Q1 2016 www.bmiresearch.com VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT INCLUDES 10-YEAR FORECASTS TO 2024 Published by:BMI Research Vietnam Pharmaceuticals & Healthcare Report Q1 2016 INCLUDES 10-YEAR FORECASTS TO 2024 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: December 2015 ISSN: 1748-2305 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2015 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Pharmaceuticals & Healthcare Report Q1 2016 CONTENTS BMI Industry View Table: Headline Pharmaceuticals & Healthcare Forecasts (Vietnam 2013-2019) SWOT Industry Forecast 11 Pharmaceutical Market Forecast 11 Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019) 14 Healthcare Market Forecast 15 Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 18 Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 18 Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 19 Prescription Drug Market Forecast 20 Table: Prescription Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 22 Patented Drug Market Forecast 23 Table: Patented Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 24 Generic Drug Market Forecast 25 Table: Generic Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 26 OTC Medicine Forecast 27 Table: Over-The-Counter (OTC) Medicine Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 29 Pharmaceutical Trade Forecast 30 Table: Pharmaceutical Trade Data And Forecasts (Vietnam 2013-2019) 32 Table: Pharmaceutical Trade Data And Forecasts local currency (Vietnam 2013-2019) 32 Pharmaceuticals & Healthcare Risk/Reward Index 33 Asia Pacific Risk/Reward Index Vietnam Risk/Reward Index Rewards Risks 33 40 40 40 Regulatory Review 42 Pharmaceutical Advertising 43 Intellectual Property Issues 44 Corruption 47 Pricing Regime 48 Reimbursement Regime 53 Pricing And Reimbursement Developments 54 Market Overview 56 Healthcare Sector 57 Hospital Sector 60 Table: Healthcare Resources (Vietnam 2009-2014) 60 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Healthcare Personnel (Vietnam 2009-2014) 60 Table: Healthcare Activity (Vietnam 2009-2014) 61 Private Healthcare Sector Healthcare Insurance Healthcare And Pharmaceutical Reform Research And Development Biotechnology Sector Clinical Trials 63 64 65 66 67 70 Competitive Landscape 75 Research-Based Industry Domestic Industry Foreign Industry Traditional Medicines 75 76 77 78 Table: Multinational Market Activity 79 Pharmaceutical Distribution 80 Pharmaceutical Retail Sector 81 Table: Key Aspects Of Good Pharmacy Practice In Developing Countries 82 Company Profile 83 DHG Pharmaceutical GlaxoSmithKline Sanofi Traphaco Pharmaceutical Vietnam Pharmaceutical Corporation (Vinapharm) 83 86 88 91 93 Demographic Forecast 96 Table: Population Headline Indicators (Vietnam 1990-2025) 97 Table: Key Population Ratios (Vietnam 1990-2025) 97 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 98 Table: Population By Age Group (Vietnam 1990-2025) 98 Table: Population By Age Group % (Vietnam 1990-2025) 99 Glossary 101 Methodology 103 Pharmaceutical Expenditure Forecast Model 103 Healthcare Expenditure Forecast Model 103 Notes On Methodology 104 Risk/Reward Index Methodology 105 Index Overview 106 Table: Pharmaceutical Risk/Reward Index Indicators 106 Indicator Weightings 107 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2016 BMI Industry View BMI View: Vietnam will be a highly attractive market for private healthcare providers in the region Beyond the expected strong increases in healthcare spending, there are also significant service gaps in the market that will provide revenue earning opportunities to companies looking to invest in the sector These stem from the underdeveloped state of the public health sector characterised by overcrowded hospitals and patients with limited access to advanced medical treatments This will in turn affect the strategies employed by pharmaceutical firms, as private hospitals will present an alternative sales channel for high value medicines Headline Expenditure Projections ■ Pharmaceuticals: VND80.73trn (USD3.81bn) in 2014 to VND92.47trn (USD4.17bn) in 2015; +14.5% in local currency terms and +9.4% in US dollar terms Forecast unchanged from last quarter ■ Healthcare: VND234.91trn (USD11.08bn) in 2014 to VND258.67bn (USD11.66bn) in 2015; +10.1% in local currency terms and +5.2% in US dollar terms Forecast unchanged from last quarter Table: Headline Pharmaceuticals & Healthcare Forecasts (Vietnam 2013-2019) 2013 2014 