Q3 2012 www.businessmonitor.com VietNam pharmaceuticals & Healthcare Report INCLUDES BMI'S FORECASTS ISSN 1748-2305 Published by Business Monitor International Ltd. VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT Q3 2012 INCLUDES 10-YEAR FORECASTS TO 2021 Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Copy deadline: June 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2012 Business Monitor International. All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Pharmaceuticals & Healthcare Report Q3 2012 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 CONTENTS Executive Summary . SWOT Analysis Vietnam Pharmaceutical And Healthcare Industry SWOT . Vietnam Political SWOT Vietnam Economic SWOT 10 Vietnam Business Environment SWOT . 11 Pharmaceutical Risk/Reward Ratings . 12 Table: Asia Pacific Pharmaceutical Risk/Reward Ratings, Q312 12 Rewards . 13 Risks . 13 Vietnam – Market Summary 15 Regulatory Regime 17 Pharmaceutical Advertising . 18 Intellectual Property Environment . 19 IP Shortcomings . 19 Counterfeit Drugs 21 Pricing Regime 22 Price Spikes . 24 Reimbursement Regime 25 Pricing And Reimbursement Developments . 26 Industry Trends And Developments 28 Epidemiology . 28 Communicable Diseases 29 HIV/AIDS . 30 Non-Communicable Diseases 31 Healthcare Financing 32 Hospital Sector 32 Private Healthcare Sector 34 Healthcare Insurance . 35 Healthcare And Pharmaceutical Reform . 36 Foreign Partnerships . 38 Research & Development . 38 Biotechnology Sector . 39 Vaccines . 40 Clinical Trials 42 Medical Device Market 42 Industry Forecast Scenario 45 Overall Market Forecast 45 Table: Pharmaceutical Sales Indicators 2008-2016 47 Healthcare Market Forecast 48 Table: Healthcare Expenditure Indicators 2008-2016 49 Table: Healthcare Governmental Indicators 2008-2016 . 50 Table: Healthcare Private Indicators 2008-2016 50 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Key Growth Factors – Macroeconomic . 52 Prescription Drug Market Forecast . 56 Table: Prescription Drug Sales Indicators 2008-2016 58 Patented Drug Market Forecast 59 Table: Patented Drug Market Indicators 2008-2016 . 60 Generic Drug Market Forecast 61 Table: Generic Drug Sales Indicators 2008-2016 . 62 OTC Medicine Market Forecast 63 Table: OTC Medicine Sales Indicators 2008-2016 64 Pharmaceutical Trade Forecast . 65 Table: Exports and Imports Indicators 2008-2016 67 Medical Device Market Forecast . 68 Table: Medical Devices Sales Indicators 2008-2016 . 69 Other Healthcare Data Forecasts 70 Key Risks To BMI’s Forecast Scenario 71 Competitive Landscape 72 Pharmaceutical Industry 72 Domestic Pharmaceutical Sector . 73 Foreign Pharmaceutical Sector . 75 Recent Pharmaceutical Industry News . 76 Traditional Medicines 79 Pharmaceutical Distribution 80 Pharmaceutical Retail Sector 80 Table: Key Aspects Of Good Pharmacy Practice In Developing Countries . 82 Company Profiles 83 Local Companies 83 Vietnam Pharmaceutical Corporation (Vinapharm) 83 Vietnam OPV Pharmaceutical Co 85 Vietnam Pharmaceutical Joint Stock Company (Ampharco) 87 Vidipha Central Pharmaceutical Joint Stock Company . 89 Multinational Companies 90 Pfizer 90 Sanofi . 91 Novartis . 93 Merck & Co . 94 GlaxoSmithKline 96 Demographic Outlook . 97 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . 98 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 99 Table: Vietnam's Key Population Ratios, 1990-2020 . 100 Table: Vietnam's Rural And Urban Population, 1990-2020 100 Glossary . 101 BMI Methodology . 103 How We Generate Our Pharmaceutical Industry Forecasts 103 Pharmaceuticals Risk/Reward Ratings Methodology . 104 Ratings Overview . 104 Table: Pharmaceutical Business Environment Indicators 105 Weighting . 106 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Table: Weighting Of Components 106 Sources 106 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Executive Summary BMI View: Vietnam continues to be viewed as a promising, but risky, commercial proposition. We envisage continued involvement of multinational companies in both its pharmaceutical and healthcare markets, although the country’s longer term potential will continue to be clouded by the lacking intellectual property (IP) climate and the prevalence of corruption, among other issues. Headline Expenditure Projections ƒ Pharmaceuticals: VND39,003bn (US$1.89bn) in 2011 to VND45,284bn (US$2.15bn) in 2012; +16.1% in local currency terms and +14.0% in US dollar terms. Forecast unchanged from Q312. ƒ Healthcare: VND157, 234bn (US$7.61bn) in 2011 to VND180,892bn (US$8.60bn) in 