Health and medical to Vietnam
(Last updated: 8 Jul 2011)
Trends and opportunities
The market
Vietnam’s healthcare system remains largely underdeveloped and both the number and quality of hospitals, clinics, and doctors have not kept pace with Vietnamese society’s needs or expectations.
Current challenges
Challenges in Vietnam’s healthcare sector include:
- Most Vietnamese seek initial and rudimentary medical treatment at public hospitals clogging an already overcrowded system
- High child mortality and other national health issues – HIV/Aids, Hepatitis B & C infections, liver cirrhosis, lung disease and asthma are all on the rise
- High incidence of deaths related to road accidents
- Overcrowded facilities (particularly in pediatric wards)
- Outdated medical equipment
- Low salaries for healthcare professionals
- Insufficient government subsidy
The Vietnamese Government provides funding to the country’s healthcare system, however funding is comparatively low by ASEAN standards, with per capita spending on health in Vietnam below that of other ASEAN countries such as Malaysia, Indonesia and the Philippines.
Overcrowding in Vietnamese hospitals is a significant issue with it not being uncommon in some poorer state-run hospitals for two or three patients to share one bed. Most of the best health workers are concentrated in the larger hospitals in Ho Chi Minh City and Hanoi. Healthcare units in these large urban areas are better equipped and have more modern equipment to provide health treatment that health centres in other provinces do not have. Given this disparity, Vietnamese from rural provinces will often seek treatment in these larger urban hospitals, compounding the problem of overcrowding.
Vietnam’s pharmacies are severely unregulated and underdeveloped. There is an under supply of pharmacists in Vietnam and an oversupply of ill-regulated pharmacies, meaning patients are often given sub-standard over-the-counter (OTC) health advice. Almost all drugs are available without prescription and counterfeit drugs are not uncommon in some pharmacies. Given most antibiotics are available without prescription; a worrying trend is the increasing antibiotic resistance many Vietnamese are developing (recent tests show 70 per cent of the bacteria carried by urban Vietnamese are resistant to penicillin).
Most Vietnamese have health insurance which is compulsorily contributed to by a small levy from both the employee and employer and the health insurance market is dominated by a state-owned company, Bao Viet Insurance Corporation. Given the lack of competition in health insurance, the scheme is viewed as inadequate and ineffective in terms of meeting the health needs of a modern Vietnamese society and most health and hospital expenses still have to be met out of pocket.
However, healthcare consumption is expected to increase as Vietnam gradually implements a universal healthcare system. Currently, 34 million Vietnamese are enrolled in a compulsory government health insurance plan. The government plans to expand the system so that it covers 100 per cent of the population by 2014.
Opportunities
Vietnam’s underdeveloped health sector and Vietnam’s demand for expertise as well as its favorable demographics and high growth rates, provide significant opportunities in various health sub-sectors for Australian exporters in health expertise, goods and services.
Pharmaceuticals and nutritionals
Vietnam’s pharmaceutical market has increased significantly and will continue to increase in the next few years. Despite this strong growth, the market size is still relatively small when compared to other ASEAN countries, largely due to the low per capita spend on pharmaceuticals each year (only around US$17 per person). Vietnam’s population of over 88 million should have a larger pharmaceutical market size, however has uniquely young demographics as a result of the Vietnam War.
Nutritionals continued to see strong growth in current value terms, driven primarily by vitamins and dietary supplements as well as slimming products. Although growth was still some way short of the pre-millennial rates posted by nutritionals, particularly in vitamins and dietary supplements, it was still ahead of projections thanks to increasing consumer product awareness, improving living standards and rising health consciousness among the local population.
There is still great potential in Vietnam and industry players will need to try and continue raising consumer awareness not only of the existence of these products, but also of the benefits that they offer. Tapping into the global health and wellness trend, where relevant, will also be a good way of promoting many of the products available in the nutritionals market. All areas of herbal/traditional products recorded increasing sales in the last two years, with herbal digestive remedies and herbal child-specific dietary supplements doing particularly well.
Medical device
Vietnam’s medical device market is estimated to be growing at a rate of about 10.3 per cent annually. This high growth makes the country an excellent prospect for long-term business. Compared with Japan and China, Vietnam’s regulatory system is less cumbersome to manufacturers in terms of the documents required, costs, and time frames. However, expertise is still required to navigate it successfully.
There are four main classes of medical device purchasers. The largest is government-funded hospitals, which counts for 70 per cent of the market. Foreign-owned hospitals and clinics are also a significant destination; however, these entities usually purchase supplies from their sponsoring country. Local private hospitals will exhibit the strongest growth, while research and educational institutions will also account for some demand.
Most government hospitals purchase medical devices though bidding, which is organised on a provincial or national level by the MOH, (government hospitals can directly buy medical devices by themselves if the amount is not exceed the limit of US$5,700) while private hospitals or clinics directly purchase those from local distributors. Foreign companies are not allowed to submit a tender – it can only be done via a local partner who will liaise with the organiser to submit the required documentation.
Competitive environment
The Vietnamese Government has a commitment to rapidly develop the health sector and improve the standard of its healthcare facilities. The government health system has already forged foreign partnerships with countries such as US, Belgium and Indonesia for assistance in improving health infrastructure, training and for research exchange and transfer. The government encourages private sector participation in the healthcare system, with French and US companies the dominant foreign players in the market.
