Q1 2014 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 Q1 2014 INCLUDES 10-YEAR FORECASTS TO 2022 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: December 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 © 2014 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 Q1 2014 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Table: Healthcare Governmental Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Table: Healthcare Private Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Prescription Drug Market Forecast 21 Table: Prescription Drug Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Patented Drug Market Forecast . 24 Table: Patented Drug Market Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Generic Drug Market Forecast 26 Table: Generic Drug Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 OTC Medicine Market Forecast . 28 Table: OTC Medicine Sales Indicators, 2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Pharmaceutical Trade Forecast . 31 Table: Vietnam Pharmaceutical Trade Data And Forecasts (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Table: Vietnam Pharmaceutical Trade Data And Forecasts (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Other Healthcare Data . 33 Key Risks To BMI's Forecast Scenario . 34 Macroeconomic Forecasts . 36 Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Industry Risk Reward Ratings 40 Asia Pacific Risk/Reward Ratings . 40 Vietnam Risk/Reward Ratings 46 Rewards 46 Risks 46 Market Overview . 48 Industry Trends And Developments 50 Epidemiology 50 Healthcare Financing . 51 © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Hospital Sector Private Healthcare Sector Healthcare Insurance Healthcare And Pharmaceutical Reform . Research And Development Biotechnology Sector Clinical Trials . 54 56 57 59 60 62 65 Regulatory Development 68 Regulatory Regime Pharmaceutical Advertising Intellectual Property Environment . Corruption Pricing Regime Reimbursement Regime Pricing And Reimbursement Developments . 68 69 70 73 74 78 80 Competitive Landscape 82 Pharmaceutical Sector . Domestic Industry . Foreign Industry Traditional Medicines . Pharmaceutical Distribution . Pharmaceutical Retail Sector . 82 83 85 88 89 90 Table: Key Aspects Of Good Pharmacy Practice In Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Company Profile 92 DHG Pharmaceutical . 92 Traphaco Pharmaceutical . 94 Vietnam Pharmaceutical Corporation (Vinapharm) . 96 Vietnam OPV Pharmaceutical Co . 99 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 101 Vidipha Central Pharmaceutical Joint Stock Company . 104 Pfizer 106 Sanofi 108 Novartis . 112 Merck & Co 114 GlaxoSmithKline . 116 Demographic Forecast . 118 Demographic Outlook 118 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Glossary . 122 Methodology 124 Pharmaceutical Expenditure Forecast Model Healthcare Expenditure Forecast Model . Notes On Methodology Risk/Reward Ratings Methodology Ratings Overview . 124 124 125 126 127 Table: Pharmaceutical Risk/Reward Ratings Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Indicator Weightings 128 © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q1 2014 BMI Industry View BMI View: The upgrade to our private healthcare forecast stems largely from the Vietnamese government's plan to pass hospital operating costs to patients. We highlight that this is potentially regressive should hospitals attempt to profit from such policies. Nevertheless, we remain largely optimistic towards Vietnam's healthcare sector, as it is seeking to implement universal healthcare for its population, which will improve access to services. Headline Expenditure Projections ■ Pharmaceuticals: VND59,214bn (US$2.84bn) in 2012 to VND69,297bn (US$3.32bn) in 2013; +17.0% in local currency terms and +16.9% in US dollar terms. Forecast unchanged from Q413, long-term forecast slightly upgraded to reflect general bullish sentiments in Vietnam's economy. ■ Healthcare: VND201,466bn (US$9.65bn) in 2012 to VND230,985bn (US$11.1bn) in 2013; +14.7% in local currency terms and +14.5% in US dollar terms. Forecast broadly in line with Q313. Risk/Reward Rating: Vietnam's Pharmaceutical Risk/Reward Rating (RRR) score for Q114 is 49.1 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 13th behind Thailand out of the 19 key markets in Asia Pacific. Key Trends And Developments ■ In December 2013, Vietnam and Cuba signed a memorandum of understanding (MoU) for regulating pharmaceuticals and boosting public health cooperation as proposed by the Intergovernmental Commission at its September session. The MoU was signed by Rafael Perez Cristia, the director of the Cuban state regulatory agency for medicine, CECMED, and Truong Quoc Cuong, the general director of Vietnam's Drug Administration, in the presence of Vietnamese Vice Minister Nguyen Than Long. Earlier in September 2013, the Intergovernmental Commission met in Havana and expressed its interest to support collaboration projects between specialised institutions in the two countries. ■ In November 2013, the Vietnamese Ministry of Health's