2012; +15.0% in local currency terms and +13.0% in US dollar terms. Forecast broadly unchanged from Q312, despite lowering of historical data. ƒ Medical devices: VND15,137bn (US$733mn) in 2011 to VND17,026bn (US$809mn) in 2012; +12.5% in local currency terms and +10.4% in US dollar terms. Forecast slightly lower from Q312, party on account of changed historical data. Risk/Reward Rating: In the current quarter’s regional Risk/Reward Rating (RRR), Vietnam scores 40.9, which is lower in relation to Q212, but still ranks the country 14th out of the 18 key markets surveyed in Asia Pacific. Globally, Vietnam is 72nd out of 95 countries assessed. Its longer-term attractiveness is clouded by low per capita spending and also by the risky operating environment, complete with widespread prevalence of counterfeit drugs, despite the benefits expected to be brought about by the country’s economic development. Key Trends And Developments ƒ In May 2012, a local subsidiary of Japanese Hisamitsu Pharmaceutical Co Inc inaugurated a new factory. The investment in the plant, located in Dong Nai province’s Bien Hoa Industrial Park, topped US$16.84mn. The factory – run by Hisamitsu Vietnam Pharmaceutical Co Ltd – will produce Salonpas pain-relief patches, as the company responds to increased demand for the product, both locally and regionally. ƒ In April 2012, the Drug Administration of Vietnam (DAV) stated that it will heavily fine organisations that violate medicine price regulations from June 2012. New price regulations have been established by the ministries of health, finance and industry and trade. According to the inter-department circular, traders will be wholly responsible for their product's original, listed and selling prices, which will be strictly monitored by the price management authorities. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Drugmakers will have to record both import prices and original prices of foreign-made as well as domestically-produced drugs. They also need to register the wholesale and retail prices offered to the DAV, the Ministry of Health and local health centres. ƒ The presence of counterfeit drugs will impede the eradication of malaria, as well as other highprevalence diseases in the country. According to the US National Institutes of Health, over a third of malaria drugs that were examined in South East Asia, including Vietnam, were counterfeits, with 30% of the 1,437-drug sample failing a test of their pharmaceutical ingredients. While we believe it is highly unlikely that counterfeit drug manufacturing will cease completely due to its lucrative nature, it is our view that the authorities have to establish stringent regulatory measures to prevent the use and distribution of fake drug in their countries. BMI Economic View: We remain positive about Vietnam's growth prospects over the next 10 years, as seen in our firm growth projections, which average 7.1% over 2012-2021. This is because we expect a shift in government policy to accommodate the effects of a less conducive global environment and a need to avoid overheating tendencies such as high inflation and a large trade deficit, which have characterised the Vietnamese economy in recent years. BMI Political View: The attractions of Vietnam to foreign, as well as domestic, investors are clear: a large and young population, and the country open to foreign influences after decades of ineffective ideological indoctrination. Vietnam has enjoyed a growing inflow of foreign direct investment (FDI) into its fledgling manufacturing sector in recent years, as its accession to the WTO in 2007 and low labour costs have made it an attractive outsourcing destination for various producers. The development of the foreign-owned manufacturing sector has been spearheaded by Japanese, South Korean and Taiwanese firms, which have become increasingly wary of rising costs of labour on the Chinese mainland, as well as the risks of becoming overly dependent on Beijing in their supply chains. We expect the country to continue pursuing similar policies, although we caution that Vietnam faces pressures for democratisation. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 SWOT Analysis Vietnam Pharmaceutical And Healthcare Industry SWOT Strengths Weaknesses Opportunities Threats ƒ Significant growth potential, given a large and growing population. ƒ The government’s commitment to developing the health sector. ƒ Sizeable local generic drugs sector, which is being encouraged by the government. ƒ 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. ƒ One of the least developed pharmaceutical markets in Asia, with low per capita spending on drugs. ƒ Counterfeit drugs account for a significant amount of market consumption. ƒ No bioequivalence requirement in place for locally made generic medicines. ƒ Little distinction made between prescription and over-the-counter drugs, with most medicines available without a prescription. ƒ Complex drug pricing policy biased towards local drug producers. ƒ Import-reliant market, especially in terms of high-tech products and active pharmaceutical ingredients, which makes it vulnerable to currency movements. ƒ Underdeveloped primary care services and a shortage of trained pharmacists is continuing to hamper access to medicines and product market penetration. ƒ Population concentrated in rural, rather than urban areas, preventing access to modern drugs and encouraging dependence upon traditional medicines. ƒ The Association of South East Asian Nations (ASEAN) harmonisation initiative, including the adoption of Western regulatory standards such as International Conference on Harmonisation and World Health Organization guidelines. ƒ Introduction of five-year exclusivity for clinical dossier data encouraging researchbased multinationals. ƒ If investment can be found for technological improvements, then there is great potential in the traditional Chinese medicine market, in addition to fledging biotechnology. ƒ Full WTO membership improving the trading climate and potentially, in the longer term, redressing pharmaceutical trade issues. ƒ Requirement for domestic companies to comply with international good manufacturing practices should boost exports. ƒ Government resistance to aligning patent law fully with international standards deterring multinational sector expansion. ƒ Need to resolve infrastructural and power supply issues, as well as higher education provision, before higher levels of foreign direct investment can be expected. ƒ The government is increasingly interfering in the industry, protecting indigenous firms through the use of legal trade barriers, which will affect competitiveness. ƒ Pharmaceutical price inflation threatens to put medicines out of reach of poor and therefore limit market volume growth. ƒ Legalisation of parallel imports negatively impacting performance of patented drugs. ƒ New health insurance legislation decreasing patients’ access to medicines. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Vietnam Political SWOT Strengths Weaknesses Opportunities Threats ƒ The Communist Party of Vietnam remains committed to market-oriented reforms and we not expect major shifts in policy direction over the next five years. The one-party system is generally conducive to short-term political stability. ƒ Relations with the US have witnessed a marked improvement, 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 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 oneparty system. ƒ Macroeconomic instabilities in 2012 are likely to weigh on public acceptance of the oneparty system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocractic rule. 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-party-state will probably be unsustainable. ƒ Relations with China have deteriorated over recent years due to Beijing's more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Developments In December 2011, the company signed an agreement with DKSH Laos to exclusively distribute six Vietnam-made pharmaceutical products to Laos. Sanofi will introduce another 50 products in the next few years. The firm has two plants in Ho Chi Minh City and approximately 30% of its medicine manufactured in Vietnam is exported to Asian countries. In August 2011, Thomas Kelly, Sanofi Asia Senior Vice President stated that the firm was interested in investing in a highly technological pharmaceutical plant in Ho Chi Minh and proposed that the city’s government facilitate the project. The idea stemmed from the fact that both Sanofi plants in the city are located in the urban areas. A rabies vaccine made by Vaccine and Biomedical Product Company No. was removed from the market in September 2007 due to safety fears. The withdrawal was not wholly unexpected as adverse events related to the product have been known about for over a decade and Vietnam was one of only three countries that still used the Fuenzalida-Palacios vaccine. To fill the market void, the health ministry allowed Sanofi-Aventis’s semi-finished rabies vaccine, Verorab, to be imported. Contact Details