There are a growing number of international hospitals and clinics in the major urban centres such as the Franco-Vietnam Hospital in Ho Chi Minh City. Demand for better healthcare services from an increasingly wealthier Vietnamese population is driving this foreign health investment.
Despite the increasing presence of international standard hospitals in Vietnam’s large urban cities, each year over 30,000 Vietnamese travel abroad to destinations such as China, Thailand and Singapore for superior medical treatment demonstrating that current health supply is not meeting demand.
Tariffs, regulations and customs
Depending on the actual product, the import tariff could vary from 5-15 per cent (pharmaceuticals); 25 to 40 per cent (supplements) and 0-5 per cent for medical device. The VAT imposed from 5-10 per cent as normal rate.
There is currently no legislation relating to vitamins or dietary supplements in Vietnam. These products must therefore follow the regulations covering pharmaceuticals in the country. The MOH only allows imported pharmaceuticals to be put on the domestic market after registration. It takes around eight months for registering a pharmaceutical/supplement product.
Required documentary for pharmaceutical/supplement product:
- Free sales certificate
- GMP
- Authorised letter
- Certificate of analysis
- Samples
As regulated by MOH, it takes 15 working days of receiving legal dossier but in fact, an import licence for medical device takes from six months or longer for registration depending on particular product. The dossier required for an import license is:
- Original catalogue
- Instruction manual and technical guide, including specifications (originals and Vietnamese translations)
- Manufacturer’s quality certificate: either ISO 13485 or ISO 9001 certification or FDA/CE approval of the device manufacturing site
- Free Sale Certificate from country of origin
- Quality declaration letter
The MOH sets out stipulations for the packaging and labelling of medical products.
These state that all drugs in Vietnam have to show clear instructions on their name and use, side-effects, dosage, storage conditions and expiration date. These must be printed in Vietnamese on the insert inside the package. The company license number, product batch number, import agent and expiration date must be printed on the outside or primary packaging.
The monitoring of packaging and labelling is carried out by the Drug Administration Department of Vietnam (DAV), which is also responsible for granting and removing licenses for all medicines in Vietnam. The Ministry of Finance is responsible for price control of medical products.
The Ministry of Culture and Information is responsible for the monitoring of medical product advertising. For the majority of OTC products advertising to consumers is only allowed through media such as advertisements in magazines and newspapers or leaflets.
Marketing your products and services
Market entry
Vietnam is a suitable market for companies looking for business cooperation opportunities in the following forms:
- Establishing foreign-owned (100 per cent FDI) hospitals, clinics or centres
- Setting up joint-ventures in medical training, technology transfer or medical device manufacturing with local companies, medical centres or medical universities
- Staff/program exchanges with local hospitals and medical universities
- Direct product export including in cosmetics, pharmaceuticals and medical equipment
Key challenges for exporters in the health sector include low (but increasing) consumer purchasing power, lack of health education and consumer awareness and the bureaucratic nature of Vietnam’s health system.
The leading players in pharmaceutical/nutrition – Plusssz Vitamin Kft, United Pharma, UPSA and Boehringer Ingelheim, UK’s GlaxoSmithKline – are all foreign companies. However, there are local firms operating in this market in Vietnam, with one of their key competitive advantages being their lower prices than the big multinationals. However, when local consumers can afford to buy multinational brands, they usually choose to do so as they feel that they offer a greater guarantee of quality. This is helped by the multinationals’ greater marketing expertise and bigger budgets for promotion and new product development.
Producers of standard OTC healthcare will face more competition from herbal product players with the latter offering lower prices and improved product quality. Consumers will meanwhile benefit from better products becoming available at a cheaper price.
More players are expected to invest in herbal/traditional products during the forecast period, particularly domestic players seeking a new niche. A flood of economy entrants is expected from China due to the opening up of trade in the wake of Vietnam’s WTO entry. Consequently, those domestic players that previously focused on low-priced generics will face strong competition. A shift into herbal/traditional products could therefore provide a lifeline for many players.
Distribution channels
For many consumers, chemists/pharmacies offer their only access to such products, particularly in rural areas, where retailing is generally underdeveloped. There are a huge number of chemists/pharmacies in the country, providing an effective distribution network across all regions. Consumers also value the expert advice on hand from pharmacists, who they trust to recommend the best product.
As the economy develops during the forecast period and living standards improve, distribution patterns are expected to change significantly. Drugstores/pharmacies are notably expected to become increasingly more important by the end of the forecast period. Chains are expected to emerge, with chained drugstores/pharmacies therefore expected to help drive the growth of sales of healthcare products into rural areas during the forecast period. Grocery retailers will also be looking to continue their expansion in Vietnam. Nevertheless, chemists/pharmacies are still expected to continue dominating distribution of products in the nutritionals market.
Links and industry contacts
Government, business and trade resources for Vietnam
Department of Vietnam Customs – www.customs.gov.vn
Ministry of Health – www.moh.gov.vn
Official Sources Central Institute for Medical Science Information – www.cimsi.org.vn
Trade Associations World Self-Medication Industry – www.wsmi.org
Vietnam Pharmaceutical Companies Association – www.vnpca.org.vn
Australian resources
Australian Self Medication Industry – www.asmi.com.au
Complementary Healthcare Council – www.chc.org.au
Therapeutic Goods Administration – www.tga.gov.au
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.