Vietnam Pharmaceuticals and Healthcare Report Q4 2009

BMI's drug forecast for Vietnam has been affected in recent months by negative macroeconomic factors.

Vietnam, like many of Asia's export-focused manufacturing economies, is vulnerable to a downturn in Western markets in which much of its output is consumed. This has a knock on effect on employment and disposable income in Vietnam, therefore reducing the potential for drug market expenditure growth.

However, for Q409, we are increasing our forecasts for the drug sector, as the government's economic stimulus package begins to take hold and the economic climate improves. Between 2008 and 2013, we expect drug market expenditure to grow at a compound annual growth rate (CAGR) of 17.95% to reach US$3.2bn. This is reflective of the current low levels of drug consumption in the country providing the pharmaceutical industry with plenty of room for expansion. It is also linked to general signs of optimism in the economy. BMI is now projecting 4.5% GDP growth for Vietnam in 2009, despite the global slowdown. Over the forecast period the population should also reach 92.8mn, from the current 86.8mn, providing extra impetus to the drug sector.

In H109 the Drug Administration of Vietnam (DAV) effectively controlled drug costs, with medicine prices only rising by 1.82%. However, over the next six months price inflation is expected to accelerate as increased costs for gasoline pressure manufacturing and distribution, and the appreciation of the US dollar against the dong makes imports more expensive. In H109, the prices of domestically-produced drugs remained stable, again highlighting the importance of an indigenous pharmaceutical industry. A survey of 8,000 drugs showed that only 22 products recorded prices increases in the period, while 10 reported price decreases. This supports BMI's core view that the development of the local pharmaceutical industry will be best achieved through the development of local manufacturing capacity. The role of the DAV is also crucial. In order to prevent rapid price rises in the remainder of the year, the agency is listing medicine prices on a daily basis on its website. This will allow regional health departments to examine and compare the prices of drugs on the market when making purchasing decisions.

Meanwhile, in July 2009, Vietnam introduced its first domestically-produced measles vaccine. This means the South East Asian country's 10-vaccine National Expanded Immunisation Programme (NEIP) is now self-sufficient. BMI believes that other developing countries should follow Vietnam's example, rather than relying on multinational drugmakers or non-government organisations (NGOs), both of which have agendas that go beyond improving health. Despite this success, Vietnam still props up the bottom of BMI's Business Environment Rankings for Asia Pacific, mainly due to the low levels of drug consumption per capita, and the sub-standard intellectual property (IP) regime.