ƒ Address: Sanofi-Aventis Vietnam, 10 Ham Hghi, District 1, Ho Chi Minh City, Vietnam ƒ Tel: +84 82 98 526 ƒ Website: www.sanofi-aventis.com.vn © Business Monitor International Ltd Page 92 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Novartis Strengths Weaknesses Opportunities Threats Company Overview ƒ Well-established presence through its subsidiary Novartis Vietnam, which directly manufactures in the country. ƒ Benefits from the advantages given to locally produced drugs. ƒ Diverse manufacturing presence, including antibiotics, vitamins and OTC pharmaceuticals, consumer, generic and healthcare products, as well as vaccines. ƒ Government drug-pricing policy is biased towards local products, which disadvantages Novartis’ patented drugs offering. ƒ Low purchasing power of the majority of the population. ƒ Widespread counterfeiting. ƒ Underdeveloped healthcare infrastructure. ƒ Demand for branded products to rise with sector modernisation and regional harmonisation. ƒ Positive economic performance – with an increase in spending power – to underpin the development of pharmaceutical demand. ƒ Developing the potential of the generic sector to open up commercial opportunities for Novartis. ƒ Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a focus on increasing the level of foreign investment. ƒ Country remains heavily reliant on imported drugs. ƒ Government resistance to aligning patent law fully with international standards. ƒ As a part of its plan to overhaul the pharmaceutical sector, the government is planning to increase intervention and protect local companies through legal trade barriers, potentially affecting margins. ƒ Vietnam’s susceptibility to economic fluctuations, with currency depreciation recently forcing price rises. ƒ Legalisation of parallel imports negatively affecting performance of patented drugs. Novartis Vietnam was established following the merger of Sandoz and Ciba-Geigy in 1997. The company is active in the manufacture and distribution of speciality pharmaceuticals, consumer healthcare and generic medicines, as well as eye care products (through Alcon). Strategy Novartis’ portfolio includes medicines in transplantation and immunology, cardiovascular diseases, diseases of the central nervous system, Parkinson’s disease, skin allergies, OTC and ophthalmic medications. The following Novartis products maintain a leadership position in their respective segments: Lamisil (terbinafine), Clozaril (clozapine), Diovan (valsartan), Lescol (fluvastatin), Aredia (pamidronate), Navoban (tropisetron), Sandostatin (octreotide), Neoral (cyclosporine), Simulect (basiliximab), Femara (letrozole), Sandoglobulin (immune globulin), Miacalcic (calcitonin) and Lentaron (formestane). The company will strive to continue their promotion to private sector in particular, which will be encouraged by economic development. Contact Details ƒ Address: Novartis Pharma Services AG, Unit 1001A, Centec Tower, 72-74 Nguyen Thi Minh Khai Street, Ward 6, District 3, Ho Chi Minh City, Vietnam ƒ Tel: +84 3823 9090 ƒ Website: www.novartis.com © Business Monitor International Ltd Page 93 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Merck & Co Strengths Weaknesses Opportunities Threats Company Overview ƒ One of the leading global producers of medicines. ƒ Considerable product portfolio, including consumer medicines. ƒ Merger with Schering-Plough further strengthening MSD’s presence in Vietnam. ƒ Difficult IP environment, including counterfeit drug trade and lax patent protection. ƒ No direct manufacturing or R&D presence in the country. ƒ Underdeveloped healthcare infrastructure. ƒ Rising demand for branded products following healthcare sector modernisation. ƒ Pending overhaul of the regulatory climate, aiming to boost foreign investment. ƒ Pending creation of a local affiliate. ƒ Legal trade barriers protecting local players and disadvantaging multinationals. ƒ Currency depreciation forcing price adjustments. ƒ Legalisation of parallel imports negatively impacting performance of branded drugs. The US drug major Merck & Co operates in Vietnam through its regional division, Merck, Sharp & Dohme (MSD) Asia Pacific, which was established in Vietnam in 1994. The company employs around 100 staff, who are mostly engaged in sales and marketing activities. Merck does not operate any manufacturing or R&D activities in Vietnam. Strategy The company is affected by regulations in Vietnam that require all state companies wishing to import foreign pharmaceutical products to apply for