2015f 2016f 2017f 2018f 2019f 3.295 3.808 4.167 4.586 5.222 5.938 6.715 Pharmaceutical sales, % of GDP 1.93 2.05 2.19 2.29 2.33 2.35 2.37 Pharmaceutical sales, % of health expenditure 32.5 34.4 35.7 37.0 38.1 39.0 39.7 10.146 11.081 11.655 12.386 13.702 15.227 16.925 Pharmaceutical sales, USDbn Health spending, USDbn f = BMI forecast Source: WHO, National Sources, BMI Risk Reward Index Vietnam's Pharmaceutical Risk Reward Index score for Q116 is 48.4 out of the maximum 100 The country scored above average for overall market expenditure and sector value growth Consequently, with this moderate score, Vietnam is ranked 12th (same as in the previous quarter) out of the 19 key Asia Pacific markets, level with Thailand and Indonesia © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Key Trends And Developments ■ As announced in September, under a new circular issued by Vietnam's Ministry of Health and Ministry of Finance, patients will be allowed to pay hospital fees through their health insurance for health examinations and treatments on weekends and holidays as long as the correct number of medical personnel are present and assure proper professional conditions with enough equipment; the circular is expected to help working people who face difficulties coming to check ups and treatments on weekdays ■ In September, Vietnam's education and training ministry has ordered the department of education and training, universities and colleges to increase awareness on health insurance programmes amongst students, pupils and parents in a move towards universal health coverage in the country Based on the country's social insurance data, social health insurance covers 85% of students and pupils at present and the participation rate is low due to poor attention being given by some educational establishments, ineffective communication and insufficient collaboration between the education department and the health and social insurance sectors ■ As announced in September, the Japanese government is promoting its healthcare and preventive medicine industries to foreign markets and Vietnam is among the targeted countries, according to the Japan External Trade Organization's Director Yasuzumi Hirotaka Heart diseases, diabetes and obesity are among the biggest risks threatening the Vietnamese and people with rising incomes prefer better, premier healthcare services that Japanese businesses can offer BMI Economic View We expect Vietnam's fiscal revenue growth to accelerate on the back of a robust economy, ongoing SOE reforms and the positive tax reform policies that have been implemented in recent years That said, a continued lack of spending prudence by the government will act as a drag As such, we forecast the country's fiscal deficit as a share of GDP to narrow marginally to 4.9% in 2016, from an estimated 5.0% in 2015 BMI Political View Political and economic ties between Vietnam and Japan look set to strengthen further over the coming years, as both countries seek to forge a strategic partnership to counterbalance China's growing assertiveness in the region © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2016 SWOT Pharmaceutical SWOT Analysis Strengths ■ Significant growth potential, given a large and growing population ■ The government's commitment to developing the health sector ■ Sizeable local generic drugs 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 Weaknesses ■ 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 ■ No bioequivalence requirement in place for locally made generic medicines ■ Little distinction made between prescription and over-the-counter 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, which makes it vulnerable to currency movements ■ Underdeveloped primary care services and a shortage of trained pharmacists are continuing to hamper access to medicines and product market penetration ■ Population concentrated in rural, rather than urban, areas, preventing access to modern drugs and encouraging dependence upon traditional medicines Opportunities ■ The Association of Southeast Asian Nations harmonisation initiative, including the adoption of Western regulatory standards such as International Conference on Harmonisation and WHO guidelines © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Pharmaceutical SWOT Analysis - Continued ■ 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 traditional Chinese medicine market, in addition to fledging biotechnology ■ Full WTO membership