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PHARMA
SUPPLY CHAIN

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RESEARCH INDEX
I. Overview p. 4 1. Gobal
p. 5 2. Vietnam
p. 5 3. Forecast

II.Production p. 6 1. Local production

p. 7 2. Trade

III. Consumption p. 11 1. Price

p. 13 2. Market
p. 14 3. Business Location

IV. Supply chain p. 16 1. Suppliers Of Raw Materials

of Vietnam ‘s p. 19 2. Pharmaceutical Manufacturers
pharmaceutical
industry p. 20 3. Outsourced Processing Companies
Franchised Production
p. 21 4. Distribution System

V. Conclusion p. 23

REFERENCES p. 23

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I.OVERVIEW
1. GLOBAL 2. VIETNAM
In the 2004-2013 period, the global drug spent has achieved a steady growth of According to BMI’s research data, the total market size of Vietnam’s
an average 5.8% per year from USD455 bn in 2004 and subsequently reaching pharmaceutical industry reached USD3,320 million in 2013, up 17% from
USD717 bn in 2013. USD2,840 million in 2012
According to EvaluatePharma, total global drug spent will reached USD900 bn Decision Resources Group finds that Vietnam is currently one of the fastest
in 2018. Average growth rate during 2014-2018 period will be around 5.7% per growing pharmaceutical markets in Southeast Asia, recording a growth rate
year. That is to say the average growth rate of patent drugs will be 5.5% per year, of nearly 17 percent and exceeding $3 billion in size in 2013. It is expected to
compared with that of generic drugs - about 7.1% per year. grow at a rate of more than 20 percent through 2017. According to Business
With their combined total population of about 3.7 bn (making up above 50% the Monitor International, Vietnam ranks 13 of 175 countries for the fastest
world’s population), India, China and other pharmerging countries are bound to growing global markets in drug spending.
be booming markets in the near future. As projected by IMS Health, proportion According to Vietnam’s Ministry of Health (MoH), the country has 140 private
of drug spent from pharmerging countries will rise from 20% in 2011 to 30% of hospitals and close to 900 public hospitals. Of the private hospitals, six have
total drug spent in 2016. foreign investments totaling close to $95 million.
The Vietnamese government is making its own investments in healthcare
India 33 infrastructure. In its 2013 budget, the MoH established funding for new
facilities (and upgrades to aging facilities) in rural and disadvantaged areas.
Pharmerging countries 96
According to the MoH, it has invested $2.5 billion in healthcare infrastructure
Chine 121
improvements since 2009. All of this makes Vietnam an attractive market for
Russia 179 foreign pharmaceutical companies, who continue to enter the country in
Brazil 180 growing numbers.
Other Asian countries 321 According to data provided by the Ministry of Health (MoH) Vietnam, imported
South Korea 323 drug accounted for more than 50% of the domestic demand in year 2012 and
EU5 375
2013

Canada 420
3. FORECAST
Japan 644
Global Data in its recent economic forecasts have expected the value to
US 892 increase continually over the next six years reaching a net worth of US$8 billion
0 200 400 600 800 1000 1200 1400 by 2020, representing a Compound Annual Growth Rate (CAGR) of 15.4%. This
rapid growth of pharmaceutical market in Vietnam is attributed to the key factors
Drug spent per capita Population
including expanding population in the country and Vietnam effort in introducing
Source: IMS Health, FPTS the New Health Insurance Law.
Correlation between drug spent per capita (USD) and population
(million people)

