Vietnam pharmaceuticals and healthcare report q1 2009

Published by BUSINESS MONITOR INTERNATIONAL LTD Vietnam Pharmaceuticals & Healthcare Report Q1 2009 ISSN: 1748-2305 Including 5-year industry forecasts 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 © 2009 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd. All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content. Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Including 5-year industry forecasts by BMI Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Publication date: February 2009 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 © 2009 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 Q1 2009 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2009 CONTENTS Executive Summary .5 Vietnam Pharmaceutical And Healthcare Industry SWOT Vietnam Political SWOT Vietnam Economics SWOT Vietnam Business Environment SWOT . Vietnam – Business Environment Rankings .10 Table: Asia Pacific Pharmaceutical Business Environment Rankings For Q109 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 20 Epidemiology . 20 Healthcare Financing 23 Healthcare Insurance 24 Healthcare And Pharmaceutical Reforms 25 Foreign Partnerships . 26 Domestic Pharmaceutical Sector . 27 Recent Pharmaceutical Industry Developments . 28 Foreign Pharmaceutical Sector . 29 Traditional Medicines 30 Retail Sector 30 Table: Key Aspects Of Good Pharmacy Practice (GPP) In Developing Countries 31 Research And Development . 31 Vaccine Sector . 32 Biotechnology Sector . 33 Industry Forecast Scenario .35 Overall Market Forecast 35 Table: Vietnam – Pharmaceutical Expenditure, 2003-2013 36 Key Growth Factors – Industry 37 Key Growth Factors – Industry 37 Table: Vietnam – Health Expenditure, 2003-2013 . 38 Key Growth Factors – Macroeconomic . 39 Table: Vietnam – Economic Activity 41 Prescription Market Forecast 42 Table: Vietnam – Prescription Market Indicators, 2003-2013 (VNDmn unless otherwise stated) . 43 OTC Market Forecast 44 Table: Vietnam – OTC Medicine Expenditure, 2003-2013 (VNDmn unless otherwise stated) . 45 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Patented Market Forecast 46 Patented Market Forecast 46 Table: Vietnam – Patented Product Expenditure, 2003-2013 47 Generic Market Forecasts . 48 Table: Vietnam – Generics Drug Expenditure, 2003-2013 49 Export/Import Forecasts 50 Table: Vietnam – Pharmaceutical Trade Indicators, 2003-2013 (US$mn) 51 Medical Device Market Forecast . 52 Table: Vietnam’s Medical Device Market (US$mn unless otherwise stated) . 54 Other Healthcare Data Forecasts 55 Table: Vietnam – Other Healthcare Indicators, 2003-2012 . 55 Key Risks To BMI’s Forecast Scenario 56 Competitive Landscape .57 Company Profiles .58 Leading Multinational Manufacturers 58 Pfizer . 58 GlaxoSmithKline 60 Sanofi-Aventis 62 Novartis . 64 Merck & Co . 65 Indigenous Manufacturer Profiles 66 Vietnam Pharmaceutical Corporation (Vinapharm) 66 Vietnam OPV Pharmaceutical Co 68 Stada Vietnam 70 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 72 Vidipha Central Pharmaceutical Joint Stock Company . 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 Forecast Modelling .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 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Executive Summary Vietnam’s US$1.2bn pharmaceutical market is one of the most promising long-term prospects in our coverage universe. Annual per capita consumption of pharmaceuticals is low; however, we are forecasting a compound annual growth rate (CAGR) of 17.6% through to 2013. BMI believes that Vietnam's ambition to have a fully subscribed national health insurance plan in place by 2014 will be achieved before that date. The country's GDP is increasing rapidly, and the desire for universal membership has been displayed by both the state and potential policy holders. It is our opinion that the October 2008 announcement that premiums will be determined using a means test methodology was critical in garnering support for the programme from those on low income. The vast majority of hospitals in Vietnam are large state-owned facilities that are frequently overcrowded and generally offer only basic services. There are a growing number of private facilities that offer advanced services, but many local people on high incomes still travel abroad for healthcare. According to the General Statistics Office of Vietnam, there were a total of 956 hospitals in the South East Asian country during 2007, up from 842 in 2003. Demonstrating the sector’s rapid development, construction on Vietnam’s first applied biotechnology research centre started in September 2008. A total of VND530bn (US$32mn) will be spent on the project, which will cover 200 