improving the trading climate and potentially, in the longer term, redressing pharmaceutical trade issues ■ Requirement for domestic companies to comply with international good manufacturing practices should boost exports Threats ■ 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 provision, before higher levels of foreign direct investment can be expected ■ The government is increasingly interfering in the industry, protecting indigenous firms through the use of legal trade barriers, which will affect competitiveness ■ Pharmaceutical price inflation threatens to put medicines out of reach of the poor and therefore limit market volume growth ■ Legalisation of parallel imports negatively impacting performance of patented drugs © Business Monitor International Ltd Page 10 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 develop a network of local factories to satisfy the basic needs of the average citizen, although no confirmation of the progress in this area is available Developments 2014 ■ In January 2014, the firm was granted certification of good distribution practice and good storage practice 2010 ■ Company Details ■ ■ Vinapharm has a stake in a new production plant, which was completed in October 2010 With a 25% share of the venture (Danapha holds 51% and US AQP a 24% share) Vinapharm will benefit from US technology and investment Vietnam Pharmaceutical Corporation (Vinapharm) 138B Giang Vo St Ba Dinh District Hanoi Vietnam ■ Tel: +84 043 443 151 ■ Website: http://vinapharm.com.vn © Business Monitor International Ltd Page 95 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail the population pyramid for 2015, the change in the structure of the population between 2015 and 2050 and the total population between 1990 and 2050 The tables show indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split and life expectancy Population (1990-2050) 150 100 50 2050f 2045f 2040f 2035f 2030f 2025f 2020f 2015f 2010 2005 2000 1990 Vietnam - Population, mn f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 96 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Vietnam Population Pyramid 2015 (LHS) & 2015 Versus 2050 (RHS) Source: World Bank, UN, BMI Table: Population Headline Indicators (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f 68,209 80,285 84,203 88,357 93,447 98,156 102,092 na 1.1 0.9 1.0 1.1 0.9 0.7 Population, total, male, '000 33,583 39,551 41,469 43,626 46,224 48,590 50,510 Population, total, female, '000 34,625 40,734 42,734 44,730 47,223 49,566 51,581 Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98 Population, total, '000 Population, % y-o-y na = not available; f = BMI forecast Source: World Bank, UN, BMI Table: Key Population Ratios (Vietnam 1990-2025) Active population, total, '000 Active population, % of total population Dependent population, total, '000 Dependent ratio, % of total working age © Business Monitor International Ltd 1990 2000 2005 2010 2015f 2020f 2025f 38,808 49,712 55,795 61,655 65,572 67,775 69,459 56.9 61.9 66.3 69.8 70.2 69.0 68.0 29,401 30,573 28,408 26,702 27,875 30,381 32,633 75.8 61.5 50.9 43.3 42.5 44.8 47.0 Page 97 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Key Population Ratios (Vietnam 1990-2025) - Continued Youth population, total, '000 1990 2000 2005 2010 2015f 2020f 2025f 25,494 25,416 22,866 20,919 21,576 22,487 22,335 65.7 51.1 41.0 33.9 32.9 33.2 32.2 3,907 5,157 5,542 5,783 6,298 7,893 10,298 10.1 10.4 9.9 9.4 9.6 11.6 14.8 Youth population, % of total working age Pensionable population, '000 Pensionable population, % of total working age f = BMI forecast Source: World Bank, UN, BMI Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 1990 Urban population, '000 2020f 2025f 13,815.9 19,568.8 22,971.6 26,853.7 31,391.9 36,120.7 40,780.9 Urban population, % of total Rural population, '000 2000 20.3 24.4 2005 27.3 2010 30.4 2015f 33.6 36.8 39.9 54,393.7 60,716.8 61,232.2 61,504.1 62,055.7 62,036.0 61,311.7 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.2 60.1 Life expectancy at birth, male, years 66.0 68.4 69.3 70.2 71.2 72.1 73.1 Life expectancy at birth, female, years 75.1 78.1 79.2 80.0 80.6 81.1 81.6 Life expectancy at birth, average, years 70.5 73.3 74.3 75.1 75.9 76.7 77.4 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, total, '000 9,211 7,244 6,751 7,265 7,740 7,601 7,108 Population, 5-9 yrs, total, '000 8,512 9,119 7,130 6,648 7,221 7,698 7,562 Population, 10-14 yrs, total, '000 7,769 9,052 