Q3 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 Q3 2010 INCLUDING 5-YEAR AND 10-YEAR INDUSTRY FORECASTS BY BMI Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Copy deadline: June 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 Q3 2010 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2010 CONTENTS Executive Summary . SWOT Analysis . 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 Q310 . 10 Limits of Potential Returns 11 Risks to Realisation of Returns 11 Vietnam – Market Summary 13 Regulatory Regime 14 Pharmaceutical Advertising . 14 Intellectual Property Environment . 15 IP Shortcomings . 15 Counterfeit Drugs 17 Other Regulatory Issues . 18 Pricing Regime 19 Price Hikes 20 Price Freeze . 21 Reimbursement Regime 21 Recent Pricing and Reimbursement Developments 22 Industry Trends and Developments . 23 Epidemiology . 23 Communicable Diseases 24 Non-Communicable Diseases 26 Healthcare Financing 27 Healthcare Insurance 29 Healthcare Insurance Spending . 30 Healthcare and Pharmaceutical Reforms 30 Foreign Partnerships . 31 Traditional Medicines 32 Pharmacy Retail Sector . 33 Table: Key Aspects Of Good Pharmacy Practice (GPP) In Developing Countries 35 Research and Development 36 Biotechnology Sector . 37 Vaccines . 38 Clinical Trials 39 Medical Device Market 39 Industry Forecast Scenario . 41 Overall Market Forecast 41 Key Growth Factors – Industry 42 Key Growth Factors – Macroeconomic . 43 Table: Vietnam – Economic Activity 46 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Prescription Drug Market Forecast . 46 Patented Product Market Forecast 48 Generic Drug Market Forecast 49 OTC Medicine Market Forecast 50 Medical Device Market Forecast . 51 Pharmaceutical Trade Forecast 52 Other Healthcare Data Forecasts 54 Key Risks to BMI’s Forecast Scenario . 55 Competitive Landscape . 56 Pharmaceutical Industry 56 Domestic Pharmaceutical Sector . 57 Foreign Pharmaceutical Sector . 59 Recent Pharmaceutical Industry News . 60 Company Profiles . 61 Indigenous Manufacturer Profiles 61 Vietnam Pharmaceutical Corporation (Vinapharm) 61 Vietnam OPV Pharmaceutical Co 63 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 65 Vidipha Central Pharmaceutical Joint Stock Company . 67 Leading Multinational Manufacturers 68 Pfizer . 68 Sanofi-Aventis 69 Novartis . 71 Merck & Co . 73 GlaxoSmithKline (GSK) . 74 Country Snapshot: Vietnam Demographic Data . 75 Section 1: Population . 75 Table: Demographic Indicators, 2005-2030 75 Table: Rural/Urban Breakdown, 2005-2030 . 76 Section 2: Education And Healthcare 76 Table: Education, 2002-2005 76 Table: Vital Statistics, 2005-2030 76 Section 3: Labour Market And Spending Power 77 Table: Employment Indicators, 1999-2004 77 Table: Consumer Expenditure, 2000-2012 (US$) 77 BMI Methodology . 78 How We Generate Our Pharmaceutical Industry Forecasts . 78 Pharmaceutical Business Environment Ratings Methodology 79 Ratings Overview . 79 Table: Pharmaceutical Business Environment Indicators . 80 Weighting . 81 Table: Weighting Of Components 81 Sources . 81 Forecast Tables 82 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Executive Summary In our Asia Pacific Business Environment Ratings (BER) matrix for Q310, Vietnam remains ranked 13th, out of 16 key regional markets, which now include Cambodia. Despite a marginally improved score, Vietnam is still regarded as one of the least attractive regional pharmaceutical markets for foreign involvement, due to a combination of economic and regulatory drawbacks. Nevertheless, over our forecast period through to 2019, Vietnam should consolidate its placing above other markets such as Pakistan and Bangladesh as its market matures. Valued at US$1.53bn in 2009, we expect the Vietnamese pharmaceutical market to post a five-year compound annual growth rate (CAGR) of 15.8% in local currency terms, to reach a value of US$3.02bn in 2014, or US$32.13 per capita, almost twice the 2009 level. Per-capita consumption is forecast to top US$54 in 2019. However, barriers