Q3 2015 www.bmiresearch.com VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT INCLUDES 10-YEAR FORECASTS TO 2024 ISSN 1748-2305 Published by:BMI Research Vietnam Pharmaceuticals & Healthcare Report Q3 2015 INCLUDES 10-YEAR FORECASTS TO 2024 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: June 2015 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 Q3 2015 INCLUDES 10-YEAR FORECASTS TO 2024 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: June 2015 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 Q3 2015 CONTENTS BMI Industry View . SWOT Political . 11 Economic . 12 Operational Risk . 14 Industry Forecast 16 Pharmaceutical Market Forecast 16 Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Healthcare Market Forecast 19 Table: Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Table: Private Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Prescription Drug Market Forecast 23 Table: Prescription Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Patented Drug Market Forecast . 25 Table: Patented Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Generic Drug Market Forecast 27 Table: Generic Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 OTC Medicine Market Forecast . 29 Table: Over-The-Counter (OTC) Medicine Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Pharmaceutical Trade Forecast . 32 Table: Pharmaceutical Trade Data And Forecasts (Vietnam 2013-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Table: Pharmaceutical Trade Data And Forecasts local currency (Vietnam 2013-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Key Risks To BMI's Forecast Scenario . 34 Macroeconomic Forecasts . 35 Economic Analysis . 35 Table: Economic Activity (Vietnam 2010-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Industry Risk Reward Indices 41 Asia Pacific Risk/Reward Index 41 Vietnam Risk Reward Index . 47 Rewards 47 Risks 47 Market Overview . 49 Industry Trends And Developments 51 Epidemiology 51 Healthcare Sector 53 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Hospital Sector 56 Table: Healthcare Resources (Vietnam 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Table: Healthcare Personnel (Vietnam 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Table: Healthcare Activity (Vietnam 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Private Healthcare Sector Healthcare Insurance Healthcare And Pharmaceutical Reform . Research And Development Biotechnology Sector Clinical Trials . 59 61 62 63 64 66 Regulatory Development 69 Pharmaceutical Advertising Intellectual Property Issues Corruption Pricing Regime Reimbursement Regime Pricing And Reimbursement Developments . 70 71 74 75 80 81 Competitive Landscape 83 Research-Based Industry . Domestic Industry Foreign Industry Traditional Medicines . Pharmaceutical Distribution Pharmaceutical Retail Sector . 83 84 85 87 88 89 Table: Key Aspects Of Good Pharmacy Practice In Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Company Profile 91 DHG Pharmaceutical . 91 GlaxoSmithKline . 93 Merck & Co 95 Novartis . 97 Pfizer 99 Sanofi 101 Traphaco Pharmaceutical . 104 Vietnam OPV Pharmaceutical Co . Vietnam Pharmaceutical Corporation (Vinapharm) . Vietnam Pharmaceutical Joint Stock Company (Ampharco) . Vidipha Central Pharmaceutical Joint Stock Company . 106 108 111 113 Demographic Forecast . 115 Table: Population Headline Indicators (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Table: Key Population Ratios (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Table: Population By Age Group (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Table: Population By Age Group % (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 Glossary . 120 Methodology 122 Pharmaceutical Expenditure Forecast Model Healthcare Expenditure Forecast Model . Notes On Methodology Risk/Reward Index Methodology . Index Overview 122 122 123 124 125 Table: Pharmaceutical Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Indicator Weightings 126 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2015 BMI Industry View BMI View: Counterfeit and substandard medicines will remain highly pervasive in Vietnam's pharmaceutical market. While this reflects the limited capacity of regulators to address the problem, its persistence also illustrates the presence of a sizeable market for manufacturers of counterfeit and low quality medicines. We highlight that pharmaceutical products most affected by this practice are small molecule medicines. Headline Expenditure Projections ■ Pharmaceuticals: VND80,731bn (USD3.81bn) in 2014 to VND92,719bn (USD4.32bn) in 2015; +14.9% in local