hectares. The centre will investigate biological solutions to agricultural problems and unmet medical needs. Completion of construction is expected in 2010. Sao Kim Company became the first Vietnamese drugmaker to receive Good Manufacturing Practice (GMP) certification from the World Health Organization (WHO) in October 2008. The company met with all of the WHO's GMP standards in pharmaceutical materials and received all certificates of GMP certification relating to both materials and products. It also received Good Laboratory Practice (GLP) and Good Safety Practice (GSP) certificates. Cancer is becoming increasingly prevalent in Vietnam. The main drivers are growing cigarette and alcohol consumption, the Westernisation of diets, worsening air quality, urbanisation and more people adopting a sedentary lifestyle. This is a trend seen in all countries, but Vietnam is not coping with the increasing burden well. BMI believes that there will be a growing opportunity for drugmakers and medical device firms as the government begins to tackle the problem. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Vietnam Pharmaceutical And Healthcare Industry SWOT Strengths ƒ ƒ ƒ ƒ Significant growth potential, given a population of approximately 86.1mn The government’s commitment to developing the health sector Sizeable local generics sector Strong traditional medicines segment with potential to improve the nonprescription drugs market in the longer term Weaknesses ƒ One of the least developed pharmaceutical markets in Asia, with low per capita spending on drugs Patent law notably below international standards 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 Domestic companies being forced to comply with international manufacturing standards (GMP), at a considerable expense Underdeveloped primary care services continuing to hamper access to medicines and improved product market penetration Multiple market barriers including the lack of freedom for foreign companies to operate freely in Vietnam ƒ ƒ ƒ ƒ ƒ ƒ ƒ ƒ Opportunities ƒ ƒ ƒ ƒ ƒ ƒ Threats ƒ ƒ ƒ ƒ 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 research-based multinationals The end of the price freeze has the potential to boost values despite a possible fall in volumes Radical restructuring of the pharmaceutical industry with an emphasis on foreign investment and biotechnology Improvements in pricing and regulatory environments to boost foreign company interest and investment in the country Recently ratified WTO membership to improve the trading climate and potentially, in the longer term, redress some pharmaceutical trade issues 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 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 Q1 2009 Vietnam Political SWOT Strengths Weaknesses Opportunities Threats ƒ The Communist Party government appears committed to market-oriented reforms necessary to double 2000's GDP per capita by 2010, as targeted. The one-party system is generally conducive to short-term political stability. ƒ Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. ƒ Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. ƒ There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent. ƒ The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. ƒ 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. ƒ Vietnamese dissidents are seeking external help, especially from the US. This could complicate Vietnam-US relations, with Washington having criticised Hanoi over its restrictions on religious freedom. ƒ Although strong domestic control will ensure little change to Vietnam's political scene in the next few years, over the longer term, the one-partystate will probably be unsustainable. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Vietnam Economics SWOT Strengths Weaknesses Opportunities Threats ƒ Vietnam has been one of the fastest growing economies in Asia in recent years, averaging growth of 8.0% a year. ƒ 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. ƒ Vietnam suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to external shocks. The fiscal picture is clouded by considerable 'off-the-books' spending. ƒ 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. ƒ WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. ƒ The government will continue to move forward with market reforms, including privatisation of the State-Owned Enterprises sector, and liberalising the banking sector. ƒ 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. ƒ Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government fails to curb inflation, it risks prolonging macroeconomic instability, which could lead to a potential crisis. ƒ 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 Q1 2009 Vietnam