8,983 7,005 6,614 7,187 7,664 Population, 15-19 yrs, total, '000 7,277 8,401 8,941 8,877 6,972 6,583 7,156 Population, 20-24 yrs, total, '000 6,570 7,610 8,242 8,764 8,803 6,908 6,522 Population, 25-29 yrs, total, '000 5,938 7,019 7,408 8,022 8,664 8,705 6,823 Population, 30-34 yrs, total, '000 5,079 6,300 6,863 7,223 7,932 8,572 8,616 Population, 35-39 yrs, total, '000 3,842 5,746 6,190 6,718 7,146 7,850 8,488 Population, 40-44 yrs, total, '000 2,447 4,938 5,663 6,096 6,640 7,065 7,766 Population, 45-49 yrs, total, '000 2,003 3,710 4,880 5,592 6,004 6,543 6,968 © Business Monitor International Ltd Page 98 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Population By Age Group (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 50-54 yrs, total, '000 1,956 2,331 3,658 4,801 5,467 5,875 6,410 Population, 55-59 yrs, total, '000 2,033 1,873 2,223 3,501 4,625 5,275 5,681 Population, 60-64 yrs, total, '000 1,658 1,779 1,723 2,055 3,314 4,392 5,023 Population, 65-69 yrs, total, '000 1,402 1,759 1,599 1,551 1,894 3,066 4,081 Population, 70-74 yrs, total, '000 1,021 1,313 1,520 1,390 1,369 1,682 2,739 Population, 75-79 yrs, total, '000 747 977 1,073 1,254 1,158 1,150 1,424 Population, 80-84 yrs, total, '000 426 593 726 809 957 893 895 Population, 85-89 yrs, total, '000 221 334 382 479 541 649 613 Population, 90-94 yrs, total, '000 70 131 176 208 265 305 370 Population, 95-99 yrs, total, '000 15 40 52 73 88 114 133 Population, 100+ yrs, total, '000 11 16 23 30 39 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group % (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, % total 13.50 9.02 8.02 8.22 8.28 7.74 6.96 Population, 5-9 yrs, % total 12.48 11.36 8.47 7.52 7.73 7.84 7.41 Population, 10-14 yrs, % total 11.39 11.28 10.67 7.93 7.08 7.32 7.51 Population, 15-19 yrs, % total 10.67 10.46 10.62 10.05 7.46 6.71 7.01 Population, 20-24 yrs, % total 9.63 9.48 9.79 9.92 9.42 7.04 6.39 Population, 25-29 yrs, % total 8.71 8.74 8.80 9.08 9.27 8.87 6.68 Population, 30-34 yrs, % total 7.45 7.85 8.15 8.18 8.49 8.73 8.44 Population, 35-39 yrs, % total 5.63 7.16 7.35 7.60 7.65 8.00 8.31 Population, 40-44 yrs, % total 3.59 6.15 6.73 6.90 7.11 7.20 7.61 Population, 45-49 yrs, % total 2.94 4.62 5.80 6.33 6.43 6.67 6.83 Population, 50-54 yrs, % total 2.87 2.90 4.34 5.43 5.85 5.99 6.28 Population, 55-59 yrs, % total 2.98 2.33 2.64 3.96 4.95 5.37 5.57 Population, 60-64 yrs, % total 2.43 2.22 2.05 2.33 3.55 4.47 4.92 Population, 65-69 yrs, % total 2.06 2.19 1.90 1.76 2.03 3.12 4.00 Population, 70-74 yrs, % total 1.50 1.64 1.81 1.57 1.47 1.71 2.68 Population, 75-79 yrs, % total 1.10 1.22 1.27 1.42 1.24 1.17 1.40 Population, 80-84 yrs, % total 0.63 0.74 0.86 0.92 1.02 0.91 0.88 © Business Monitor International Ltd Page 99 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Population By Age Group % (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 85-89 yrs, % total 0.33 0.42 0.45 0.54 0.58 0.66 0.60 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.28 0.31 0.36 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.09 0.12 0.13 Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 100 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Glossary ■ Pharmaceuticals, medicines, drugs: synonym terms used interchangeably ■ Pharmaceutical market/sales: the sum of revenues generated by generic, patented, and over-the-counter (OTC) drugs through hospitals, retail pharmacies and other channels Unless otherwise stated, market value is reported at final consumer price including mark-ups, taxes, etc ■ Prescription drugs: patented and generic drugs regulated by legislation that requires a physician's prescription before they can be sold to a patient ■ Patented drug: an innovative medicine granted intellectual property protection by the patent and trademark office The patent may encompass a wide range of claims, such as active ingredient, formulation, mode of action, etc, giving the patent holder the sole right to sell the drug while the patent is in effect ■ Generic drug: a bioequivalent medicine that contains the same active ingredient as an originator drug The originator drug is an innovative medicine that no longer has intellectual property protection due to patent expiry ■ OTC drug: a medicine that does not require a prescription to be sold to patients Also known as nonprescription medicines ■ Counterfeit drugs: unregistered and illegal medicines which have not been subject to regulatory assessments to ensure