Q4 2013 www.businessmonitor.com VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT INCLUDES 10-YEAR FORECASTS TO 2022 ISSN 1748-2305 Published by:Business Monitor International Vietnam Pharmaceuticals & Healthcare Report Q4 2013 INCLUDES 10-YEAR FORECASTS TO 2022 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: September 2013 Business Monitor International 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@businessmonitor.com Web: http://www.businessmonitor.com © 2013 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 Q4 2013 CONTENTS BMI Industry View . SWOT Political . 11 Economic . 12 Business Environment 13 Industry Forecast 14 Pharmaceutical Market Forecast 14 Table: Pharmaceutical Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Healthcare Market Forecast 16 Table: Healthcare Expenditure Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Table: Healthcare Governmental Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Table: Healthcare Private Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Prescription Drug Market Forecast 20 Table: Prescription Drug Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Patented Drug Market Forecast . 23 Table: Patented Drug Market Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Generic Drug Market Forecast 25 Table: Generic Drug Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 OTC Medicine Market Forecast . 27 Table: OTC Medicine Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Pharmaceutical Trade Forecast . 30 Table: Exports And Imports Indicators, 2011-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Other Healthcare Data . 32 Key Risks To BMI's Forecast Scenario . 33 Macroeconomic Forecasts . 35 Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Industry Risk Reward Ratings 39 Asia Pacific Risk/Reward Ratings . 39 Vietnam Risk/Reward Ratings 44 Rewards 44 Risks 45 Market Overview . 46 Industry Trends And Developments 48 Epidemiology 48 Healthcare Financing . 49 Hospital Sector 51 © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Private Healthcare Sector Healthcare Insurance Healthcare And Pharmaceutical Reform . Research And Development Biotechnology Sector Clinical Trials . 53 54 56 58 59 63 Regulatory Development 65 Regulatory Regime 65 Pharmaceutical Advertising Intellectual Property Environment . Corruption Pricing Regime Reimbursement Regime Pricing And Reimbursement Developments . 67 68 71 71 75 77 Competitive Landscape 79 Pharmaceutical Sector . Domestic Industry . Foreign Industry Recent Pharmaceutical Industry News Traditional Medicines . Pharmaceutical Distribution . Pharmaceutical Retail Sector . 79 80 82 85 85 86 87 Table: Key Aspects Of Good Pharmacy Practice In Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Company Profile 89 DHG Pharmaceutical . 89 Traphaco Pharmaceutical . 91 Vietnam Pharmaceutical Corporation (Vinapharm) . 93 Vietnam OPV Pharmaceutical Co . 96 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 98 Vidipha Central Pharmaceutical Joint Stock Company . 101 Pfizer 103 Sanofi 105 Novartis . 108 Merck & Co 110 GSK 112 Demographic Forecast . 114 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Glossary . 118 © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Methodology 120 Pharmaceutical Expenditure Forecast Model Healthcare Expenditure Forecast Model . Notes On Methodology Risk/Reward Ratings Methodology Ratings Overview . 120 120 121 122 123 Table: Pharmaceutical Risk/Reward Ratings Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Indicator Weightings 124 © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q4 2013 BMI Industry View BMI View: The government's promise to improve healthcare conditions through rising expenditure will bring potential growth to pharmaceutical firms over the longer term. However, we highlight that there may be a risk of not fulfilling such aims, given extensive bureaucracy and rampant corruption. In addition, the macroeconomic condition was less -than optimistic between Q1 and Q2 this year. Should this continue, it will be challenging for the country to invest in healthcare substantially. Headline Expenditure Projections ■ Pharmaceuticals: VND59,214bn (US$2.84bn) in 2012 to VND69,455bn (US$3.32bn) in 2013; +17.3% in local currency terms and +17.1% in US dollar terms. Forecast broadly unchanged from Q313. ■ Healthcare: VND201,466bn (US$9.66bn) in 2012 to VND232,015bn (US$11.1bn) in 2013; +15.2% in local currency terms and +15.0% in US dollar terms. Forecast broadly in line with Q313. Risk/Reward Rating: Vietnam's Pharmaceutical Risk/Reward Rating (RRR) score for Q413 is 50 out of the maximum 100 in our newly improved RRR system. The country scored above average for some indicators and sub-indicators, including overall market expenditure and sector value growth, pensionable population. Consequently, with this moderate score Vietnam continues ranked 12th behind Thailand but in front of Indonesia out of the 19 key markets in Asia Pacific. Key Trends And Developments ■ In August 2013, in an online meeting held by the Vietnamese government electronic portal, chinhphu.vn, the implementation of the health insurance law in 2010-2011 compensated the deficit in 2009 and had a surplus. However, due to the increase in health services fee, Vietnam Social Insurance calculated