Business Environment SWOT Strengths Weaknesses Opportunities Threats ƒ Vietnam has a large, skilled and low-cost workforce that has made the country attractive to foreign investors. ƒ 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. ƒ 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. ƒ Vietnam remains one of the world's most corrupt countries. Its score in Transparency International's 2007 Corruption Perceptions Index was 2.6, lower than the regional average of 4.6. ƒ 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. ƒ 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. ƒ Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern. ƒ 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 Q1 2009 Recent Activities In early 2004 Vinapharm signed a cooperation agreement with the Shanghai Pharmaceutical Group of China. The two companies are focusing on technology transfer and the construction of units to develop antibiotics, traditional medicines and drug research. As part of planned initiatives, funding will be allocated to a variety of projects, including the exploration of Kalium (Potassium) in Laos. In addition, a Domestic Appliances and Personal Care (DAP) factory in the northern port city of Hai Phong and an Apatite Flotation Factory in northern Lao Cai province, as well as some fertiliser and antibiotics manufacturing plants, will receive funding. Vinachem is also co-operating with the Vietnam Rubber Corporation for the manufacture of auto tyres and latex gloves, and it is involved in a joint venture with foreign investors for producing coal. The government is promoting self-sufficiency in terms of satisfying pharmaceutical demand. The authorities are expecting that locally made medicines will account for 70% of the market by 2015 and 80% by 2020. To achieve these goals, Vinapharm will restructure to operate under a holding company. Due to be inaugurated in 2010, the Vietnam Pharmaceutical Group will develop a network of local factories to satisfy the basic needs of the average citizen. © Business Monitor International Ltd Page 67 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Vietnam OPV Pharmaceutical Co SWOT Analysis Strengths ƒ One of Vietnam’s most prominent pharmaceutical companies ƒ Government-promoted measures to increase domestic manufacturing ƒ Presence in prescription and consumer healthcare segments ƒ Partnership with foreign companies Weaknesses ƒ Most units facing financial difficulties ƒ Need to comply with international standards requiring substantial financial investment ƒ Need to import most of raw materials for pharmaceutical production Opportunities ƒ Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a particular focus on encouraging the domestic manufacture of drugs in order to reduce the country’s dependence on imports ƒ Improvement of regulatory climate following the WTO accession to attract foreign investment Threats ƒ Complex and discriminatory pricing policy ƒ Vietnam being increasingly susceptible to economic fluctuations Overview Contacts Vietnam OPV Pharmaceutical Co is one of the more prominent local drug ƒ OPV Pharmaceutical Co., Ltd Suite 803 Saigon Tower Building 29 Le Duan St District Ho Chi Minh City Vietnam ƒ Tel. +84 88 238 999 ƒ Fax. +84 88 275 689 ƒ http://opv.fuzing.com producers. OPV’s pharmaceutical plant is located in the Bien Hoa Industrial Zone II in Ho Chi Minh City. The firm also has extensive sales, marketing and distribution facilities in pharmaceuticals and consumer healthcare. OPV Pharmaceutical first set up operations in Vietnam in the 1950s. After a long period of interruption, the company made its return in 1993 with the construction of a US$20mn project to build a pharmaceutical manufacturing facility in Bien Hoa. The GMP-certified facility was opened in 2003. Recent Activities Leading Products In November 2005, the firm signed an agreement with UK pharmaceutical ƒ OpeCipro (ciprofloxacin) major GlaxoSmithKline (GSK) to produce GSK’s high-grade products in ƒ OpeClacine (clarithromycine) Vietnam. The locally produced branded medicines were expected to be ƒ Ameflu (acetaminophen, pseudoephedrin, dextromethorphan) priced at lower levels than imports of a similar nature. Previously, the company partnered with a number of foreign players including Bayer, Ciba Geigy, Mead Johnson, Merck & Co, Roche, Sandoz, Upjohn and Warner Lambert. Product Portfolio In terms of prescription pharmaceuticals, the company markets mostly © Business Monitor International Ltd Page 68 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 respiratory and anti-infective products. © Business Monitor International Ltd Page 69 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Stada Vietnam SWOT Analysis Strengths