annual quotas. These activities are set to be phased out under the US-Vietnam Bilateral Trade Agreement. In Vietnam, MSD is mostly involved in supplying prescription products for a number of conditions. These include cardiovascular diseases, osteoporosis, asthma, osteoporosis and severe infections as well as range of other conditions such as hepatitis B. In January 2011, MSD announced that it will establish a 100% foreign-owned company in Vietnam. Headquartered in the capital Ho Chi Minh City, the operation will sell high-margin patented drugs, such as the cervical cancer vaccine Gardasil. Developments In November 2011, MSD established the Vietnam Society for Reproductive Medicine with Vietnam Gynaecology and Obstetrics Association. In February 2011, MSD, along with the Programme for Appropriate Technology in Health (PATH) and the National Institute of Hygiene and Epidemiology (NIHE), emerged to provide corporate social responsibility (CSR) activities, giving part of their profits to the development of community. At the end of May 2009, distributor Diethelm Vietnam Corp increased the prices of 14 speciality drugs – manufactured Merck – by 7.3-10%. The prices of imported drugs had been increasing as a result of currency depreciation and the growing price of raw materials. In March 2009, MSD said it regretted a labelling mistake on its measles, mumps and rubella vaccine. MMRII was labelled with instructions saying ‘for intramuscular injection’ rather than ‘for subcutaneous injections’. No adverse reaction was reported. © Business Monitor International Ltd Page 94 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 MSD’s cervical cancer vaccine Gardasil has been approved in Vietnam, as has its competitor, GSK’s Cervarix. GSK has reduced the price of its products, increasing competitive pressure. Contact Details ƒ Address: Merck, Sharp & Dohme Asia Vietnam Branch, 16th Floor, Kumho Asiana Plaza, 39 Le Duan Street,, District 1, Ho Chi Minh City, Vietnam ƒ Tel: +84 3915 5800 ƒ Website: www.msd-vietnam.com © Business Monitor International Ltd Page 95 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 GlaxoSmithKline Strengths Weaknesses Opportunities Threats Company Overview ƒ One of the leading global producers of medicines. ƒ Some of its products are covered by the public insurance scheme. ƒ Considerable product portfolio, including consumer medicines and vaccines. ƒ Difficult IP environment. ƒ No direct manufacturing or R&D presence in the country. ƒ Counterfeiting remains a problem. ƒ Rising demand for branded products following healthcare sector modernisation. ƒ Pending overhaul of the regulatory climate, aiming to boost foreign investment. ƒ Strong regional experience and connections. ƒ Legal trade barriers protecting local players and disadvantaging multinationals. ƒ Country susceptible to economic and currency fluctuations. ƒ Legalisation of parallel imports negatively impacting performance of branded drugs. GSK began operating in Vietnam in 1994, with a staff of only seven. In the following years, GSK merged with Wellcome, and became GSK Vietnam. The company offers a range of prescription medicines, although not all of its products are covered by public insurance, as is the case with Advair/Seretide (fluticasone + salmeterol). Developments In July 2011, after the recall of Augmentin (amoxicillin clavulanate) in Hong Kong, DAV requested the firm send samples of the drug to be tested for plasticisers. This was after the Taiwan di(2ethylhexyl)phthalate (DEHP) scandal, where the Taiwanese government detected DEHP, a plasticiser, in various food and health products in May 2011. DEHP is known to disrupt hormonal actions, reducing testosterone levels in boys and causing early sexual development in girls. In March 2010, the US FDA voiced concerns over GSK’s Rotarix vaccine. It was thought that the live oral preventative had been contaminated with a benign pig virus, known as porcine circovirus type (PCV-1). The US FDA recommended that any use of the vaccine be temporarily suspended. The DVA has also requested documents from GSK verifying the safety of the vaccine. GSK’s cervical cancer vaccine Cervarix has been approved in Vietnam. Its competitor, MSD’s Gardasil, also received approval in 2009. GSK reduced the price of its vaccine in mid-2010, in line with its ‘differential pricing’ strategy for certain products in select global markets. The government agency has also ordered 10,000 packets of GSK’s Relenza (zanamivir) for Tamiflu-resistant patients. In late 2009, GSK’s