that if such adjustments are applied in 2013, the fund may run a VND10trn deficit. ■ In July 2013, Terumo BCT (a Terumo company) has started constructing its second manufacturing facility in Vietnam. The manufacturing facility, when open in 2015, will support growth and demand for blood and cellular therapy products globally. Terumo BCT serves three primary customer segments: blood centres, therapeutic apheresis & cell collections and cell processing. The Vietnam facility is part of Terumo's broader strategy that includes investments in its existing US manufacturing operations at its global headquarters in Colorado, and its manufacturing facilities in Northern Ireland and India. • In the same month, Vietnam's Pharmaceutical Management Department ordered a recall of Relab 20%, a drug solution for intravenous infusion manufactured by India's Reliance Life Science. The department has also suspended the distribution of the drug in the country. The recall has been ordered due to the drug's harmful side effects. The importers and the distributor of Relab 20% were asked by the department to immediately withdraw the drug from the domestic market. BMI Economic View: Vietnam's economic recovery is beginning to lose its momentum, with the country recording a relatively weak real GDP growth figure of 5.0% year-on-year (y-o-y) in Q213, up only slightly © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q4 2013 from 4.9% in Q113. The latest GDP print also suggests to us that further efforts by the Vietnamese government to speed up the restructuring of debt-laden banks and restart lending to small and medium-sized enterprises (SMEs) may be necessary to support economic growth over the coming quarters. Moreover, given that we have recently begun to see signs of a slowdown in economic activity across the region, 2013 looks increasingly precarious for the Vietnamese economy. BMI Political View: The Communist Party of Vietnam (CPV)'s decision to implement an annual noconfidence vote for senior officials is a sign of progress for the country's evolving political system towards a more accountable and democratic government. We believe that the move will also have a significant influence on the CPV's economic agenda by putting pressure on senior government officials to speed up economic reforms. © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q4 2013 SWOT 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 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. © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q4 2013 SWOT Analysis - Continued ■ Introduction of five-year exclusivity for clinical dossier data encouraging researchbased multinationals. ■ If investment can be found for technological improvements, then there is great potential in the traditional Chinese medicine market, in addition to fledging biotechnology. ■ Full WTO membership improving the trading climate and potentially, in the longer term, redressing pharmaceutical trade issues. ■ Requirement for domestic companies to comply with international good manufacturing practices should boost exports. ■ Threats ■ Government resistance to aligning patent law fully with international standards deterring multinational sector expansion. ■ Need to resolve infrastructural and power supply issues, as well as higher education provision, before higher levels of foreign direct investment can be expected. ■ The government is increasingly interfering in the industry, protecting indigenous firms through the use of legal trade barriers, which will affect competitiveness. ■ Pharmaceutical price inflation threatens to put medicines out of reach of poor and therefore limit market volume growth. ■ Legalisation of parallel imports negatively impacting performance of patented drugs. © Business Monitor International Page 10 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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 highmargin patented drugs, such as the cervical cancer vaccine Gardasil. Recent Developments In March 2013, the firm opened a new representative office in Hanoi highlighting that Hanoi itself has more than 1000 pharmacies and thus it 'should be a potential healthcare market'. The new office will help MSD 'optimise marketing activities for healthcare products to people'. 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. 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. Company Details ■ ■ Merck & Co Merck, Sharp & Dohme Asia Vietnam Branch 16th Floor, Kumho Asiana Plaza 39 Le Duan Street, District Ho Chi Minh City Vietnam ■ Tel: +84 3915 5800 © Business Monitor International Page 111 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 GSK SWOT Analysis Strengths Weaknesses Opportunities Threats Company Overview ■ One of the leading global producers of medicines. ■ Some of its products are covered by the public insurance scheme. ■ Considerable product portfolio, including consumer medicines and vaccines. ■ Difficult IP environment. ■ No direct manufacturing or R&D presence in the country. ■ Counterfeiting remains a problem. ■ Rising demand for branded products following healthcare sector modernisation. ■ Pending overhaul of the regulatory climate, aiming to boost foreign investment. ■ Strong regional experience and connections. ■ Legal trade barriers protecting