to market entry remain. Counterfeiting remains a major deterrent for research-based foreign companies, with the Pharmaceutical Research and Manufacturers of America (PhRMA)’s Special 301 submission for 2010 again placing Vietnam on its Watch List. The association was critical of the limited progress made in addressing some of its concerns, including the draft regulations on clinical trials, which could hamper innovative pharmaceuticals, despite acknowledging the government’s willingness to consult on proposed reforms. From the start of 2010, a new health insurance system has been in place in Vietnam. Public discontent is widespread however, given that as many as 90% of the insured now have to make co-payments for medical services. Local press has reported that many people on low incomes cannot afford the copayments and are thus forgoing check-ups and treatment, which will create epidemiological and demographic issues down the line. Moreover, urban hospitals are now reportedly overwhelmed by rural patients, as they now only have to pay 70% of costs (down from the previous 100%). The Health Insurance Department is presently seeking to resolve some of the issues, with local press reporting that a fund for the poor or a ceiling for hospital fees may be set up to cushion the impact of the reforms. On the economic front, we expect a double-dip scenario, with real GDP expansion dipping to 4.4% in 2010 after a forceful recovery in the three last quarters of 2009. This was based on our expectations that fiscal and monetary policy would have to be tightened sharply in H110 in order to rein in the widening trade deficit and halt inflationary pressures. With Vietnam having effected yet another devaluation of the dong in February 2010, less than three months after the previous devaluation in late November 2009, our conviction in this view is even stronger. An appreciating currency would dampen inflationary pressures and we foresee consumer price inflation stabilising at around 5% annually from 2014 onwards, down from the 10% expected for the current year, which will also translate into inflated pharmaceutical prices. However, this stabilisation is conditional on the government resolving bottlenecks in infrastructure and power supply, thus also representing a risk to our current drug market forecasts. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 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, in addition to fledging biotechnology. ! 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. ! Need to resolve infrastructural and power supply issues, as well as higher education, before higher levels of foreign direct investment (FDI) can be expected. ! 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. ! New health insurance legislation decreasing patients’ access to medicines. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 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 un-democractic 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 Q3 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 Q3 2010 Vietnam Business Environment SWOT Strengths Weaknesses Opportunities Threats ! Vietnam has a large, skilled and low-cost workforce, which 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 for 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 International's 2009 Corruption Perceptions Index was 2.7, th placing it in 20 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 high-tech 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 Q3 2010 Company Address ! Novartis Pharma rd 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 72 Vietnam Pharmaceuticals & Healthcare Report Q3 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. ! Difficult IP environment, including counterfeit drug trade and lax patent protection. ! 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. ! 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. MSD’s cervical cancer vaccine Gardasil has been approved in Vietnam. Its competitor, GSK’s Cervarix, also received approval in 2009. 