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II. PRODUCTION

1. LOCAL PRODUCTION 2. TRADE

Local pharmaceutical production Service Holding bought a 25 percent Import and Export Performance: Large deficit trade balance
accounts for nearly half of Vietnam’s stake in a Vietnamese drug maker
Import is still high. Vietnam imports over 60% of domestic demand. Vietnam
drug needs. Most of local products called Pymepharco. The transaction
keeps on importing a huge quantity of both generic and prescribed drugs from
are low-cost generics produced brought Stada Service Holdings’ total
worldwide exporters. Total value of pharmaceutical products in Vietnam in
by about 170 pharmaceutical share to 49 percent.
the period of 2008 and 2013 have increased steadily and have the potential
companies in Vietnam. Almost ten
to develop much more in the future. In 2013, it reached over USD 1.8 billion
percent of them are foreign investors, Finally, many foreign pharmaceutical
compared to USD 1.7 billion in 2012 and only USD 864 million 5 years ago.
with another four percent operating companies are partnering with
The average growth rate was recorded at 18% from 2008 to 2013 according to
under joint venture agreements. To Vietnamese drug makers for
General Statistics Office data.
boost domestic production of higher- manufacturing and distribution. In
quality drugs, Vietnam has recently 2010, for example, GlaxoSmithKline
encouraged manufacturers to signed an agreement with leading
1000 0
obtain Good Manufacturing Practice Vietnamese pharmaceutical company 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f
(GMP) certification. However, so far Savipharm. Under the agreement, -500
0
only about one-third of Vietnamese GlaxoSmithKline is responsible for -1000
pharmaceutical companies have got marketing authorization, technical -1000
-1500
GMP certification. support and quality control (including
-2000 -2000
the upgrading of Savipharm’s quality
There has been a growing interest control systems), while Savipharm is -2500
-3000
among foreign drug companies in responsible for both manufacturing -3000
establishing production and sales and distribution. -4000
-3500
facilities in Vietnam. For example,
in 2012 Japan’s Nipro Pharma -5000 -4000
Corporation invested $250 million
into a manufacturing plant for new Export value (US$mn) Import value (US$mn) Trade balance (US$mn)
drugs and medical equipment.The
facility will specialize in high quality, Source: Business Monitor International (BMI)
low-priced injected drugs for export Pharmaceutical trade
into developed countries, including
Japan. Other pharmaceutical
companies are buying shares in
their Vietnamese counterparts. In
2012, the Netherlands based Stada

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Import of pharmaceutical products in Vietnam 2013 Pharmaceuticals are imported maily from France, India and Korea.
Although the price of medicines imported from France is higher than that
of domestic products, French medicines are still more rational compared
1,790 1,880 30 with other markets. Regarding Indian market, due to cheap labor and
2000 26
23 1,483 25 plentiful raw material sources, Indian pharmaceuticals are competitive in
1500 1,243 term of price.
20
864 21
1000 19 15
13 5 10 Export Is Weak
500
5 The pharmaceutical export of Vietnam still faces the barriers of prices and
0 0 export policies.
2008 2009 2010 2011 2012 2013 Firstly, according to Price Management However, export performance is
Department, the annual average gradually becoming better as export
Import of pharmaceutical products (million USD) Growth(%)
export price of Vietnam is 20%-25% revenues have increased over
Source: ICE processing of General Statistics Office data higher than other countries in the the years. By 2013, Vietnamese
region such as India and China. The companies has exported to countries
high price is caused by the fact that including Myanmar, Laos, Cambodia,
Vietnam pharmaceutical industry India, Hongkong, Philippin, Malaysia,
France has to import main materials while and more than 20 countries in Africa.
India those two countries can manage this BMI forecasts that export continues
Korea matter in-house. Secondly, product to grow rapidly and reaches USD250
14.49% registration process still faces many million in 2017. This is based on
Germany
23.17% difficulties of time consuming. In order the assessment of some potential
Switzerland
to bring products to new markets, markets in Africa since 70% of
Italia
12.98% companies must send registration demand in African countries can
2.32% United Kingdom
form, application form and product only be met by import, as WHO said.
2.41% Belgium sample for testing. This process takes Primary products needed including
3.21% 8.43% Ireland up to 2 years. medicines for malaria and diarrhea
Thailand and vaccines are those products that
3.28%
USA Vietnamese companies can produce.
3.62% 7.97% China
3.83% Australia
4.2% 4.93% 5.25% Others

