Population By Age, 2005 and 2030 (m n, total) 70-74 70-74 0-64 60-64 50-54 50-54 0-44 40-44 0-34 30-34 0-24 20-24 10-14 10-14 0-4 0-4 -6.0 -4.0 -2.0 0.0 Male 2.0 4.0 6.0 -10.0 -5.0 0.0 2030 Female 5.0 10.0 2005 Source: UN Population Division Table: Demographic Indicators, 2005-2030 2005 2010f 2020f 2030f Dependent population, % of total 34.1 29.9 30.4 31.2 Dependent population, total, ‘000 28,318 26,225 30,950 34,499 Active population, % of total 65.8 70.0 69.5 68.7 Active population, total, ‘000 54,650 61,263 70,706 75,927 Youth population*, % of total 28.8 25.0 23.4 20.3 Youth population*, total, ‘000 23,972 21,887 23,807 22,508 Pensionable population, % of total 5.2 4.9 7.0 10.8 Pensionable population, total, ‘000 4,346 4,338 7,143 11,991 f = forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 76 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Table: Rural/Urban Breakdown, 2005-2030 2005 2010f 2020f 2030f Urban population, % of total 26.7 29.4 34.7 41.8 Rural population, % of total 73.3 70.6 65.3 58.2 Urban population, total, ‘000 22,509 26,395 35230 46,123 Rural population, total, ‘000 61,729 63,323 66426 64,306 Total population, ‘000 84,238 89,718 101,656 110,429 f = forecast. Source: UN Population Division Section 2: Education And Healthcare Table: Education, 2002-2005 2002/2003 2004/2005 Gross enrolment, primary 98 93 Gross enrolment, secondary 73 75 Gross enrolment, tertiary 10 16 Adult literacy, male, % na 93.9 Adult literacy, female, % na 86.9 Gross enrolment is the number of pupils enrolled in a given level of education regardless of age expressed as a percentage of the population in the theoretical age group for that level of education. na = not available. Source: UNESCO Table: Vital Statistics, 2005-2030 2005 2010f 2020f 2030f Life expectancy at birth, males (years) 68.4 69.9 74.2 75.8 Life expectancy at birth, females (years) 72.4 73.9 78.4 80.0 Life expectancy estimated at 2005. f = forecast. Source: UNESCO © Business Monitor International Ltd Page 77 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Section 3: Labour Market And Spending Power Table: Employment Indicators, 1999-2004 1999 2000 2001 2002 2003 2004 Employment, ‘000 38,120 38,368 39,000 40,162 41,176 42,316 – % change y-o-y 3.1 0.6 1.6 2.9 2.5 2.7 – male 19,029 19,292 19,744 20,356 20,959 21,649 – female 19,091 19,076 19,257 19,807 20,217 20,666 — female, % of total 50.0 49.7 49.3 49.3 49.1 48.8 Unemployment, ‘000 909 886 1,107 871 949 926 – male 439 468 458 398 402 410 – female 470 418 650 473 547 517 – unemployment rate, % 2.3 2.2 2.7 2.1 2.2 2.1 Source: ILO Table: Consumer Expenditure, 2000-2012 (US$) 2000 2007 2008 2009e 2010f 2012f 110 265 301 368 386 427 Poorest 20%, expenditure per capita 49 119 136 166 174 192 Richest 20%, expenditure per capita 243 587 668 815 855 946 Richest 10%, expenditure per capita 316 763 868 1,060 1,112 1,230 Middle 60%, expenditure per capita 85 206 235 286 301 332 Consumer expenditure per capita 556 1,196 1,297 na na na Poorest 20%, expenditure per capita 250 538 583 na na na Richest 20%, expenditure per capita 1,231 2,649 2,872 na na na Richest 10%, expenditure per capita 1,600 3,444 3,734 na na na 433 931 1,009 na na na Consumer expenditure per capita Purchasing power parity Middle 60%, expenditure per capita e/f = BMI estimate/forecast. na = not available. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 78 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 BMI Methodology How We Generate Our Pharmaceutical Industry Forecasts Pharmaceutical sub-sector forecasts are generated using a top-down approach from BMI’s Drug Expenditure Forecast Model. The semi-automated tool incorporates historic trends, macroeconomic variables, epidemiological forecasts and analyst input, which are weighted by relevance to each market. The following elements are fed into the model: BMI’s historic pharmaceutical market data, which has been collected from a range of sources including: – regulatory agencies; – pharmaceutical trade