ƒ One of Vietnam’s most prominent pharmaceutical companies ƒ Financial backing from large foreign player ƒ Strong generic portfolio ƒ Presence in the erectile dysfunction market Weaknesses ƒ Most units facing financial difficulties ƒ Low patient purchasing power and insufficient healthcare funding ƒ Need to comply with international standards requiring substantial financial investment Opportunities ƒ Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a particular focus on encouraging domestic manufacture of drugs in order to reduce dependence on imports ƒ Improvement of regulatory climate following WTO accession to attract foreign investment ƒ Relaxation of price freeze to improve product revenues ƒ Healthcare modernisation initiatives Threats ƒ Complex and discriminatory pricing policy ƒ Vietnam being increasingly susceptible to economic fluctuations ƒ Increased competition following WTO entry Overview Contacts In 2002 German Stada formed a joint venture (Stada Vietnam) with privately ƒ Stada Vietnam K63/1 Country Road 80 My Hoa Hamlet Tan Xuan Ward Hoc Mon District Ho Chi Minh City Vietnam The joint venture has the potential to boost local exports of ARVs. Although ƒ Tel. +84 87 181 154 the generics will be used to meet domestic demand, with approximately ƒ Fax. +84 87 182 140 ƒ www.stada.de owned Vietnamese company Khuong Duy Pharmaceutical Company Ltd, engaged in manufacture and wholesaling. Stada has a manufacturing plant in Ho Chi Minh City, mostly supplying the local market. Stada Vietnam has an erectile dysfunction generic product, Tadalafil. 3,500 patients set to receive treatment in 2005 alone, the drugs will be exported to other Asian and African countries in the near term. The project, which is expected to help Vietnam reduce its soaring trade deficit in pharmaceuticals, will also boost regional sales – a factor that is likely to become a more attractive proposition for the production scheme. Recent Developments Leading Products In January 2008 Stada Vietnam opened the country's first production plant ƒ Tadalafil built to Western manufacturing standards. The new factory, located at the © Business Monitor International Ltd Page 70 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Vietnam-Singapore industrial park just outside Ho Chi Minh City, is the first to receive EU GMP certification. In May 2008 local Pymerpharco Joint Stock Co. announced that it will produce oral antibiotic Cefdinir (omnicef) in partnership with Stada. Financial Performance In 2005 the company posted an 18% decline in sales, to EUR6.1mn. The performance was boosted In the first nine months of 2006, with sales increasing by 288% to EUR17.1mn on the back of a one-time tender business focused on Q106. The tender contributed EUR 12.2mn to the overall business. In the first nine months of 2006 the company sold EUR4.8mn worth of generics (up by over 80% on the previous year), compared to EUR1.5mn of branded medicines (up by 27%). © Business Monitor International Ltd Page 71 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Vietnam Pharmaceutical Joint Stock Company (Ampharco) SWOT Analysis Strengths ƒ One of Vietnam’s largest companies ƒ Government encouragement of generics Weaknesses ƒ Most units facing financial difficulties ƒ Need to comply with international standards requiring substantial financial investment ƒ Need to import most of raw materials for pharmaceutical production Opportunities ƒ Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a particular focus on encouraging the domestic manufacture of drugs in order to reduce the country’s dependence on imports ƒ Relaxation of price freeze to improve product revenues ƒ Government push for self-sufficiency in pharmaceutical production ƒ Improvement of regulatory climate following the WTO accession to attract foreign investment Threats ƒ Complex and discriminatory pricing policy ƒ Vietnam being increasingly susceptible to economic fluctuations ƒ Domestic production and the trading of pharmaceutical products facing difficulties due to rising prices of pharmaceutical materials and medicines in the world market Overview Contacts Ampharco is one of the more prominent generics producers in Vietnam. In ƒ Ampharco Lot.20B,No.1 Street Tan Binh Industrial Park Ho Chi Minh City Vietnam 2007 Ampharco obtained the right to import and export pharmaceuticals directly from and to foreign partners. The company also operates a subsidiary in the US. ƒ Tel: +84 26 968 8808 Ampharco has a long history for an emerging market drugmaker. The ƒ Fax: +84 26 968 6806 forerunner of the company was ThaiVan Laboratories, which was founded in ƒ www.ampharco.com 1969, during the height of the Vietnam War. In addition to manufacturing, ThaiVan