currency terms and +13.4% in US dollar terms. ■ Healthcare: VND234,889bn (USD11.08bn) in 2014 to VND258,648bn (USD12.05bn) in 2015; +10.1% in local currency terms and +8.7% in US dollar terms. Risk Reward Index Vietnam's Pharmaceutical Risk Reward Index score for Q315 is 47.9 out of the maximum 100. The country scored above average for some indicators and sub-indicators, including overall market expenditure, sector value growth and pensionable population. Consequently, with this moderate score, Vietnam is ranked 11th out of the 19 key Asia Pacific markets, level with Thailand and Indonesia. Key Trends And Developments ■ Vietnam has met international vaccine-management standards and is eligible for exporting its domestically produced vaccines, according to World Health Organization (WHO) representative Lahouari Belghabi. The country's National Regulatory Authorities has scored more than 90% in its critical control functions during an assessment carried out by 14 WHO specialists. The functions include surveillance of vaccine performance in the field, regular inspections for good manufacturing practice and evaluation of clinical performance. The country is among 39 countries that meet WHO's strict vaccine standards, and is expected to become one of the world's leading vaccine producers in 20 or 30 years, Belghabi noted (Vietnamnet). ■ The Drug Administration of Vietnam has imposed fines and a two-year drug import ban on two foreign firms after they were found to be selling unqualified medicines and pharmaceutical products from unclear origins, reports Thanhnien News. The DAV ordered Hong Kong-based Austin Pharma Specialties and China-based CSPC Innovation Pharmaceutical to submit, from the profits made from these illegal products, USD30,625 and USD29,750 respectively. On top of this, the agency fined the companies VND160mn (USD7,300) each. The alleged materials were used to manufacture omeprazole and pantoprazole, both 'proton pump inhibitors', commonly used to treat acid reflux and ulcers of stomach. ■ Vietnam Social Insurance (VSI) is set to implement numerous measures in order to simplify health insurance procedures to encourage more people to buy insurance. The development comes after the number of people buying health insurance in Q115 decline by 1.4mn, compared with Q414. The © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2015 measures are aimed towards achieving 75% health insurance coverage in 2015. Under the plan, the VSI will work with the health ministry to spread awareness of the benefits of health insurance. These measures will be taken in provinces and cities, where currently only 60% of the population is covered under health insurance. Furthermore, health insurance will be allowed to be collected two times in a year, instead of just once as in previous years (Viet Nam News). BMI Economic View While the Vietnamese banking sector remains burdened by bad debts and the still-strong presence of state enterprises, sustained rapid economic growth momentum and ongoing banking reform efforts by the government should gradually strengthen the local banks. The retail banking segment will be a key growth engine over the coming years owing to the relatively under-banked nature of the country. BMI Political View Despite increasing political and international pressures, China will continue to hold a firm stance on its nine-dash line claims to the South China Sea. Therefore, there remains no end in sight to the ongoing maritime dispute between Vietnam and China. That said, we believe Vietnam will not want to strain ties with China given the latter's increasing economic importance. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 World Health Organization guidelines. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Company Overview Ampharco is one of the more prominent generic drugs producers in Vietnam. In 2007, Ampharco obtained the right to import and export pharmaceuticals directly from and to foreign partners. The company also operates a subsidiary in the US. Ampharco has a long history for an emerging market drug maker. The forerunner of the company was ThaiVan Laboratories, which was founded in 1969, during the height of the Vietnam War. In addition to manufacturing, ThaiVan Laboratories was the exclusive distributor for several European pharmaceutical firms, including Allard (France) KaliChemie (Germany) and Farmitalia (Italy). By 1979, Ampharco's product portfolio which included K-Cort (corticoid) vitamin Campofort, vitamin B complex Becofort and beta-blocker Timol (timolol) - had become well known in Vietnam. Nowadays, the company has products