associations; – company press releases and annual reports; – subscription information providers; – local news sources; – information from market research firms that is in the public domain. Data that has been validated by BMI’s pharmaceutical and healthcare analysts using a composite approach, which scores data sources by reliability in order to ensure accuracy and consistency of historic data. Five key macroeconomic and demographic variables, which have been demonstrated through regression analysis to have the greatest influence on the pharmaceutical market. These have been forecast by BMI’s Country Risk analysts using an in-house econometric model. The burden of disease in a country. This is forecast in disability-adjusted life years (DALYs) using BMI’s Burden of Disease Database, which is based on the World Health Organization’s burden of disease projections and incorporates World Bank and IMF data. Subjective input and validation by BMI’s pharmaceutical and healthcare analysts to take into account key events that have affected the pharmaceutical market in the recent past or that are expected to have an impact on the country’s pharmaceutical market over the next five years. These may include policy/reimbursement decisions, new product launches or increased competition from generics. © Business Monitor International Ltd Page 79 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Pharmaceutical Business Environment Ratings Methodology Our approach in assessing the Pharmaceutical Business Environment Ratings is threefold. First, we have defined the risks rated to capture the operational dangers to companies operating in this industry. Second, we attempt where possible to identify objective indicators that may serve as proxies for issues/trends. Finally, we use BMI’s proprietary Country Risk Ratings (CRR) to ensure only the aspects most relevant to the industry are included. Overall, the system, which is integrated with all the industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings Overview Ratings System Conceptually, the new ratings system divides into two distinct areas: Limits of potential returns: Evaluation of sector’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. © Business Monitor International Ltd Page 80 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Table: Pharmaceutical Business Environment Indicators Indicator Rationale Limits to potential returns Market structure Market expenditure, US$bn Market expenditure per capita, US$ Sector value growth, % y-o-y Denotes breadth of pharmaceutical market. Large markets score higher than smaller ones Denotes depth of pharmaceutical market. High value markets score better than low value ones Denotes sector dynamism. Scores based on annual average growth over five-year forecast period Country structure Urban-rural split Pensionable population, % of total Population growth, 2003-2015 Urbanisation is used as a proxy for development of medical facilities. Predominantly rural therefore states score lower Proportion of the population over 65 years of age. States with aging populations tend to have higher per-capita expenditure Fast-growing states suggest better long-term trend growth for all industries Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Policy/reimbursements Markets with full and equitable access to modern medicines score higher than those with minimal state support for healthcare Approvals process High scores awarded to markets with a swift appraisal system. Those that are weighted in favour of local industry or are corrupt score lower Country risk Economic structure Policy continuity Bureaucracy Legal framework Corruption Rating from CRR evaluates the structural balance of the economy, noting issues such as reliance on single sectors for exports/growth, and past economic volatility Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy Rating from CRR denotes ease of conducting business in the state Rating from CRR denotes the strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies’ ability to compete Source: BMI © Business Monitor International Ltd Page 81 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 60% – Pharmaceutical market – 75% – Country structure – 25% Risks to realisation of potential returns 40% – Market risks – 60% – Country risk – 40% Source: BMI Sources Sources used include national industry associations, government ministries, global health organisations, officially released pharmaceutical company results and international and national news agencies. © Business Monitor International Ltd Page 82 11.33 10.10 1.59 Per capita drug market expenditure (US$) Drug expenditure % GDP 1.57 13.01 17,908.4 1.11 2007 1.56 16.13 23,003.7 1.40 2008 1.72 17.42 27,265.0 1.53 2009f 1.77 19.22 32,114.0 1.71 2010f 1.84 22.18 37,594.7 2.01 2011f © Business Monitor International Ltd 47.29 25.90 f = forecast. Source: World Health Organization (WHO), BMI Public sector health expenditure (%) 0.82 37.95 Public sector health expenditure (US$bn) Health expenditure per capita (US$) 6.55 5.97 Health expenditure (% GDP) 3.99 32.33 1.29 63,810.03 3.16 50,056.42 Health expenditure (US$bn) Health expenditure (VNDbn) 2006 2005 39.32 1.99 59.01 7.10 81,204.58 5.05 2007 Table: Vietnam Healthcare Expenditure Indicators, Historical Data and Forecasts 6.36 2008 35.85 2.28 73.23 7.08 6.65 2009f 2.01 30.32 49,938.0 2.81 2013f 38.80 2.58 75.52 7.46 118,171.13 1.91 26.02 43,494.3 2.38 2012f 104,440.49 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 1.57 15,283.9 13,315.3 Drug market expenditure (VNDbn) 0.96 0.84 2006 Drug market expenditure (US$bn) 2005 Table: Vietnam Pharmaceutical Expenditure Indicators, Historical Data and Forecasts 41.82 3.18 85.26 7.84 142,478.23 7.61 2010f 2.11 34.93 56,706.0 3.29 2014f 4.34 2016f 8.98 44.90 4.03 99.30 8.22 168,312.35 10.75 2012f 48.01 5.16 117.32 8.60 12.56 2013f 2.33 55.45 83,973.8 5.51 2018f 51.13 6.42 135.29 8.97 222,855.14 2.31 50.22 77,512.8 4.92 2017f 196,119.03 2.26 44.93 70,602.3 2011f 2.19 39.79 63,586.6 3.80 2015f 54.23 7.89 154.69 9.33 251,102.55 14.56 2014f 2.31 60.32 89,509.3 6.07 2019f Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Page 83 © Business Monitor International Ltd 56.37 116.86 14.53 23.37 15.70 64.42 57.21 29.37 83.36 Blood and blood forming organ drug sales Cardiovascular system drug sales Dermatological drug sales Genito-urinary system and sex hormone sales Systemic hormonal preparation, excluding sex hormones and insulins, sales Anti-infective for systemic use sales Antineoplastic and immunomodulating agent sales Musculoskeletal system drug sales Nervous system drug sales Page 84 8.77 Other prescription drug sales 10.05 11.17 53.91 0.83 95.54 33.66 65.57 73.83 17.99 26.78 16.65 133.93 64.60 79.01 11.78 13.09 63.17 0.98 111.95 39.44 76.84 86.51 21.08 31.39 19.51 156.94 75.70 92.59 71.90 12,876.15 10,928.01 71.50 0.80 2007 0.68 2006 14.88 16.54 79.83 1.23 141.48 49.85 97.10 109.33 26.64 39.66 24.66 198.33 95.66 117.00 72.30 16,631.66 1.01 2008 16.37 18.19 87.80 1.36 155.60 54.82 106.79 120.24 29.30 43.62 27.12 218.13 105.21 128.68 72.60 19,794.39 1.11 2009f 18.35 20.39 98.42 1.52 174.43 61.45 119.71 134.79 32.85 48.90 30.40 244.52 117.94 144.25 72.80 23,378.97 1.25 2010f 21.52 23.92 115.44 1.79 204.59 72.08 140.41 158.09 38.53 57.35 35.66 286.79 138.33 169.19 73.00 27,444.13 1.46 2011f f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 9.75 Sensory organ drug sales 47.04 68.94 Alimentary tract and metabolism drug sales Respiratory system drug sales 71.00 Prescription drug market as % total 0.73 9,453.87 Prescription drug market (VNDbn) Antiparasitic product, insecticide and repellent sales 0.60 Prescription drug market (US$bn) 2005 25.61 28.47 137.40 2.13 243.51 85.79 167.12 188.17 45.86 68.26 42.44 341.36 164.65 201.38 73.10 31,794.31 1.74 2012f Table: Prescription Drug Market Indicators, Historical Data and Forecasts (US$mn unless stated) 30.28 33.65 162.42 2.51 287.85 101.42 197.56 222.44 54.21 80.70 50.17 403.52 194.63 238.05 