local players and disadvantaging multinationals. ■ Country susceptible to economic and currency fluctuations. ■ 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). Recent Developments In June 2013, Ho Chi Minh City Department of Health announced that a batch of GSK's Cervarix (human papillomavirus vaccine) will have to be tested further to clarify its role in the death of a 17-year old girl, who died after getting a vaccination shot. In July 2012, it was revealed that GSK's Singapore division worked with a local pharmaceutical manufacturer to manipulate drug prices in Vietnam. The firm sold the drugs at prices 4-5 times higher than their original rates. The DAV granted licences to © Business Monitor International Page 112 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Vietnam-based Savi Pharmaceutical for the circulation of 15 types of medicines in 2008-2011. Between October 18 2011 to May 17 2012, Savipharm produced six of the drugs and sold them to GSK under an in-country export transaction, with the help of importer Phytopharma, at very low prices. 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(2-ethylhexyl)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. Company Details ■ ■ GlaxoSmithKline GlaxoSmithKline Vietnam, The Metropolitan, Unit 701 235 Dong Khoi St, District Ho Chi Minh City Address line Postcode Vietnam ■ Tel: +84 3824 8744 © Business Monitor International Page 113 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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 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 Page 114 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012e 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 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012 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 © Business Monitor International Page 115 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Vietnam's Population By Age Group, 1990-2020 (% of total) - Continued 1990 1995 2000 2005 2010 2012 2015f 2020f 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 Table: Vietnam's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 Youth population, % of total working age Youth population, total, '000 Pensionable population, % of total working age Pensionable population, '000 1990 1995 2000 2005 2010 2012 2015f 2020f 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6 38,243 43,218 49,079 55,552 61,842 63,699 65,725 68,034 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3 25,529 27,009 25,268 22,735 20,732 20,610 20,837 20,615 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3 3,330 3,780 4,411 4,874 5,274 5,421 5,881 7,706 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 © Business Monitor International Page 116 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 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 Page 117 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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 Page 118 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 ■ 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 Page 119 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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 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). Data is provided in nominal local currency terms. © Business Monitor International Page 120 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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). Firstly on five years of real per-capita 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 general 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. 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 for the health expenditure tables in the World Health Statistics Report and the WHO Global Health Observatory. Note 2: Linear regression equation. y = mx + b © Business Monitor International Page 121 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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 expenditures 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 Ratings 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 ratings tool, which provides a globally comparative and numerically-based assessment of a market's attractiveness, was established to address this. BMI's Pharmaceutical Risk/Reward Ratings (RRRs) analyses and assess 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 Ratings (CRR), 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 RRRs 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 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. © Business Monitor International Page 122 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Ratings 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 Ratings Indicators Indicator Rationale Rewards Industry Rewards Market expenditure, US$bn Denotes breadth of pharmaceutical market. Large markets score higher than smaller ones Denotes depth of pharmaceutical market. High value markets score better than low Market expenditure per capita, US$ 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 Country Risks Economic diligence © Business Monitor International 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 Page 123 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Pharmaceutical Risk/Reward Ratings Indicators - Continued