quality, safety, efficacy and manufacturing standards ■ Similares: non-bioequivalent alternatives to either an originator patented drug or a generic drug While similares and the originator/generic drug have a common indication, similares not always contain the same active ingredient as an originator and invariably have a different pharmacokinetic and pharmacodynamic profile Prevalent in select South American countries, similares are legal BMI does not include their sales in total pharmaceutical market values ■ Health expenditure: the sum of the funds mobilised by government and private systems for the operation of a healthcare system, according to the WHO It includes the purchase of healthcare services and goods by public entities such as ministries and social security institutions; or by private entities such as non-profit institutions, commercial insurances and households acting as complementary funders to the previously cited institutions or unilaterally disbursing health commodities The revenue base of these entities varies by country and comprises multiple sources The inclusion of this in BMI's forecasts necessitates taking into account the essential attributes of country-specific health accounting such as comprehensiveness, consistency, standardisation and timeliness ■ Government health expenditure: the sum of outlays for health maintenance, restoration or enhancement paid by government entities such as a ministry of health, other ministries, parastatal organisations and social security agencies, including transfer payments to households to offset medical care costs and extrabudgetary funds to finance healthcare provision ■ Private health expenditure: the sum of outlays for health by private entities such as commercial or mutual health insurance, households, non-profit institutions serving households, resident corporations and quasi-corporations not controlled by governments, according to the WHO ■ Medical devices: products used for diagnosis or therapy in patients Whereas pharmaceuticals achieve their principal action by pharmacological, metabolic or immunological means, medical devices act by physical or mechanical means Medical devices include a wide range of products, including syringes, thermometers, blood-sugar tests, prosthetic limbs, ultrasound scans and X-ray machines © Business Monitor International Ltd Page 101 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 ■ Burden of Disease Database (BoDD): BMI's disease database incorporates WHO, World Bank, IMF and BMI's own data to create a proprietary dataset BoDD data are quantified as the sum of disabilityadjusted life years lost to a disease in a particular country ■ Disability-adjusted life years (DALYs): the sum of the years of life lost (YLL) due to premature mortality in a population and the years lost due to disability (YLD) for incident cases of the health condition The DALY is a health gap measure that extends the concept of potential years of life lost due to premature death (PYLL) to include equivalent years of 'healthy' life lost in states of less than full health (broadly termed 'disability') One DALY represents the loss of one year of equivalent full health © Business Monitor International Ltd Page 102 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Methodology Pharmaceutical Expenditure Forecast Model Historic pharmaceutical market data is 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 Currently available data varies in confidence levels, so it is calibrated by BMI's Pharmaceuticals & Healthcare analysts In the absence of a complete time series of numbers, intermediate years are calculated from secondary sources This 'composite' approach is used to ensure the accuracy and consistency of historic data, which is crucial for reliable forecasts To remove the effect of inflation, real pharmaceutical expenditure figures are then calculated by removing the annual average consumer price index (CPI) Real per-capita pharmaceutical expenditure numbers are calculated by dividing by population figures A linear regression (see Note for explanation) is then performed on five years of real per-capita pharmaceutical expenditure against real per-capita final consumption (see Note 2) From analysis of the top 130 economies, BMI has established a strong statistical relationship between pharmaceutical expenditure and final consumption expenditure (r = 0.985) Healthcare Expenditure Forecast Model Historic public and private healthcare