73.20 36,554.63 2.06 2013f 35.45 39.40 190.17 2.94 337.03 118.74 231.31 260.44 63.47 94.48 58.74 472.46 227.88 278.72 73.35 41,593.85 2.41 2014f - - - - - - - - - - - - - - 73.48 46,723.41 2.79 2015f - - - - - - - - - - - - - - 73.61 51,970.37 3.20 2016f - - - - - - - - - - - - - - 73.74 57,157.93 3.63 2017f - - - - - - - - - - - - - - 73.87 62,031.41 4.07 2018f - - - - - - - - - - - - - - 74.00 66,236.91 4.49 2019f Vietnam Pharmaceuticals & Healthcare Report Q2 2010 29.00 28.50 28.10 5,032.26 0.31 2007 27.70 6,372.02 0.39 2008 27.40 7,470.61 0.42 2009f 27.20 8,735.00 0.47 2010f 13,315.31 24.10 Patented market (VNDbn) Patented market as % total market 24.30 15,283.93 0.23 2006 24.40 17,908.41 0.27 2007 24.10 23,003.68 0.34 2008 23.80 27,265.00 0.36 2009f 23.43 32,113.97 0.40 2010f 23.04 37,594.70 0.46 0.54 2012f 22.54 0.62 2013f 22.02 0.71 2014f 21.55 0.80 2015f 21.04 0.89 2016f 26.39 18,631.95 1.15 2016f 20.51 70,602.33 26.52 16,863.16 1.01 2015f 63,586.56 26.65 15,112.15 0.88 2014f 56,706.00 26.80 13,383.39 0.75 2013f 49,938.02 26.90 11,699.96 0.64 2012f 43,494.27 27.00 2011f f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 0.20 Patented market (US$bn) 2005 Table: Patented Product Market Indicators, Historical Data and Forecasts 0.54 2011f 10,150.57 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI OTC market as % total market 0.27 0.24 3,861.44 OTC market (US$bn) OTC market (VNDbn) 4,355.92 2006 2005 Table: OTC Medicine Market Indicators, Historical Data and Forecasts 19.97 77,512.79 0.98 2017f 26.26 20,354.86 1.29 2017f 19.42 83,973.76 1.07 2018f 26.13 21,942.34 1.44 2018f 18.85 89,509.34 1.14 2019f 26.00 23,272.43 1.58 2019f Vietnam Pharmaceuticals & Healthcare Report Q2 2010 © Business Monitor International Ltd Page 85 46.90 Generics market as % total market 47.20 7,214.0 0.45 2006 47.50 8,506.5 0.53 2007 48.20 11,087.8 0.67 2008 48.80 13,305.3 0.75 2009f 49.37 15,856.1 0.85 2010f 531.10 475.50 15.00 -460.50 Imports Exports Balance © Business Monitor International Ltd na na Medical device market (VNDbn) Medical device market as % of total healthcare market 0.18 2006 4.54 3.96 3,209.00 0.20 2007 49.96 3.47 3,642.30 0.22 2008 -833.81 28.83 862.64 2009f 50.56 21,991.5 1.21 2012f -973.63 34.84 1,008.47 3.66 4,259.23 0.24 2009f 1.70 2014f 2011f 4,887.52 3.30 3.53 0.30 2013f 54.45 45,725.4 57.36 3.04 5,065.36 2.87 5,047.68 0.36 2013f -1,573.30 0.33 3.00 2018f 1,630.66 53.77 41,676.7 2.65 2017f 2012f -1,337.39 49.14 1,386.54 4,698.73 0.27 2010f -1,139.69 41.62 2012f 53.10 37,488.3 2.31 2016f 2011f 52.44 33,346.6 1.99 2015f 1,181.31 51.80 29,374.8 2010f 51.18 25,555.8 1.44 2013f na = not available. f = forecast. Source: Vietnam Ministry of Health, International Trade Administration, US Commercial Service, BMI na Medical device market (US$bn) 2005 23.60 739.38 2008 -715.78 2,904.11 -663.50 19.10 682.60 2007 Table: Medical Device Market Indicators, Historical Data and Forecasts f = forecast. Source: International Trade Centre (ITC), BMI -513.60 17.50 2006 2005 Table: Pharmaceutical Trade Indicators, Historical Data and Forecasts (US$mn) 1.00 2011f 18,782.9 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 6,244.9 0.39 Generics market (VNDbn) Generics market (US$bn) 2005 Table: Generic Drug Market Indicators, Historical Data and Forecasts 2.68 5,047.68 0.39 2014f -1,855.41 66.17 1,921.58 2014f 55.15 49,366.2 3.35 2019f Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Page 86 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... overall level of healthcare services In fact, according to the chairman of the Vietnam Medical Association, the government has not been able to meet the expectations associated with healthcare services, despite the state doubling its healthcare © Business Monitor International Ltd Page 26 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 spending over the course of 2007 According to a report by the... November 2009 VietNamNet Bridge reported that the number of children admitted to hospital in Ho