Indicator Rationale Policy continuity Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy Lack of bureaucracy Rating from CRR denotes ease of conducting business in the state Legal diligence Rating from CRR denotes the strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Business Transparency Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies' ability to compete Source: BMI Indicator Weightings 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 RRR, and the score assigned to each indicator shows each indicator's influence within the sub-sector and the final RRR. All the indicators and their weightings are visible, improving the transparency of the rating system, allowing for the identification of regional (or group) outperformers across one indicator. Uses For BMI's Pharmaceutical RRRs ■ 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 on markets in which data collection is difficult. ■ Internal presentations. © Business Monitor International Page 124 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 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 Page 125 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Page 11 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Economic SWOT Analysis 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 2012 ■ 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. .. Med Review reports that medicine prices in Vietnam are high, both for © Business Monitor International Page 20 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 patented and generic drugs, and that regulation is required to control mark-ups One other method of keeping prices to reasonable levels is through controlling the volume of drugs on the market Hospitals remain the primary source of healthcare, ... 53.84 f = BMI forecast Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies, local press © Business Monitor International Page 26 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 OTC Medicine Market Forecast Despite the blurred distinction between prescription and non-prescription products, OTC healthcare has OTC Medicine Market Forecast been achieving... 27.20 26.91 26.67 26.43 26.19 25.94 25.69 25.44 f = BMI forecast Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies, local press © Business Monitor International Page 29 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Pharmaceutical Trade Forecast Vietnam is highly reliant on pharmaceutical imports Latest data from UN Commodities Trade Database (UNComtrade)... 31 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Exports And Imports Indicators, 2011-2017 - Continued 2011 Pharmaceutical trade balance (VNDmn) 2012 2013f 2014f 2015f 2016f 2017f -31,355,994 -36,959,194 -43,203,391 -50,143,480 -58,209,046 -66,842,546 -76,255,415 f = BMI forecast Source: BMI, United Nations Comtrade Database DESA/UNSD Other Healthcare Data The vast majority of hospitals in Vietnam. .. progress of Vietnam' s healthcare and pharmaceutical industries However, whether such reform can be carried out successfully is a matter for much conjecture given the disorganised state of the sector Nevertheless, Vietnam' s WTO membership since early 2007 is expected to stimulate other similar deals in the region © Business Monitor International Page 34 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Macroeconomic... 157.2 176.6 196.4 Health expenditure (% GDP) 6.4 6.3 6.2 6.2 6.3 6.4 6.4 6.4 6.4 Source: BMI, WHO © Business Monitor International Page 18 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Table: Healthcare Governmental Indicators, 2009-2017 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f Government health expenditure (US$bn) 2.5 2.6 3.4 3.9 4.4 5.1 5.7 6.5 7.2 Government health expenditure (US$bn),... the European Self-Medication Industry (AESGP), 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 Page 27 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Market research also established that it is common for people in Vietnam to ask the advice of unlicensed pharmacists or friends... Labour unrest remains a lingering threat A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Page 13 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Industry Forecast Pharmaceutical Market Forecast Vietnam' s pharmaceutical market was valued at VND59,214bn (US$2.84bn) in 2012, a 18.2% year- Pharmaceutical... total sales 72.60 72.80 73.09 73.33 73.57 73.81 74.06 74.31 74.56 f = BMI forecast Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies, local press © Business Monitor International Page 22 Vietnam Pharmaceuticals & Healthcare Report Q4 2013 Patented Drug Market Forecast Value development of the patented drugs segment - Patented Drug Market Forecast and . Q4 2013 www.businessmonitor.com VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT INCLUDES 10-YEAR FORECASTS TO 2022 ISSN 1748-2305 Published by:Business Monitor International Vietnam Pharmaceuticals. towards Vietnamese healthcare through investment in three hospitals including: Bach Mai Hospital, Hue Central Hospital and Cho Ray Hospital. Vietnam Pharmaceuticals & Healthcare Report Q4 2013 ©. BMI, WHO Vietnam Pharmaceuticals & Healthcare Report Q4 2013 © Business Monitor International Page 18 Table: Healthcare Governmental Indicators, 2009-2017 2009 2010 2011 2012 2013f 2014f