expenditure data is sourced from the World Health Organization (WHO)'s Global Health Expenditure Database, which contains the National Health Accounts (see Note for methodology) © Business Monitor International Ltd Page 103 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Data is provided in nominal local currency terms To remove the effect of inflation, real healthcare expenditure figures are then calculated by removing the annual average CPI Real per-capita healthcare expenditure numbers are calculated by dividing by population figures A linear regression is then performed (see Note for explanation) This is first on five years of real percapita public healthcare expenditure against real per-capita government final consumption expenditure (see Note for definition) This generates a 10-year forecast of future of real per-capita public healthcare expenditure figures from 'known' projected real per-capita government final consumption expenditure figures Another linear regression is simultaneously performed on real per-capita private healthcare expenditure against real per-capita private final consumption expenditure (see Note for definition) To generate the nominal public healthcare spending forecast, population and CPI numbers are returned to both real per-capita public healthcare expenditure figures and real per-capita private healthcare expenditure figures The overall healthcare expenditure forecast is then calculated by combining public and private healthcare expenditure Notes On Methodology Note 1: National Health Accounts methodology The global health expenditure database that the WHO has maintained for the past 10 years provides internationally comparable numbers on national health expenditures The WHO updates the data annually, taking, adjusting and estimating the numbers based on publicly available reports (national health account reports, reports from ministries of finance, central banks, national statistics offices, public expenditure information and reports from the World Bank, the IMF, etc) The estimates are sent out to the ministries of health for validation prior to publication, but users are advised that country data may still differ in terms of definitions, data collection methods, population coverage and estimation methods used This database is the source of the health expenditure tables in the World Health Statistics Report and the WHO Global Health Observatory © Business Monitor International Ltd Page 104 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Note 2: Linear regression equation y = mx + b Where y = unknown variable, m = slope of gradient, x = known variable, and b = where the line crosses the y-axis Note 3: Final consumption is the sum of government final consumption expenditure and private final consumption expenditure Government final consumption expenditure is the sum of expenditure on final goods and services by the government Included in this are public sector salaries, but it does not include transfer payments such as unemployment benefits or pensions Private final consumption expenditure is the sum of all private consumption of goods and services within the economy, including both durable and nondurable goods Housing purchases, however, are excluded Government final consumption expenditure and private final consumption expenditure are the 'G' and 'C' in this equation: GDP = C + I + G + (X - M) Where GDP = gross domestic product, C = private final consumption expenditure, I = gross investment, G = government final consumption, X = exports, and I = imports Risk/Reward Index Methodology Geographic diversification may be a favourable strategy for any multinational pharmaceutical company but it is vital that a company recognises both the rewards and the risks present in a market, in both developed and emerging pharmaceutical markets BMI's index, which provides a globally comparative and numerically based assessment of a market's attractiveness, was established to address this BMI's Pharmaceutical Risk/Reward Index (RRI) analyses and assesses a market's attractiveness to multinational drugmakers looking to launch innovative medicines in the country Our approach in assessing the risk/reward balance incorporates our industry-leading Country Risk Index (CRI), drawing on our 25year expertise in assessing political, economic and business operational risk, as well as our in-depth knowledge of the global pharmaceutical industry It should be emphasised that the Pharmaceutical