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 73 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 GlaxoSmithKline (GSK) Strengths Weaknesses Opportunities Threats Company Overview ! One of the leading global producers of medicines. ! Considerable product portfolio, including consumer medicines and vaccines. ! Difficult IP environment. ! No direct manufacturing or R&D presence in the country. ! Counterfeiting remains a problem. ! 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. ! Legal trade barriers protecting local players and disadvantaging multinationals. ! Country susceptible to economic and currency fluctuations. ! Legalisation of parallel imports negatively impacting performance of branded drugs. Glaxo began operating in Vietnam in 1994, with a staff of only seven. In the following years, Glaxo merged with Wellcome, and became GSK Vietnam. The company offers a range of prescription medicines, although not all of its products are covered by public insurance, as is the case with Advair/Seretide (fluticasone + salmeterol). Product Portfolio In March 2010, the US Food and Drug Administration (FDA) voiced concerns over GSK's Rotarix vaccine. It is thought that the live oral preventative has been contaminated with a benign pig virus, known as porcine circovirus type (PCV-1). The US FDA has consequently recommended that any use of the vaccine be temporarily suspended. The DVA has also requested documents from GSK verifying the safety of the vaccine. GSK’s cervical cancer vaccine Cervarix has been approved in Vietnam. Its competitor, MSD’s Gardasil, also received approval in 2009. The government agency has also ordered 10,000 packets of GSK’s Relenza (zanamivir) for Tamiflu-resistant patients. In late 2009, GSK’s Augmentin‘s retail price rose from VND14,000 to VND15,000 per pack. Company Address ! GlaxoSmithKline Vietnam The Metropolitan, Unit 701, 235 Dong Khoi St, District HoChiMinh City Vietnam ! Tel: +84 3824 8744 ! Fax: +84 3824 8742 ! www.gsk.com/worldwide/vn.htm © Business Monitor International Ltd Page 74 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Country Snapshot: Vietnam Demographic Data Section 1: Population Population By Age, 2005 and 2030 (m n, total) Population By Age, 2005 (mn) 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 75 Vietnam Pharmaceuticals & Healthcare Report Q3 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 76 Vietnam Pharmaceuticals & Healthcare Report Q3 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 77 Vietnam Pharmaceuticals & Healthcare Report Q3 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 78 Vietnam Pharmaceuticals & Healthcare Report Q3 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 79 Vietnam Pharmaceuticals & Healthcare Report Q3 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 80 Vietnam Pharmaceuticals & Healthcare Report Q3 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 81 0.96 2006 1.11 2007 1.40 2008 1.53 2009f 1.67 2010f 1.90 2011f 2.20 2012f 2.59 2013f 3.02 2014f 3.48 2015f 3.98 2016f 4.49 2017f 5.01 2018f 5.51 2019f 1.59 Drug expenditure % GDP 1.57 11.33 1.57 13.01 1.56 16.13 1.67 17.42 1.77 18.75 1.79 21.05 © Business Monitor International Ltd 25.90 0.82 37.95 f = forecast. Source: World Health Organization (WHO), BMI Public sector health expenditure (%) Public sector health expenditure (US$bn) Health expenditure per capita (US$) 5.97 Health expenditure (% GDP) 32.33 1.29 47.29 6.55 63,810.03 3.99 3.16 50,056.42 Health expenditure (US$bn) Health expenditure (VNDbn) 2006 2005 39.32 1.99 59.01 7.10 81,204.58 5.05 2007 6.36 2008 35.85 2.28 73.23 7.08 104,440.49 Table: Vietnam Healthcare Expenditure Indicators, Historical Data and Forecasts f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 10.10 38.80 2.66 77.81 7.46 121,752.07 6.85 2009f 1.90 24.04 7.42 2010f 41.82 3.10 83.15 7.84 8.75 2011f 2.18 36.51 44.90 3.93 96.75 8.22 172,743.14 2.10 32.13 142,405.59 