in a number of therapeutic areas including cardiovascular, dermatology, genitory-urinary, antibiotics and allergy and immune system. Some of its products are allergic treatment Cezil (cefprozil) and Mepraz (omeprazole) indicated for stomach ulcers. Other products include consumer healthcare treatments Bosamin (herb extract) and nicotine replacement therapy Nicostop. Strategy Boasting a strong OTC portfolio across several therapeutic areas, Ampharco supports its consumer brands with comprehensive advertising campaigns. Expertise in selfmedication means Ampharco is well positioned in the case of prescription to OTC switches. Ampharco's goal of exporting its products to the US and other foreign markets has received a boost after investment funds were received from Vietnam Equity Holding (VEH). The new resources will be used to restructure Ampharco's finances and 'improve competitive capacity'. Acting under the supervision of investment fund management company Anpha Capital, VEH owns 10% of Ampharco's issued shares. Ampharco is also looking to develop its local research and manufacturing facilities. Company Details ■ ■ Vietnam Pharmaceutical Joint Stock Company (Ampharco) Ampharco, Lot.20B No.1 Street, Tan Binh Industrial Park Ho Chi Minh City Vietnam ■ Tel: +84 815 6880 © Business Monitor International Ltd Page 112 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Vidipha Central Pharmaceutical Joint Stock Company SWOT Analysis Strengths Weaknesses Opportunities ■ One of Vietnam's more prominent pharmaceutical companies. ■ Strong export portfolio. ■ Most units facing financial difficulties. ■ Low patient purchasing power and insufficient healthcare funding. ■ Underdeveloped healthcare infrastructure in the country. ■ Plans for a major overhaul of the domestic pharmaceutical regulatory environment, with a focus on local manufacture of drugs in order to reduce the country's dependence on imports. ■ Improvement of regulatory climate following the World Trade Organization (WTO) accession to attract foreign investment. ■ Healthcare modernisation initiatives. ■ Should benefit from the construction of new production facilities, even though the move from the old factory negatively affected output levels in 2010. Threats Company Overview ■ Complex and discriminatory pricing policy. ■ New health insurance regulations hampering access to pharmaceuticals. ■ Vietnam being increasingly susceptible to economic fluctuations. ■ Increased competition following WTO entry. Vidipha is one of the more prominent pharmaceutical companies in Vietnam. In June 2006, Vidipha revealed its plan to raise USD2.3mn in an initial public offering of more than 1mn shares. The company produces coated tablets and solutions for injections and exports to Russia and Iraq, as well as a number of South East Asian countries. © Business Monitor International Ltd Page 113 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Strategy Vidipha is likely to continue increasing its interest in exports, given its good manufacturing practice certification, although the domestic market does offer significant longer-term potential. The company is also upgrading its production facilities, with a new factory located in the Binh Duong province. Developments 2013 ■ Company Details ■ ■ In November 2013, local media Thanhnien Online reported that Vidipha was one of the five companies approved by the Ministry of Health to produce methadone to treat heroin addiction. Vidipha Central Pharmaceutical Joint Stock Company 184/2 184/2 Lê Van Sy Phuong 10 Q. Phu Nhuan Vietnam ■ Tel: +84 38 440 106 © Business Monitor International Ltd Page 114 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 115 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 68,909 80,887 84,947 89,047 93,386 97,057 99,811 na 1.1 0.9 1.0 0.9 0.7 0.5 Population, total, male, '000 33,892 39,827 41,830 43,970 46,158 47,980 49,302 Population, total, female, '000 35,017 41,060 43,117 45,077 47,228 49,076 50,508 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 39,197 50,153 56,330 62,305 66,093 68,401 70,001 56.9 62.0 66.3 70.0 70.8 70.5 70.1 29,712 30,733 28,617 26,741 27,292 28,655 29,810 75.8 61.3 50.8 42.9 41.3 41.9 42.6 Page 116 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Key Population Ratios (Vietnam 1990-2025) - Continued Youth population, total, '000 1990 2000 2005 2010 2015f 2020f 2025f 25,778 25,543 23,038 20,918 20,950 20,690 19,395 65.8 50.9 40.9 33.6 31.7 30.2 27.7 3,934 5,190 5,578 5,823 6,342 7,964 10,414 10.0 10.3 9.9 9.3 9.6 11.6 14.9 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 13,957.7 19,715.6 23,174.6 27,064.2 