RRIs broadly assess the rewards and the risks that a company will face when looking to launch an innovative drug in a market For example, we not differentiate between drugs that are a part of different therapeutic groups or whether the drug being © Business Monitor International Ltd Page 105 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 launched is the first to be launched in the market or will be one of the many different drugs of the same therapeutic class that has been launched in the market Index Overview With regards to assessing rewards, we identify industry specific factors (such as the size of the pharmaceutical market) and country specific factors (such as the size of the pensionable population) that represent opportunities to would-be investors With regards to assessing risks, we identify industry specific dangers (such as approvals expediency) and those emanating from the state's political/economic profile (such as bureaucracy) that call into question the likelihood of anticipated returns being realised over the assessed time period With regard to the economic and political assessment, only aspects most relevant to the pharmaceutical industry are incorporated in the assessment Table: Pharmaceutical Risk/Reward Index Indicators Rationale Rewards Industry Rewards Market expenditure, USDbn Denotes breadth of pharmaceutical market Large markets score higher than smaller ones Market expenditure per capita, USD Denotes depth of pharmaceutical market High value markets score better than low value ones Sector value growth, % y-o-y Denotes sector dynamism Scores based on annual average growth over five-year forecast period Country Rewards Urban-rural split Urbanisation is used as a proxy for development of medical facilities Predominantly rural states score lower Pensionable population, % of total Proportion of the population over 65 years of age States with ageing populations tend to have higher per-capita expenditure Population growth, 2003-2015 Fast-growing states suggest better long-term trend growth for all industries Risks Industry Risks Patent respect Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Policy reinforcement Markets with full and equitable access to modern medicines score higher than those with minimal state support Approvals expediency High scores awarded to markets with a swift appraisal system Those that are weighted in favour of local industry or are corrupt score lower © Business Monitor International Ltd Page 106 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Pharmaceutical Risk/Reward Index Indicators - Continued Rationale Country Risks Economic diligence Evaluates the structural balance of the economy, noting issues such as reliance on single sectors for exports/growth, and past economic volatility Policy continuity Evaluates the risk of a sharp change in the broad direction of government policy Lack of bureaucracy Denotes ease of conducting business in the state Legal diligence Denotes the strength of legal institutions in each state Security of investment can be a key risk in some emerging markets Business Transparency Denotes the risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies' ability to compete Source: BMI Indicator Weightings Source: BMI The weighting of each indicator reflects its relative importance to the pharmaceutical industry and the relative reward or risk that each factor poses to drug companies The score assigned to each sub-sector (ie Industry Rewards) indicates the weighting of the sub-sector segment in the final RRI, and the score assigned to each indicator shows each indicator's influence within the sub-sector and the final RRI All the indicators and their weightings are visible, improving the transparency of the index, allowing for the identification of regional (or group) outperformers across one indicator © Business Monitor International Ltd Page 107 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Uses For BMI's Pharmaceutical RRIs ■ Strategic decision making and country/market comparisons, providing quantifiable reasons as to why one market is more attractive than another ■ Assessing the viability of new markets ■ A benchmark for internal rating systems ■ Assessing frontier markets or markets in which data collection is difficult ■ Internal presentations Principals Likely To Derive Benefit ■ Disease manager ■ Country manager ■ Regional manager ■ CEO and other senior executives involved in high level strategic decisions ■ Business development team ■ Credit risk team © Business Monitor International Ltd Page 108 Reproduced with permission of the copyright owner Further reproduction prohibited without permission [...]