Vietnam pharmaceutical imports by countries 2013

Source: General Department of Vietnam Customs

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III.CONSUMPTION 1. PRICE

Drug prices in Vietnam are comparatively high; 12 times higher than international
According to the data provided by the Ministry of Health (MoH), the market size
reference prices. Drug consumption per capita in Vietnam is also climbing. In 2010,
of Vietnam’s pharmaceutical industry was estimated to be USD2,775 million in
the typical Vietnamese citizen spent $104 annually on pharmaceutical products.
2013, boasting a 10-year CAGR of 16%. Out of this amount, only USD1,300
This compared to $148 in China and $51 in India. Per capita spending on drugs in
million represented drugs that were domestically produced. Currently,
Vietnam should more than double by 2015. That increase is fueled by a richer and
because of the country’s outdated technology infrastructure and the domestic
older society and by an expansion of the country’s national health insurance system.
population’s strong preference for foreign medicines, drug imports account for
Today, 65 percent of Vietnam’s 93 million people are covered by the national system.
more than 50% of the domestic demand.
That number is projected to reach 90 percent by 2020.

Price index volatility of

Domestically produced Domestically produced 18 Pharmaceutical products and USD
drugs 46% drugs 47% 16.3
16
13.8
14

12 13.2 8.9
USD USD
2,601 2,775 10
million million
8
6.1
6 5.7

4 5.4 4.9 5.1

Imported drugs 54% Imported drugs 53% 2.9
3.4
2
VIETNAM’S DRUG VIETNAM’S DRUG 0
CONSUMPTION IN 2012 CONSUMPTION IN 2013

2000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012
Source: Ministry of Health (MoH), VPBS research Pharmaceutical Price Index
USD (previous year = 100) (%)

Average pharmaceutical prices still rise annually at the average rate of 7.7%.
This is due to the increase of national CPI together with the increase of major
costs such as raw materials, wages and electricity and water prices.

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7 Pharmceutical sales 25
6 Sanofi DHG TRA
20 Market share
4 5.8% 4.95% 2.37%
5 15
Vietnam pharmaceutical industry concentrates on domestic market. Especially,
3 10 revenues generated from medical facilities account for 70%
2
5
1
0 0 2. MARKET
2009

2010

2011

2012

2013

2014

2015

2016

2017
OTC 26.5% Exports 3.02% Medical facilities 70.48%
Pharmaceutical Sales (USDbn)
Growth (% y-o-y) Source: VietinbankSc

8 US$bn The number of medical facilities and drugstores in Vietnam

Sales value of prescription
6 and OTC drugs 2010 2011 2012 2013

Hospitals 1.030 1.040 1.042 1.069

4
Regional polyclinics 622 620 631 636
2 Nursing hospitals 44 59 59 60

0 Clinics 11.028 11.047 11.049 11.055

Instituitional health stations 710 710 710 710
9

4f

f
15

16

17
0

1
20

20

20

20

20

20

20

20

20

Other facilities 33 30 32 32
Prescription drugs sales (US$bn)
Growth (% y-o-y) (US$bn) Retail drugstores 42000 N/A 57000 N/A

However, according to the Drug Administration of Vietnam, domestic medicine

The number of drugs sold in drugstores in Vietnam is quite high (50-60%).
prices have not changed as much as imported medicine prices. This can be
However, since medicines sold in drugstores are common medicines and tonic
explained by the following reasons:
with lower prices than specific medicines prescribed through hospitals, then in
(1) The devaluation of Vietnam Dong against US dollar.
terms of revenue, medicines at drugstores take up only 26.5% of market share.
(2) This could be due to tacit agreements between foreign manufacturers
In 2012, there were about 57,000 drugstores in the country, which means that
and domestic importers. For example, the branch of GSK in Vietnam had
every 10,000 people, there were 6.3 drugstores.
agreements with companies in the country to raise the price up to 4-5 times
more than the original price.
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IV. SUPPLY CHAIN OF VIETNAM ‘S

3. BUSINESS LOCATION
PHARMACEUTICAL INDUSTRY
According to statistics from Ministry of
Health, pharmaceutical manufacturing
companies mainly focus in two cities,
namely Ho Chi Minh city that takes up International International
International
50% of the number of enterprises) and Manufactures Distributors
Hanoi that accounts for 30%.The rest
of 20% belongs to An Giang, Can Tho,
Vietnam
Nam Dinh and Phu Yen.
Wholesalers Importers FDI logistics FDI Domestic
companies Manufactures Manufactures
The concentration of factories leads
to the concentration of distribution.
In small provinces, the number of Distributors
drugstores of enterprise is also smaller.