Laboratories was the exclusive distributor for several European pharmaceutical firms, including Allard (France), KaliChemie (Germany) and Farmitalia (Italy). Recent Activities The goal of Vietnam Pharmaceutical Joint Stock Company (Ampharco) to export its products to the US and other foreign markets has received a boost after investment funds were received from Vietnam Equity Holding (VEH). The new resources will be used to restructure Ampharco's finances and 'improve competitive capacity'. Acting under the supervision of investment fund management company © Business Monitor International Ltd Page 72 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Anpha Capital, VEH now owns 10% of Ampharco's issued shares. Given that Ampharco's charter capital was VND87bn (US$5.5mn) as of December 2007, BMI estimates that VEH spent US$550,000 on the investment, which is a shrewd move in our opinion. This is confirmed by Ampharco's profit projection. It expects to record net profit of VND50bn (US$3.2mn) this year, an increase of over 200% on the 2007 figure. Arguably the most significant development to affect Ampharco was its transformation into a joint stock company in 2003. This enabled the firm to attract investment and expand operations. During June 2007 Ampharco opened one of the country's first GMP-accredited facilities, which will allow it to export to developed markets. Demonstrating the scale of commitment, it cost US$15mn to build the plant, which boasts a special air conditioning system that prevents contamination between different areas of the building. Product Portfolio By 1979 Ampharco's product portfolio – which included K-Cort (corticoid), vitamin Campofort, vitamin B complex Becofort and beta-blocker Timol (timolol) – had become well known in Vietnam. Nowadays, the company has products in a number of therapeutic areas including cardiovascular, dermatology, genitory-urinary, antibiotics and allergy and immune system. Some of its products are allergic treatment Cezil (cefprozil) and Mepraz (omeprazole), indicated for stomach ulcers. Other products include consumer healthcare treatments Bosamin (herb extract) and nicotine replacement therapy Nicostop. © Business Monitor International Ltd Page 73 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Vidipha Central Pharmaceutical Joint Stock Company SWOT Analysis Strengths ƒ One of Vietnam’s more prominent pharmaceutical companies ƒ Financial backing from recent IPO ƒ Strong export portfolio Weaknesses ƒ Most units facing financial difficulties ƒ Low patient purchasing power and insufficient healthcare funding ƒ Need to comply with international standards requiring substantial financial investment Opportunities ƒ Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a particular focus on encouraging the domestic manufacture of drugs in order to reduce the country’s dependence on imports ƒ Improvement of regulatory climate following the WTO accession to attract foreign investment ƒ Relaxation of price freeze to improve product revenues ƒ Healthcare modernisation initiatives Threats ƒ Complex and discriminatory pricing policy ƒ Vietnam being increasingly susceptible to economic fluctuations ƒ Increased competition following WTO entry Overview Contacts Vidipha is one of the more prominent pharmaceutical companies in Vietnam. ƒ Vidipha 19-21 Nguyen Van Troi P. 12, Q. Phu Nhuan Vietnam tablets and solutions for injections and exports to Russia and Iraq, as well as ƒ Tel. +84 88 440 448 a number of South East Asian countries. ƒ Fax. +84 88 440 446 ƒ www.vidipha.com.vn In June 2006 Vidipha revealed its plan to raise US$2.3mn in an initial public offering (IPO) of more than 1mn shares. The company produces coated © Business Monitor International Ltd Page 74 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 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 0-64 50-54 50-54 0-44 0-44 0-34 0-34 0-24 0-24 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 Q1 2009 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 Q1 2009 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 2007e 2008f 2009f 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 Q1 2009 BMI Forecast Modelling 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: ƒ 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. ƒ 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. ƒ 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. ƒ 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. ƒ 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 Q1 2009 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 16 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 Q1 2009 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 Q1 2009 