2.00 27.95 48.01 4.77 108.49 8.60 196,278.08 9.94 2012f 2.24 41.12 11.61 2013f 51.13 5.94 125.15 8.97 13.46 2014f 2.27 54.74 54.23 7.30 143.09 9.33 252,467.24 2.29 50.48 223,561.37 2.28 45.84 13,315.3 15,283.9 17,908.4 23,003.7 27,265.0 32,112.5 37,591.0 43,487.6 49,929.6 56,695.6 63,574.3 70,587.9 77,495.8 83,953.9 89,486.3 0.84 Per capita drug market expenditure (US$) Drug market expenditure (VNDbn) Drug market expenditure (US$bn) 2005 Table: Vietnam Pharmaceutical Expenditure Indicators, Historical Data and Forecasts Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Page 82 56.37 116.86 14.53 23.37 15.70 64.42 57.21 29.37 83.36 Blood and blood forming organ drug sales (US$mn) Cardiovascular system drug sales (US$mn) Dermatological drug sales (US$mn) Genito-urinary system and sex hormone sales (US$mn) Systemic hormonal preparation, excluding sex hormones and insulins, sales (US$mn) Anti-infective for systemic use sales (US$mn) Antineoplastic and immunomodulating agent sales (US$mn) Musculoskeletal system drug sales (US$mn) Nervous system drug sales (US$mn) © Business Monitor International Ltd Page 83 8.77 Other prescription drug sales (US$mn) 10.05 11.17 53.91 0.83 95.54 33.66 65.57 73.83 17.99 26.78 16.65 133.93 64.60 79.01 71.50 10,928.01 0.68 2006 11.78 13.09 63.17 0.98 111.95 39.44 76.84 86.51 21.08 31.39 19.51 156.94 75.70 92.59 71.90 12,876.15 0.80 2007 14.88 16.54 79.83 1.23 141.48 49.85 97.10 109.33 26.64 39.66 24.66 198.33 95.66 117.00 72.30 16,631.66 1.01 2008 16.37 18.19 87.80 1.36 155.60 54.82 106.79 120.24 29.30 43.62 27.12 218.13 105.21 128.68 72.60 19,794.39 1.11 2009f 17.90 19.90 96.03 1.49 170.19 59.96 116.80 131.51 32.05 47.71 29.66 238.58 115.07 140.74 72.80 23,377.93 1.22 2010f 20.43 22.71 109.58 1.70 194.21 68.42 133.29 150.07 36.57 54.44 33.85 272.25 131.31 160.61 73.00 27,441.46 1.39 2011f f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 9.75 Sensory organ drug sales (US$mn) 47.04 68.94 Alimentary tract and metabolism drug sales (US$mn) Respiratory system drug sales (US$mn) 71.00 Prescription drug market as % total 0.73 9,453.87 Prescription drug market (VNDbn) Antiparasitic product, insecticide and repellent sales (US$mn) 0.60 Prescription drug market (US$bn) 2005 23.66 26.30 126.95 1.96 224.98 79.26 154.41 173.85 42.37 63.07 39.21 315.38 152.12 186.06 73.10 31,789.40 1.61 2012f Table: Prescription Drug Market Indicators, Historical Data and Forecasts (US$mn unless stated) 27.91 31.03 149.74 2.32 265.38 93.50 182.13 205.07 49.98 74.40 46.25 372.02 179.44 219.47 73.20 36,548.49 1.90 2013f 32.61 36.25 174.92 2.71 310.01 109.22 212.77 239.56 58.38 86.91 54.03 434.58 209.61 256.38 73.35 41,586.25 2.22 2014f - - - - - - - - - - - - - - 73.48 46,714.38 2.56 2015f - - - - - - - - - - - - - - 73.61 51,959.72 2.93 2016f - - - - - - - - - - - - - - 73.74 57,145.41 3.31 2017f - - - - - - - - - - - - - - 73.87 62,016.77 3.70 2018f - - - - - - - - - - - - - - 74.00 66,219.84 4.08 2019f Vietnam Pharmaceuticals & Healthcare Report Q3 2010 13,315.31 24.10 Patented market (VNDbn) Patented market as % total market 24.30 15,283.93 0.23 2006 24.40 17,908.41 0.27 2007 24.10 23,003.68 0.34 2008 23.80 27,265.00 0.36 2009f 23.43 32,112.54 0.39 2010f 46.90 Generics market as % total market 47.20 7,214.0 0.45 2006 47.50 8,506.5 0.53 2007 48.20 11,087.8 0.67 2008 48.80 13,305.3 0.75 2009f 49.37 15,855.4 0.83 2010f 0.95 49.96 18,781.1 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 6,244.9 0.39 Generics market (VNDbn) Generics market (US$bn) 2005 Table: Generic Drug Market Indicators, Historical Data and Forecasts 0.57 2013f 50.56 21,988.1 1.11 0.65 2014f 51.18 25,551.5 1.33 0.73 2015f 51.80 29,369.5 1.57 0.82 2016f 52.44 33,340.1 1.83 53.10 37,480.6 2.11 2016f 20.51 70,587.85 2015f 21.04 63,574.28 2014f 21.55 56,695.63 2013f 22.02 49,929.63 2012f 22.54 43,487.55 0.50 2012f 2011f 23.04 37,591.04 0.44 2011f f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 0.20 Patented market (US$bn) 2005 Table: Patented Product Market