Augmentin’s retail price rose from VND14,000 to VND15,000 per pack. Presently, the product costs in the region of VND175,000. Contact Details ƒ Address: GlaxoSmithKline Vietnam, The Metropolitan, Unit 701, 235 Dong Khoi St, District 1, Ho Chi Minh City, Vietnam ƒ Tel: +84 3824 8744 ƒ Website: www.gsk.com/worldwide/vn.htm © Business Monitor International Ltd Page 96 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Demographic Outlook 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 key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Vietnam's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 97 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012f 2015f 2020f 67,102 74,008 78,758 83,161 87,848 89,730 92,443 96,355 0-4 years 9,340 9,212 7,002 6,776 7,186 7,186 7,026 6,529 5-9 years 8,685 9,193 9,124 6,921 6,703 6,885 7,143 6,982 10-14 years 7,504 8,604 9,142 9,038 6,844 6,539 6,668 7,104 15-19 years 7,127 7,408 8,535 9,064 8,963 8,161 6,806 6,628 20-24 years 6,492 7,003 7,305 8,420 8,954 9,115 8,892 6,745 25-29 years 5,893 6,361 6,879 7,167 8,284 8,602 8,862 8,803 30-34 years 4,884 5,779 6,250 6,765 7,058 7,475 8,202 8,779 35-39 years 3,965 4,794 5,688 6,163 6,677 6,770 6,991 8,131 40-44 years 2,420 3,884 4,710 5,614 6,086 6,304 6,609 6,925 45-49 years 2,039 2,358 3,802 4,653 5,548 5,761 6,012 6,536 50-54 years 1,933 1,968 2,287 3,739 4,580 4,936 5,449 5,914 55-59 years 1,946 1,843 1,887 2,201 3,617 4,001 4,446 5,305 60-64 years 1,544 1,822 1,737 1,767 2,076 2,573 3,455 4,268 65-69 years 1,283 1,391 1,659 1,582 1,621 1,649 1,927 3,233 70-74 years 919 1,084 1,194 1,439 1,389 1,384 1,438 1,729 1,127 1,305 1,559 1,852 2,264 2,388 2,516 2,743 Total 75+ years f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 98 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012f 2015f 2020f 0-4 years 13.92 12.45 8.89 8.15 8.18 8.01 7.60 6.78 5-9 years 12.94 12.42 11.58 8.32 7.63 7.67 7.73 7.25 10-14 years 11.18 11.63 11.61 10.87 7.79 7.29 7.21 7.37 15-19 years 10.62 10.01 10.84 10.90 10.20 9.10 7.36 6.88 20-24 years 9.68 9.46 9.27 10.13 10.19 10.16 9.62 7.00 25-29 years 8.78 8.60 8.73 8.62 9.43 9.59 9.59 9.14 30-34 years 7.28 7.81 7.94 8.14 8.03 8.33 8.87 9.11 35-39 years 5.91 6.48 7.22 7.41 7.60 7.55 7.56 8.44 40-44 years 3.61 5.25 5.98 6.75 6.93 7.03 7.15 7.19 45-49 years 3.04 3.19 4.83 5.59 6.32 6.42 6.50 6.78 50-54 years 2.88 2.66 2.90 4.50 5.21 5.50 5.89 6.14 55-59 years 2.90 2.49 2.40 2.65 4.12 4.46 4.81 5.51 60-64 years 2.30 2.46 2.21 2.12 2.36 2.87 3.74 4.43 65-69 years 1.91 1.88 2.11 1.90 1.85 1.84 2.08 3.36 70-74 years 1.37 1.46 1.52 1.73 1.58 1.54 1.56 1.79 75+ years 1.68 1.76 1.98 2.23 2.58 2.66 2.72 2.85 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 99 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Table: Vietnam's Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6 Dependent population, total, '000 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321 Active population, % of total 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6 Active population, total, '000 38,243 43,218 49,079 55,552 61,842 63,699 65,725 68,034 Youth population, % of total working age 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3 Youth population, total, '000 25,529 27,009 25,268 22,735 20,732 20,610 20,837 20,615 Pensionable population, % of total working age 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3 Pensionable population, '000 3,330 3,780 4,411 4,874 5,274 5,421 5,881 7,706 Dependent ratio, % of total working age f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+. Source: World Bank, UN, BMI Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f Urban population, % of total 20.3 22.2 24.3 26.4 28.7 29.7 31.2 33.9 Rural population, % of total 79.7 77.8 75.7 73.6 71.3 70.3 68.8 66.1 Urban population, '000 13,438.6 16,201.6 18,865.4 21,940.1 25,212.5 26,649.9 28,842.1 32,664.4 Rural population, '000 52,761.4 56,778.4 58,770.0 61,166.2 62,635.9 63,080.4 63,600.5 63,690.7 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 100 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Glossary ƒ Pharmaceuticals, medicines, drugs: synonym terms used interchangeably. ƒ Pharmaceutical market/sales: the sum of revenues generated by generic, patented, and over-thecounter (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. ƒ Prescription drugs: patented and generic drugs regulated by legislation that requires a physician’s prescription before they can be sold to a patient. ƒ 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. ƒ 