31,383.5 35,771.3 40,027.3 Urban population, % of total Rural population, '000 2000 20.3 24.4 2005 27.3 2010 30.4 2015f 33.6 36.9 40.1 54,952.2 61,172.3 61,773.2 61,983.2 62,003.1 61,285.7 59,783.9 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.1 59.9 Life expectancy at birth, male, years 66.1 69.0 69.9 70.7 71.7 72.7 73.7 Life expectancy at birth, female, years 75.1 78.5 79.6 80.2 80.7 81.2 81.7 Life expectancy at birth, average, years 70.6 73.8 74.8 75.5 76.2 77.0 77.8 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 9,314 7,127 6,897 7,228 7,012 6,574 5,922 Population, 5-9 yrs, total, '000 8,606 9,253 7,023 6,790 7,180 6,968 6,535 Population, 10-14 yrs, total, '000 7,856 9,162 9,117 6,898 6,757 7,147 6,936 Population, 15-19 yrs, total, '000 7,359 8,492 9,050 9,011 6,865 6,725 7,116 Population, 20-24 yrs, total, '000 6,644 7,672 8,332 8,873 8,936 6,802 6,664 Population, 25-29 yrs, total, '000 6,005 7,065 7,470 8,111 8,772 8,837 6,717 Population, 30-34 yrs, total, '000 5,138 6,351 6,909 7,285 8,021 8,680 8,747 Population, 35-39 yrs, total, '000 3,888 5,803 6,241 6,763 7,207 7,939 8,596 Population, 40-44 yrs, total, '000 2,462 4,994 5,719 6,147 6,684 7,127 7,856 Population, 45-49 yrs, total, '000 2,016 3,753 4,935 5,647 6,054 6,588 7,031 © Business Monitor International Ltd Page 117 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Population By Age Group (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 50-54 yrs, total, '000 1,968 2,345 3,699 4,855 5,521 5,926 6,457 Population, 55-59 yrs, total, '000 2,045 1,885 2,237 3,541 4,677 5,330 5,733 Population, 60-64 yrs, total, '000 1,668 1,790 1,734 2,068 3,352 4,443 5,079 Population, 65-69 yrs, total, '000 1,411 1,770 1,609 1,562 1,906 3,104 4,134 Population, 70-74 yrs, total, '000 1,027 1,322 1,530 1,399 1,379 1,695 2,776 Population, 75-79 yrs, total, '000 752 984 1,080 1,263 1,166 1,159 1,437 Population, 80-84 yrs, total, '000 429 596 731 814 964 900 903 Population, 85-89 yrs, total, '000 223 336 385 482 545 653 617 Population, 90-94 yrs, total, '000 71 132 177 209 267 306 372 Population, 95-99 yrs, total, '000 15 40 52 74 89 115 133 Population, 100+ yrs, total, '000 11 16 23 30 38 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 13.52 8.81 8.12 8.12 7.51 6.77 5.93 Population, 5-9 yrs, % total 12.49 11.44 8.27 7.63 7.69 7.18 6.55 Population, 10-14 yrs, % total 11.40 11.33 10.73 7.75 7.24 7.36 6.95 Population, 15-19 yrs, % total 10.68 10.50 10.65 10.12 7.35 6.93 7.13 Population, 20-24 yrs, % total 9.64 9.49 9.81 9.97 9.57 7.01 6.68 Population, 25-29 yrs, % total 8.72 8.73 8.79 9.11 9.39 9.11 6.73 Population, 30-34 yrs, % total 7.46 7.85 8.13 8.18 8.59 8.94 8.76 Population, 35-39 yrs, % total 5.64 7.17 7.35 7.60 7.72 8.18 8.61 Population, 40-44 yrs, % total 3.57 6.17 6.73 6.90 7.16 7.34 7.87 Population, 45-49 yrs, % total 2.93 4.64 5.81 6.34 6.48 6.79 7.04 Population, 50-54 yrs, % total 2.86 2.90 4.36 5.45 5.91 6.11 6.47 Population, 55-59 yrs, % total 2.97 2.33 2.63 3.98 5.01 5.49 5.74 Population, 60-64 yrs, % total 2.42 2.21 2.04 2.32 3.59 4.58 5.09 Population, 65-69 yrs, % total 2.05 2.19 1.90 1.75 2.04 3.20 4.14 Population, 70-74 yrs, % total 1.49 1.63 1.80 1.57 1.48 1.75 2.78 Population, 75-79 yrs, % total 1.09 1.22 1.27 1.42 1.25 1.20 1.44 Population, 80-84 yrs, % total 0.62 0.74 0.86 0.92 1.03 0.93 0.91 © Business Monitor International Ltd Page 118 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Population By Age Group % (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 85-89 yrs, % total 0.32 0.42 0.45 0.54 0.58 0.67 0.62 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.29 0.32 0.37 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.10 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 119 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 World Health Organization (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 countryspecific 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 120 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 ■ 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 121 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 122 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 consumer price index (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 123 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 (RRIs) 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 124 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 125 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 126 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 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 127 [...]