Administration of Science, Technology and Training (ASTT) signed an agreement with Quintiles to enhance clinical research. Under the two-year agreement, Quintiles and ASTT will jointly address a number of topics, such as improving processes for trial management, developing streamlined processes to improve trial efficiency and quality as well as training for investigators and ethics committees. ■ In October 2013, Ho Chi Minh City health department inspectors have exposed several regulatory violations in an inspection at a Vietnamese public hospital, Nguyen Tri Phuong. The inspectors found that the hospital had been charging 14% more than the regular VND700,000 (US$32.66) for a MSCT scan over the past two years. The inspection also revealed that hospital staff were involved in many corrupt practices such as purchasing medicines and equipment from unauthorised suppliers, overcharging patients and embezzling assets from the hospital. © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q1 2014 BMI Economic View: Our assessment of the Vietnamese economy at the provincial level suggests that there are attractive opportunities for foreign companies to invest in rapidly-developing provinces that are situated in the South East region (including Ba Ria-Vung Tau, Dong Nai, and Binh Duong). We expect rising labour costs and intense competition in developed cities to push companies to look for better opportunities in these provinces. BMI Political View: We view the passing of the revised Land Law in Vietnam as a significant milestone with regards to government efforts to clamp down on corruption and address mounting public dissent over land rights violations. The new law, which aims to establish a fairer process of compensating occupants for the appropriation of land by the government, will help to significantly reduce cases of land disputes. Furthermore, the new law could also benefit investment, as projects often face long and costly delays due to land disputes arising from unfair compensation. © Business Monitor International Page Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 Q1 2014 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 Q1 2014 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 115 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 GlaxoSmithKline 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 116 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 Vietnam ■ Tel: +84 3824 8744 © Business Monitor International Page 117 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Demographic Forecast Demographic Outlook Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Vietnam's population pyramid for 2013, the change in the structure of the population between 2013 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. Population Pyramid 2013 (LHS) And 2013 Versus 2050 (RHS) Source: World Bank, UN, BMI © Business Monitor International Page 118 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Population Indicators Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050 Source: World Bank, UN, BMI Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2013e 2015f 2020f 68,910 76,020 80,888 84,948 89,047 91,680 93,387 97,057 0-4 years 9,315 9,323 7,128 6,898 7,229 7,152 7,012 6,575 5-9 years 8,606 9,212 9,253 7,023 6,791 7,052 7,181 6,968 10-14 years 7,857 8,541 9,162 9,117 6,899 6,619 6,757 7,147 15-19 years 7,359 7,788 8,492 9,050 9,011 7,686 6,866 6,726 20-24 years 6,644 7,222 7,673 8,333 8,874 9,148 8,936 6,802 25-29 years 6,006 6,470 7,065 7,471 8,112 8,528 8,772 8,837 30-34 years 5,138 5,890 6,352 6,910 7,286 7,703 8,022 8,680 35-39 years 3,888 5,065 5,803 6,242 6,763 7,011 7,208 7,940 40-44 years 2,463 3,826 4,994 5,719 6,147 6,472 6,685 7,127 45-49 years 2,017 2,409 3,753 4,935 5,648 5,894 6,054 6,589 50-54 years 1,968 1,959 2,346 3,700 4,855 5,306 5,521 5,926 55-59 years 2,046 1,891 1,885 2,237 3,542 4,278 4,677 5,330 60-64 years 1,669 1,934 1,790 1,734 2,068 2,795 3,352 4,444 65-69 years 1,412 1,522 1,771 1,610 1,562 1,673 1,906 3,104 70-74 years 1,028 1,216 1,322 1,530 1,399 1,360 1,379 1,695 Total © Business Monitor International Page 119 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Vietnam's Population By Age Group, 1990-2020 ('000) - Continued 1990 1995 2000 2005 2010 2013e 2015f 2020f 75-79 years 752 819 984 1,080 1,263 1,219 1,167 1,160 80-84 years 430 536 597 732 815 919 964 900 85-89 years 224 261 336 385 483 517 546 654 90-94 years 71 108 132 177 210 245 268 306 95-99 years 16 25 41 53 74 83 89 115 100+ years 12 17 21 24 30 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2013e 2015f 2020f 0-4 years 13.52 12.26 8.81 8.12 8.12 7.80 7.51 6.77 5-9 years 12.49 12.12 11.44 8.27 7.63 7.69 7.69 7.18 10-14 years 11.40 11.23 11.33 10.73 7.75 7.22 7.24 7.36 15-19 years 10.68 10.25 10.50 10.65 10.12 8.38 7.35 6.93 20-24 years 9.64 9.50 9.49 9.81 9.97 9.98 9.57 7.01 25-29 years 8.72 8.51 8.73 8.79 9.11 9.30 9.39 9.11 30-34 years 7.46 7.75 7.85 8.13 8.18 8.40 8.59 8.94 35-39 years 5.64 6.66 7.17 7.35 7.60 7.65 7.72 8.18 40-44 years 3.57 5.03 6.17 6.73 6.90 