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 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... global standards, but improvements are expected Corruption is an issue, as is the sub-standard legal framework © Business Monitor International Ltd Page 11 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Market Summary In common with many of its regional neighbours, the Vietnamese Pharmaceutical Market By Segment (2008) pharmaceutical market is underdeveloped and suffers from poor regulatory and intellectual... import of APIs from abroad as well as rising staff, packaging and transportation costs and exchange rate fluctuations Due to complaints from patients and healthcare providers, the government put a cap on the prices of pharmaceuticals in late March 2008 © Business Monitor International Ltd Page 18 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 However, as the supply issues did not go away, the burden... only Bangladesh scoring below Vietnam © Business Monitor International Ltd Page 10 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Pharmaceutical Market Vietnam is an attractive market currently experiencing double-digit growth, and, importantly, we expect this trend to continue for at least the next five years However, very low annual per capita spending (US$12.80) and a relatively small market... drugmakers that had not fulfilled their contracts © Business Monitor International Ltd Page 19 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Industry Trends And Developments Epidemiology The majority of Vietnam s 86mn inhabitants live in rural areas Most are below the age of 35 and born after the conflict with France and the US While health outcomes are improving, child mortality remains high (at over... the © Business Monitor International Ltd Page 21 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 country had only 600,000 capsules of Tamiflu, which had been donated by Taiwan Nevertheless, it has been suggested that Vietnam has the capacity to produce 20mn doses of the drug a year Smoking is a major problem and between 30,000 and 40,000 people in Vietnam die of smoking-related diseases each year... provide free healthcare to children under the age of six In one regional hospital, the number of young children receiving treatment increased by over 30% in 2005 Local authorities claim healthcare expenditure is not sustainable at these levels, and many parents are now © Business Monitor International Ltd Page 23 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 bypassing the system and opting to... the treatment of incurable diseases and epidemic control The two countries have also discussed ways of transferring technology and training of medical and pharmaceutical experts The focus of the recent © Business Monitor International Ltd Page 26 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 meeting was prevention as a core of successful health improvement and control, with future conferences... However, because Vietnam s generic drug and OTC sectors are forecast to post healthy growth through 2012, we are confident that the investment will pay off in the medium term © Business Monitor International Ltd Page 29 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 The facility, which is awaiting approval from Vietnam s planning authorities, is expected to start production before the end of 2009 When... living in urban parts of Vietnam are resistant to penicillin © Business Monitor International Ltd Page 30 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Under GPP plans for Vietnam, all dispensed drugs will have to be safe and effective Pharmacies will be required to have proper facilities, including air conditioning, to ensure the right temperature for certain medicines, and a monitoring system... less than 10 days, as this would encourage people to sign up for the plan BMI expects both proposals to be implemented and membership to the programme to accelerate accordingly © Business Monitor International Ltd Page 24 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 Healthcare And Pharmaceutical Reforms In June 2005 the government unveiled a new 10-year industry development plan, aimed at increasing . date: February 2009 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 © Business Monitor International Ltd Page 2 Vietnam Pharmaceuticals & Healthcare Report Q1 2009 ©. begins to tackle the problem. Vietnam Pharmaceuticals & Healthcare Report Q1 2009 © Business Monitor International Ltd Page 6 Vietnam Pharmaceutical And Healthcare Industry SWOT Strengths. Vietnam Pharmaceuticals & Healthcare Report Q1 2009 © Business Monitor International Ltd Page 9 Vietnam Business Environment SWOT Strengths  Vietnam has a large, skilled and