Indicators, Historical Data and Forecasts 53.77 41,667.5 2.42 2017f 19.97 77,495.82 0.90 2017f 54.45 45,714.6 2.73 2018f 19.42 83,953.93 0.97 2018f 55.15 49,353.5 3.04 2019f 18.85 89,486.27 1.04 2019f Vietnam Pharmaceuticals & Healthcare Report Q3 2010 © Business Monitor International Ltd Page 84 28.50 4,355.92 0.27 2006 28.10 5,032.26 0.31 2007 27.70 6,372.02 0.39 2008 27.40 7,470.61 0.42 2009f 27.20 8,734.61 0.45 2010f 45.47 47.32 35.94 42.46 12.18 Cough & cold (US$mn) Digestives (US$mn) Skin treatments (US$mn) Vitamins and minerals (US$mn) Other OTCs (US$mn) 13.62 47.49 40.20 52.92 50.86 67.37 2006 15.65 54.56 46.18 60.80 58.43 77.40 2007 © Business Monitor International Ltd na na Medical device market (VNDbn) Medical device market as % of total healthcare market 4.54 2,904.11 0.18 2006 3.96 3,209.00 0.20 2007 19.39 67.59 57.21 75.33 72.39 95.89 21.01 73.23 61.99 81.61 78.42 103.89 3.47 3,642.30 0.22 2008 0.70 2013f 2010f 3.55 4,259.23 0.24 2009f 22.75 79.29 67.12 88.36 84.92 0.92 2015f 25.70 89.57 75.82 99.82 95.92 127.07 2011f 26.52 16,859.90 4,887.52 3.39 3.62 0.30 2011f 1.18 2017f 3.29 5,065.36 0.33 2012f 29.62 103.24 87.39 115.05 110.56 146.46 2013f 26.13 21,937.16 1.31 2018f 3.10 5,047.68 0.36 2013f 34.76 121.16 102.56 135.02 129.75 171.88 26.26 20,350.40 2012f 26.39 18,628.13 1.05 2016f 4,698.73 0.27 2010f 26.65 15,109.39 0.81 2014f 112.49 26.80 13,381.14 2009f 26.90 11,698.15 0.59 2012f na = not available. f = forecast. Source: Vietnam Ministry of Health, International Trade Administration, US Commercial Service, BMI na Medical device market (US$bn) 2005 Table: Medical Device Market Indicators, Historical Data and Forecasts 27.00 2008 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 60.23 Analgesics (US$mn) 2005 Table: Vietnam – OTC Market Indicators, Historical Data And Forecasts (US$mn) 0.51 2011f 10,149.58 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 29.00 3,861.44 OTC market (VNDbn) OTC market as % total market 0.24 OTC market (US$bn) 2005 Table: OTC Medicine Market Indicators, Historical Data and Forecasts 2.89 5,047.68 0.39 2014f 40.29 140.46 118.89 156.52 150.42 199.26 2014f 26.00 23,266.43 1.43 2019f Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Page 85 531.10 475.50 15.00 -460.50 Imports Exports Balance -663.50 19.10 682.60 2007 © Business Monitor International Ltd 13.62 16.70 0.63 - 1.56 903.00 2006 15.65 16.70 0.64 - 1.67 956.00 2007 19.39 16.47 0.66 - 1.75 974.00 2008 -715.78 23.60 739.38 2008 f = forecast. Source: Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, BMI 12.18 16.80 Births per 000 population Other OTCs (US$mn) 0.62 - 1.53 878.00 Doctors per 000 population Hospital admissions per 000 population Beds per 000 population Hospitals 2005 Table: Taiwan – Other Healthcare Indicators, Historical Data And Forecasts f = forecast. Source: International Trade Centre (ITC), BMI -513.60 17.50 2006 2005 Table: Pharmaceutical Trade Indicators, Historical Data and Forecasts (US$mn) 21.01 16.40 0.68 - 1.83 1,008.28 2009f -833.81 28.83 862.64 2009f 22.75 16.35 0.69 - 1.93 1,042.51 2010f -973.63 34.84 1,008.47 2010f 25.70 16.30 0.71 - 2.02 1,076.62 2011f -1,139.69 41.62 1,181.31 2011f 29.62 16.10 0.73 - 2.12 1,110.51 2012f -1,337.39 49.14 1,386.54 2012f 34.76 15.90 0.75 - 2.23 1,144.10 2013f -1,573.30 57.36 1,630.66 2013f 40.29 15.70 0.77 - 2.34 1,177.28 2014f -1,855.41 66.17 1,921.58 2014f Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Page 86 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... assistance for healthcare training as well as help develop Vietnam s medical infrastructure Reinforcing the trend of co-operation between regulators in various jurisdictions around the world, the Bulgarian government has announced plans to collaborate with Vietnam in the field of healthcare Under © Business Monitor International Ltd Page 31 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 the two-year... Ltd Page 18 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 be barred from