Therefore, According to the

development plan of pharmaceutical
industry, Ministry of Health encourages Foreign
enterprises to build factories in areas Representative
that have not had any pharmaceutical Offices
manufacturing companies such as High
Registrant
Land and Northern Mountainous area. companies

Accordingly, these factories will focus Public Private Retail Medicine

on manufacturing generic medicines Hospitals, Health Stations, Clinics Outlets
and prioritize the use of pharmaceutical
products that have raw materials
available in the region. Regarding the
USERS
regions that have many factories such
as HCM city, Ministry of Health orient to
manufacture various kinds of specific Source: VietinbankSc
medicines and high-tech medicines. Product line Support (delivery, promotion)
Mandated importation Possessive

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1.SUPPLIERS OF RAW MATERIALS
According to the statistics from General Department of Vietnam
Customs, Ministry of Health and Drug Administration, 90% of raw
pharmaceutical materials are foreign imports. China and India are two
largest source of imported medicinal raw materials that achieved
51.4% and 18.3% of the total import value in 2013 respectively.
Herbal raw materials: according to Drug Administration and Ministry of Health,
up to 90% of herbal raw materials in Vietnam are imported from China given the
fact that they are in short supply due to our climate constraints making herb
planting impossible in Vietnam. The remaining 10% are popular herbs known
as artichoke, Polyscias fruticosa, Licorice, Leonurus japonicus, and Phyllanthus
urinaria, to name just a few.
The dependence of gross profit in input raw materials

VND
Assume revenue 1000 Costs also include other items
bn
such as:
2% 1% 0% Average gross profit Packaging costs ( in some cases
2% 45%
2% margin higher than the cost of raw
3% materials), Depreciation expenses,
3% VND
China Cost of goods 550 transportation
bn
India Raw materials take up 60% of COGS
5%
Austria
Raw materials’ -30% -20% -10% 0% 10% 20% 30%
7% Spain difference
Germany Cost of goods 451 484 517 550 583 616 649
57%
France Gross profit margin 55% 52% 48% 45% 42% 38% 35%
18%
Italia Raw materials take up 80% of COGS

Sweden
Raw materials’ -30% -20% -10% 0% 10% 20% 30%
Korea difference
Cost of goods 418 462 506 550 594 638 682

Vietnam pharmaceutical material imports Gross profit margin 58% 54% 49% 45% 41% 36% 32%

by countries by 2013 Source: FPTS

Source: Vietnam custom Input prices, as typical of pharmaceutical industry, usually account for
between 50% and 80% of COGS. Therefore, the difference in input prices
tremendously affects gross profit margins of each company.

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2. PHARMACEUTICAL MANUFACTURERS
The entire country has approximately 178 drug manufacturers (about 100
pharmaceutical companies, 80 traditional drug manufacturers and above
300 drug-manufacturing units). Most of them focus on popular drug lines
rather than specialty drugs that require sophisticated technology. As a result,
overlapping production among domestic companies occurs only within a
small market segment. On the other hand, valuable specialty drug market is
dominated by foreign companies.
In Vietnam, drug manufacturers can be classified into smaller groups according
to criteria below:

Classification by ownership: Classification by product segments:

Companies with foreign owned
capital (FDI).
Domestic pharmaceutical companies
Classification by sales strategies:
Rapid growth as a result of network
and marketing investments
Sustainable growth as a result of
substantial investments in drug quality
Others
High-quality products
Popular products
Noticeable drug manufacturing
companies:
DHG Pharma: the largest
pharmaceutical manufacturer in
Vietnam.
Imexpharm: a high-quality
pharmaceutical manufacturer
specializing in injectable antibiotics.
Domesco: a company with its
strength in manufacturing cures for
cardiovascular, diabetes and obesity,
etc.
Traphaco: the largest herbal drug
manufacturer in Vietnam.
Pymepharco: a pharmaceutical
manufacturer featuring high-quality
products
Bidiphar 1: a pharmaceutical
company with cancer production line