... Pharmaceuticals & Healthcare Report Q3 2015 SWOT Analysis - Continued • Vietnam' s reliance on imported oil poses risks in the form of energy and fuel shortages • Corruption and inefficiency in the legal system • Anti-Chinese violence, as seen in May 2014, could be a harbinger of wider political and social unrest © Business Monitor International Ltd Page 15 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Industry... undoubtedly reinforced our bullish view of the Vietnamese economy, we maintain our forecast for the country's real GDP growth to accelerate to 6.4% in 2015 from 6.0% in 2014 © Business Monitor International Ltd Page 35 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Strong Growth Trajectory Vietnam - Real GDP Growth, % 8 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015f e/f = BMI estimate/forecast Sources:... spending, VNDbn f = BMI forecast Source: World Health Organization (WHO)/ BMI © Business Monitor International Ltd Page 21 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Table: Government Healthcare Expenditure Trends, Historical Data And Forecasts (Vietnam 2011-2019) 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f Govt health spend, USDbn 3.775 3.953 4.250 4.573 4.907 5.345 5.881 6.482 7.157 Govt health... hypertension among the Vietnamese population will provide scope for drugmakers to expand © Business Monitor International Ltd Page 23 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 One therapeutic area that has strong potential is oncology At an international scientific conference in April 2013, Mai Trong Khoa, deputy director of Hanoi-based Bach Mai Hospital, stated that Vietnam reports about 110,000... Page 31 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Pharmaceutical Trade Forecast Vietnam is highly reliant on pharmaceutical imports Data from UN Commodities Trade Pharmaceutical Trade Forecast 2010-2019 (2010-2019) Database (UNComtrade) showed that the country imported USD1.8bn worth of pharmaceuticals in 6,000 2012 while exporting USD77.1mn worth of products in the same period Imported pharmaceuticals. .. Ltd Page 11 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Economic SWOT Analysis Strengths ■ Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 6.5% annually between 2000 and 2014 ■ The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 17.2% in 2012 ■ Vietnam has... foreign investors © Business Monitor International Ltd Page 13 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Operational Risk SWOT Analysis Strengths ■ Vietnam has a high number of university graduates with skilled degrees and a high literacy rate for its income level • In addition to a number of regional and international flight options, Vietnam has an extensive inland waterway system • Growing levels... Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S) GMP standards © Business Monitor International Ltd Page 17 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Table: Pharmaceutical Sales, Historical Data And Forecasts (Vietnam 2011-2019) 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f Pharmaceutical sales, USDbn 2.4 2.8 3.3 3.8 4.3 4.9 5.6 6.4 7.3 Pharmaceutical sales, USDbn, %... International Ltd Page 27 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 ■ Some drugs used in specialised and central hospitals are still protected by patents, preventing local firms from producing them The situation is made worse by free trade agreements that may extend patent terms Table: Generic Drug Market Indicators, Historical Data And Forecasts (Vietnam 2011-2019) 2011 2012 2013 2014 2015f 2016f 2017f... Association of the European Self-Medication Industry consumers in Vietnam (at 45% of the total) are among the most likely to take an OTC drug for a minor ailment as soon as symptoms are present © Business Monitor International Ltd Page 29 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 Market research also established that it is common for people in Vietnam to ask the advice of unlicensed pharmacists or friends . Q3 2015 www.bmiresearch.com VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT INCLUDES 10-YEAR FORECASTS TO 2024 ISSN 1748-2305 Published by:BMI Research Vietnam Pharmaceuticals & Healthcare Report. 51 Epidemiology 51 Healthcare Sector 53 Vietnam Pharmaceuticals & Healthcare Report Q3 2015 © Business Monitor International Ltd Page 4 Hospital Sector 56 Table: Healthcare Resources (Vietnam 2009-2014). Source: National Sources/BMI Vietnam Pharmaceuticals & Healthcare Report Q3 2015 © Business Monitor International Ltd Page 18 Healthcare Market Forecast In 2014, healthcare expenditure reached