Chi Minh City with measles was the highest in a decade These © Business Monitor International Ltd Page 20 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 figures reflect a shortage of measles vaccines, despite the fact that children are immunised for free as part of the National Vaccination Programme Vietnam. .. the Vietnam Drug Administration (VDA) warning pharmacies not to raise prices, reports VietNamNet Nguyen Viet Hung, deputy head of the administration, stated that the body and provincial health departments would impose fines on pharmacies, distributors and manufacturers who fixed unreasonable drug prices © Business Monitor International Ltd Page 21 Vietnam Pharmaceuticals & Healthcare Report Q2 2010. .. of kidney failure are reported each year in Vietnam However, only 10% can afford dialysis treatment, which costs US$25 per session Moreover, due to poor diagnosis, many patients are unaware of their status until end-stage disease develops © Business Monitor International Ltd Page 25 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Hypertension is another area of concern in Vietnam The prevalence... to potential returns Vietnam s score of 45 is unchanged from the previous quarter and puts the market below the regional average of 51 © Business Monitor International Ltd Page 10 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Pharmaceutical Market Vietnam is an attractive market currently experiencing double-digit growth and, Business Environment Ratings By Sub-Sector Score Q21 0 importantly, we... product portfolio of tablets, capsules, creams and powder is expected to do well in Vietnam, especially branded offerings, which are already proving very popular in Vietnam © Business Monitor International Ltd Page 33 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 A survey of over 200 investors published by Grant Thornton Vietnam consultants in November 2009 reveals that the country is viewed as an.. .Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Vietnam – Business Environment Ratings Table: Asia Pacific Pharmaceutical Business Environment Ratings For Q21 0 Limits of Potential Returns Risks to realisation of returns Pharmaceutical Market Country Structure Limits Market Risks... parallel imports must be © Business Monitor International Ltd Page 15 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 less expensive than the same drug already registered in Vietnam However, the move also allowed imports by third companies that have no prior approval from patent holders, which violates the rights of the latter Vietnamese consumers stand to benefit from the parallel import law, although... farmers, uptake was low due to the cost involved © Business Monitor International Ltd Page 27 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 To get all of Vietnam s mostly rural 86mn population to sign up for the national health insurance plan, the National Assembly intends to raise public awareness and strengthen healthcare facilities so they can meet rising demand Under draft legislation, if a farmer... accord will help develop their respective healthcare sectors as well as improve competitiveness ahead of the planned ASEAN Free Trade © Business Monitor International Ltd Page 29 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 Agreement, which is due to be signed in 2015 The region’s pharmaceutical market is expected to reach US$6bn in the next decade Vietnam and the US are signatories of the first . date: February 2010 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 © Business Monitor International Ltd Page 2 Vietnam Pharmaceuticals & Healthcare Report Q2 2010 ©. Biologicals (NICVB). Vietnam Pharmaceuticals & Healthcare Report Q2 2010 © Business Monitor International Ltd Page 6 SWOT Analysis Vietnam Pharmaceutical And Healthcare Industry SWOT. environmental damage. Vietnam Pharmaceuticals & Healthcare Report Q2 2010 © Business Monitor International Ltd Page 8 Vietnam Economic SWOT Strengths Vietnam has been one of