establishing regional branch offices in Vietnam, which should make supply chain management less complex In fact, as of the start of 2009, local entities that are fully owned by foreign companies are no longer barred from importing pharmaceuticals into the country in an unrestricted fashion Clarification is still reportedly... In March 2010, Vietnam' s Ministry of Health decided to provide additional medications and supplements to children under age six for no charge, reports Viet Nam News The Head of the Ministry's Health Insurance Department announced that 58 more medicines were included on the list of treatments for heart © Business Monitor International Ltd Page 21 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 diseases,... announced that after a six month break, new cases of avian flu among poultry have been reported With © Business Monitor International Ltd Page 25 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Vietnam having the world’s second-highest human avian flu death toll (behind Indonesia), a WHO representative warned that Vietnam must take full precautions against the disease With regards to swine flu, in... 11 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Country Risk Vietnam is a stable Communist state and thus scores highly for policy continuity Its economic structure, which is characterised by increasing privatisation, is below global standards but improvements are expected Corruption is an issue, as is the sub-standard legal framework © Business Monitor International Ltd Page 12 Vietnam Pharmaceuticals. .. components of Vietnam s score are: © Business Monitor International Ltd Page 10 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Limits of Potential Returns Pharmaceutical market and country structure scores are weighed and Business Environment Ratings By Sub-Sector Score combined to form limits to potential Q31 0 returns Vietnam s score of 45 is Pharmaceutical Market 100 unchanged from the previous.. .Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Vietnam – Business Environment Ratings Table: Asia Pacific Pharmaceutical Business Environment Ratings For Q31 0 Limits of Potential Returns Risks to realisation of returns Pharmaceut ical Market Country Structure Limits Market Risks... drugs, such as biologics, cannot be manufactured in Vietnam, so some spending on imports is necessary This problem is developing rapidly, with spending on medicines for Vietnamese health insurance holders increasing by 43.8% in 2009 compared with the previous year © Business Monitor International Ltd Page 22 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Industry Trends and Developments Epidemiology... registered for sale in Vietnam, of which some 60% were produced locally The figures represent a marked improvement on 1995 when the local sector produced only 80 substances as well as on 2002, when 384 products were manufactured © Business Monitor International Ltd Page 13 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 Regulatory Regime The main regulatory authority in Vietnam is the Ministry... Pharmaceuticals & Healthcare Report Q3 2010 medical device firms as the government begins to tackle the problem According to reports in VietNamNet Bridge in October 2009, the Ho Chi Minh City Tumor and Cancer Hospital has launched a new treatment for cancer, stereotactic body radiation therapy, in response to this growing problem The incidence of diabetes has grown by three to four times in urban Vietnam; . deadline: June 2010 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 © Business Monitor International Ltd Page 2 Vietnam Pharmaceuticals & Healthcare Report Q3 2010 ©. market forecasts. Vietnam Pharmaceuticals & Healthcare Report Q3 2010 © Business Monitor International Ltd Page 6 SWOT Analysis Vietnam Pharmaceutical And Healthcare Industry SWOT. Vietnam Pharmaceuticals & Healthcare Report Q3 2010 © Business Monitor International Ltd Page 8 Vietnam Economic SWOT Strengths ! Vietnam has been one of