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. ƒ OTC drug: a medicine that does not require a prescription to be sold to patients. Also known as nonprescription medicines. ƒ Counterfeit drugs: unregistered and illegal medicines which have not been subject to regulatory assessments to ensure quality, safety, efficacy and manufacturing standards. ƒ 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. ƒ 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 © Business Monitor International Ltd Page 101 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 forecasts necessitates taking into account the essential attributes of country-specific health accounting such as comprehensiveness, consistency, standardisation and timeliness. ƒ 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 extra-budgetary funds to finance healthcare provision. ƒ 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. ƒ 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, among others. ƒ 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 (DALYs) lost to a disease in a particular country. ƒ Disability-Adjusted Life Years: 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 Q3 2012 BMI Methodology How We Generate Our Pharmaceutical Industry Forecasts Pharmaceutical sub-sector forecasts are generated using a top-down approach from BMI’s Drug Expenditure Forecast Model. The semi-automated tool incorporates historic trends, macroeconomic variables, epidemiological forecasts and analyst input, which are weighted by relevance to each market. The following elements are fed into the model: 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 DALYs using BMI’s BoDD, which is based on the WO’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 generic drugs. © Business Monitor International Ltd Page 103 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Pharmaceuticals Risk/Reward Ratings Methodology BMI’s approach in assessing the risk/reward balance for Pharmaceutical & Healthcare Industry investors globally is fourfold. First, we identify factors (in terms of current industry/country trends and forecast industry/country growth) representing opportunities to would-be investors. Second, we identify country and industry-specific traits which pose or could pose operational risks to would-be investors. Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/trends to avoid subjectivity. Finally, we use BMI’s proprietary Country Risk Ratings (CRR), ensuring that only the aspects most relevant to the Pharmaceutical & Healthcare Industry are incorporated. Overall, the system offers an industry-leading, comparative insight into the opportunities and risks for companies across the globe. Ratings Overview Ratings System Conceptually, the ratings system divides into two distinct areas: Rewards: Evaluation of the sector’s size and growth potential in each state, as well as broader industry/state characteristics that may inhibit its development. Risks: Evaluation of industry-specific dangers and those emanating from a 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 ratings use three subjectively measured indicators and 41 separate indicators/datasets. © Business Monitor International Ltd Page 104 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Table: Pharmaceutical Business Environment Indicators Indicator Rationale Rewards Industry Rewards Market expenditure, US$bn Denotes breadth of pharmaceutical market. Large markets score higher than smaller ones Market expenditure per capita, US$ 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. States with ageing populations tend to have higher per capita expenditure Population growth, 2003-2016 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 Industry 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 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 Risks Economic structure 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 Policy continuity Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy Bureaucracy Rating from CRR denotes ease of conducting business in the state Legal framework Rating from CRR denotes the strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Corruption 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 105 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Weighting Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Rewards 60% – Industry Rewards – 75% – Country Rewards – 25% Risks 40% – Industry Risks – 60% – Country Risks – 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 106 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...].. .Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Vietnam Economic SWOT Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.1% annually between 2000 and 2011 The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 14.0% in 2010 Weaknesses Vietnam. .. overall score for risks Vietnam s score of 36 is among the lowest in the region, indicating substantial risks facing multinationals operating and wishing to operate in the country The regional average has remained at 57 for Q31 2 © Business Monitor International Ltd Page 13 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Industry Risks One of the most obvious drawbacks of the Vietnamese pharmaceutical... Page 15 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 and product portfolios Vinapharm exemplifies this trend, having signed technology transfer agreements with US and Chinese firms in recent years At the start of 2005, there were more than 10,000 kinds of medicines registered for sale in Vietnam and about 60% were produced locally © Business Monitor International Ltd Page 16 Vietnam Pharmaceuticals. .. as biologics, cannot be manufactured in Vietnam, so some © Business Monitor International Ltd Page 26 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 spending on imports is necessary This problem is developing rapidly, with spending on medicines for Vietnamese health insurance holders increasing by 43.8% in 2009 compared with the previous year More recent reports from local press show that the issue... nations are looking to the committed actions of the Vietnamese government for inspiration According to the UNICEF, foreign experts work with the Vietnamese Ministry of Health to train local people to administer immunisations These indigenous ‘on- © Business Monitor International Ltd Page 28 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 the-ground’ healthcare workers also spend a lot of time educating... Diseases, according to the institute director In late May 2012, the Vietnamese Ministry of Health reported that hand, foot and mouth disease (HFMD) had killed 27 children under five in the first five months of the year About 50,000 people have suffered © Business Monitor International Ltd Page 29 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 from the disease in the country The ministry has requested... takes more time due to late diagnoses, usually at the metastasis phase © Business Monitor International Ltd Page 31 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Healthcare Financing According to a panel of stakeholders that includes UN representatives, Vietnam needs to increase healthcare spending significantly and improve the distribution of funds to reduce inequalities among its population... evidence to suggest that a large-scale political uprising could occur in the short-to-medium term © Business Monitor International Ltd Page 14 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Vietnam – Market Summary In common with many of its regional neighbours, the Vietnamese Pharmaceutical Market By Sub-Sector (US$bn) pharmaceutical market is underdeveloped 2011 and suffers from poor regulatory and... 47 43 45 44 45.7 13 Vietnam 43 47 44 40 30 36 40.9 14 Pakistan 40 47 42 33 40 36 39.5 15 Bangladesh 37 43 38 40 36 38 38.3 16 Sri Lanka 30 43 33 40 48 43 37.2 17 Cambodia 33 37 34 30 36 32 33.5 18 Regional Average 48 57 50 55 59 57 52.7 Scores out of 100, with 100 highest Source: BMI © Business Monitor International Ltd Page 12 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Vietnam maintains its... International Ltd Page 20 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 Clinical trials: PhRMA expressed its concerns over the new regulations that stipulate domestic clinical trials requirements for marketing approval of all pharmaceuticals that have not been made available in the country for more than five years Member companies are concerned this could hamper innovative pharmaceuticals development, . deadline: June 2012 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 © Business Monitor International Ltd Page 2 Vietnam Pharmaceuticals & Healthcare Report Q3 2012 ©. Vietnam Pharmaceuticals & Healthcare Report Q3 2012 © Business Monitor International Ltd Page 5 Table: Weighting Of Components 106 Sources 106 Vietnam Pharmaceuticals & Healthcare. caution that Vietnam faces pressures for democratisation. Vietnam Pharmaceuticals & Healthcare Report Q3 2012 © Business Monitor International Ltd Page 8 SWOT Analysis Vietnam Pharmaceutical