... International Ltd Page 14 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Healthcare Market Forecast BMI View: Over the long-term, Vietnam' s healthcare sector is forecast to grow in accordance with its strong economic growth However, we highlight that rising healthcare expenditure does not necessarily equate to quality healthcare provision Latest Updates ■ In September, Vietnam' s Prime Minister... as improving health infrastructure © Business Monitor International Ltd Page 17 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) Health spending, USDbn Health spending, USDbn, % yo-y Health spending, VNDbn 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f 8.3 9.3 10.1 11.1 11.7 12.4 13.7 15.2 16.9 16.3 11.3 9.3... 39.9 39.5 39.2 f = BMI forecast Source: World Health Organization, BMI © Business Monitor International Ltd Page 18 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f Private health spend, USDbn 4.6 5.3 5.9 6.5 6.9 7.4 8.2 9.2 10.3 Private health spend, USDbn,... © Business Monitor International Ltd Page 29 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Pharmaceutical Trade Forecast BMI View: Data from UNComtrade do not specify the type of finished pharmaceuticals traded (i.e whether they are patented or generic drugs) However, given that Vietnam is a developing country with low percapita pharmaceutical and healthcare expenditure (USD41.2 and USD119.9... overcrowded facilities and rely on relatives to complement the provision of care © Business Monitor International Ltd Page 12 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 In fact, according to a survey by the Vietnam Union of Science and Technology Associations published on the VietNamNet Bridge website in September 2009, gifts - which we interpret mostly as cash, but can also be physical goods -... GMP standards © Business Monitor International Ltd Page 13 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019) Pharmaceutical sales, USDbn Pharmaceutical sales, USDbn, % y-o-y Pharmaceutical sales, VNDbn Pharmaceutical sales, VNDbn, % y-o-y 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f 2.4 2.8 3.3 3.8 4.2 4.6 5.2 5.9 6.7... modernise traditional medicine by 2020 under decree 2166/QD-TTg © Business Monitor International Ltd Page 28 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Over-The-Counter (OTC) Medicine Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f OTC medicine sales, USDbn 0.653 0.757 0.871 0.997 1.081 1.178 1.329 1.496 1.674 OTC... Administration of Vietnam, part of the Health ministry, has launched an online public service facilitating drugmakers to register drug prices Companies will be able to submit documents, pay fees and check the progress of documents being processed through the online platform from the beginning of 2016 © Business Monitor International Ltd Page 11 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Pharmaceutical... locally made drugs under the scheme, which would bring downside risks to foreign drugmakers © Business Monitor International Ltd Page 31 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Pharmaceutical Trade Data And Forecasts (Vietnam 2013-2019) 2013 2014 2015f 2016f 2017f 2018f 2019f Pharmaceutical exports, USDmn 93.77 116.47 141.94 170.53 204.33 242.54 283.26 Pharmaceutical exports, USDmn,... -63,285,945 -70,850,260 -78,879,463 -87,370,787 f = BMI forecast Source: United Nations Comtrade Database DESA/UNSD, BMI © Business Monitor International Ltd Page 32 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Pharmaceuticals & Healthcare Risk/Reward Index Asia Pacific Risk/Reward Index Geographic diversification may be a favourable strategy for multinational pharmaceutical companies, but it ... information hereto contained Vietnam Pharmaceuticals & Healthcare Report Q1 2016 CONTENTS BMI Industry View Table: Headline Pharmaceuticals & Healthcare Forecasts (Vietnam 2013-2019) ... Business Monitor International Ltd Page 14 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Healthcare Market Forecast BMI View: Over the long-term, Vietnam' s healthcare sector is forecast to grow... Page 18 Vietnam Pharmaceuticals & Healthcare Report Q1 2016 Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 2011 2012 2013 2014 2015f 2016f 2017f