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3. OUTSOURCED PROCESSING COMPANIES 4. DISTRIBUTION SYSTEM

FRANCHISED PRODUCTION
Outsourcing
According to the definition of Ministry of Health of Vietnam, outsourcing a
processing company involves having it undertake one, a few or the entire drug
manufacturing procedures (including receiving raw materials, processing,
packaging and labeling).This type of manufacturing is relatively popular in
Vietnam and is usually happens between mall-scale and large-scale drug
manufacturers. Quality in drug processing practices often fluctuates wildly and
heavily depends on the ordering party.
Under Vietnamese law, Foreign Invested Enterprises (FIE) are not allowed
to distribute pharmaceutical products in Vietnam. Therefore, foreign drug
companies generally turn to Vietnamese distributors to sell their products on
the Vietnamese market.
Domestic/ foreign
manufacturers

Franchised production
This is an advanced form of outsourcing with franchisers being large foreign
drug corporations that aim to manufacture their own drugs in Vietnam at lower
cost than imported drugs. Such drug products are very affordable in Vietnam Domastic/ Foreign
Wholesaler at
and their quality is still as reliable as patent drugs. distributors
flea markets
(1,200 companies)
(4 main markets)
Meanwhile, franchisees have to satisfy every requirement on factories,
manufacturing qualification and storage, etc. Franchisers, in return, will transfer
their technological know-how to franchisees (under the conditions of the
confidential contracts). Prices of such drug products will be 30% lower than those
of patent drugs. The most significant difference, however, between outsourcing a Pharmacies/ Drug retailers Hospitals Private clinics
processing company and franchising is drug quality. Some companies with their (54,250 stores) (1,180 facilities) (no statistic)
strength in franchised production in Vietnam are Imexpharm, Pymerpharco,
Savipharm, Bidiphar, OPV, etc. Profit margin of outsourcing ranges from 1% to
10% depending on its complexity. Profit margin of franchised production ranges
from 20 to 30%
Distribution channels of pharmaceutical products in Vietnam
Source: VPBS

With regard to drug distributors, there are about 1,200 companies working in
this role, out of which approximately 300 are foreign firms and the rest are
domestic ones. According to several news sources, it would appear that the
top three drug distributors in Vietnam are Zuellig Pharma, Mega Products
and Diethelm Vietnam. These news sources indicated that these three
foreign companies together account for 50% of the total market shares of
drug distribution.
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Notable distribution companies in Vietnam

Companies Country

Zuellig Pharma Singapore

Diethelm Vietnam Switzerland

Mega Products Thailand

Central Pharmaceutical Company No.1 Vietnam

Central Pharmaceutical Company No.2 Vietnam

Hoang Duc PM Supplies Company Vietnam

Tedis SA France

East Asian Medicine Trade Company Ltd Vietnam

ATM Pharma Vietnam

Quan Son Pharmaceutical JSC Vietnam

Foreign pharmaceutical firms with representative offices in Vietnam

Companies Country

Glaxo Smith Kline United Kingdom

Astra Zeneca United Kingdom

Pfizer United States

Bristol Mayer Squipp United States

Merck Shape & Dohme United States

Bayer Germany

Schering AG Germany

Roche Switzerland

Pierre Faber France

Solway Netherland

Source: VPBS collected

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V. CONCLUSION
With the situation as it is, Vietnam remains a promising destination for drugs
exporters, particularly those specializing in prescribed products. Making a joint
venture with local pharmaceutical producer could obtain certain advantages on
marketing development, products registrations, production and distribution.

Vietnam’s health care system is a mixed public-private system. However, the

healthcare system has been slow to develop. Around 30,000 Vietnamese
people travel abroad annually to seek treatment in foreign hospitals at cost of
more than USD $1 billion.

REFERENCES
1. Business Monitor International
2. General Statistics Office (GSO)
3. VPBS Vietnam Pharmaceutical industry
4. FPTS Pharmaceutical sector report
5. VietinbankSc Industry Report- Vietnam Pharmaceutical Industry April 2014
6. Vietnam Pharma Update April 2014, Tilleke & Gibbins
7. Global Data
8. Ministry of Health (MoH)
9. IMS Health
10. General Department of Vietnam Customs
11. Drug Administration of Vietnam (DAV)
12. ICE processing of General Statistics Office data

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