7.06 7.16 7.34 45-49 years 2.93 3.17 4.64 5.81 6.34 6.43 6.48 6.79 50-54 years 2.86 2.58 2.90 4.36 5.45 5.79 5.91 6.11 55-59 years 2.97 2.49 2.33 2.63 3.98 4.67 5.01 5.49 60-64 years 2.42 2.54 2.21 2.04 2.32 3.05 3.59 4.58 65-69 years 2.05 2.00 2.19 1.89 1.75 1.83 2.04 3.20 70-74 years 1.49 1.60 1.63 1.80 1.57 1.48 1.48 1.75 75-79 years 1.09 1.08 1.22 1.27 1.42 1.33 1.25 1.19 80-84 years 0.62 0.70 0.74 0.86 0.91 1.00 1.03 0.93 85-89 years 0.32 0.34 0.42 0.45 0.54 0.56 0.58 0.67 90-94 years 0.10 0.14 0.16 0.21 0.24 0.27 0.29 0.32 95-99 years 0.02 0.03 0.05 0.06 0.08 0.09 0.10 0.12 © Business Monitor International Page 120 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Vietnam's Population By Age Group, 1990-2020 (% of total) - Continued 100+ years 1990 1995 2000 2005 2010 2013e 2015f 2020f 0.00 0.00 0.01 0.01 0.02 0.02 0.03 0.03 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI Table: Vietnam's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 1990 1995 2000 2005 2010 2013e 75.8 71.0 61.3 50.8 42.9 41.4 2015f 2020f 41.3 41.9 29,712 31,567 30,734 28,617 26,741 26,860 27,293 28,655 Active population, % of total 56.9 Active population, total, '000 58.5 62.0 66.3 70.0 70.7 70.8 70.5 39,198 44,453 50,154 56,331 62,306 64,820 66,094 68,402 Youth population, % of total working age 65.8 Youth population, total, '000 60.9 50.9 40.9 33.6 32.1 31.7 30.2 25,778 27,076 25,544 23,038 20,918 20,822 20,950 20,690 Pensionable population, % of total working age Pensionable population, total, '000 10.0 10.1 10.3 9.9 9.3 9.3 9.6 11.6 3,934 4,491 5,190 5,579 5,823 6,037 6,343 7,965 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2013e 2015f 2020f Urban population, % of total 20.3 22.2 24.4 27.3 30.4 32.3 33.6 36.9 Rural population, % of total 79.7 77.8 75.6 72.7 69.6 67.7 66.4 63.1 Urban population, total, '000 13,958 16,867 19,716 23,175 27,064 29,632 31,384 35,771 Rural population, total, '000 54,952 59,153 61,172 61,773 61,983 62,048 62,003 61,286 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI © Business Monitor International Page 121 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 122 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 ■ 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 123 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 data 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 124 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 this by population figures. A linear regression is then performed (see Note for explanation). This is first to 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. 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 125 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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. This include public sector salaries, but not 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 non-durable 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) analyse 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 25-years of 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 belong to different therapeutic groups, or whether the drug being launched is the first to be launched in the market - or will be one of many different drugs of the same therapeutic class that has been launched in the market. © Business Monitor International Page 126 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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. 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 the fiveyear 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 growth across 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 Rating from CRR evaluates the structural balance of the economy, noting issues such as reliance on single sectors for exports/growth, and past economic volatility Policy continuity Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy © Business Monitor International Page 127 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Pharmaceutical Risk/Reward Ratings Indicators - Continued Indicator Rationale 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 reward or risk that each factor poses to drug companies. The score assigned to each sub-sector (i.e. Industry Rewards) indicates the weighting of the sub-sector segment in the final RRR score. The score assigned to each indicator shows its influence within the sub-sector and the final RRR. All the indicators and their weightings are visible, improving the transparency of the rating system, and 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 markets in which data collection is difficult. ■ Internal presentations. © Business Monitor International Page 128 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Principals Likely To Derive Benefit ■ Disease manager ■ Country manager ■ Regional manager ■ CEOs and other senior executives involved in high-level strategic decisions ■ Business development team ■ Credit risk team © Business Monitor International Page 129 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Page 11 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 20.7% in 2012 Weaknesses ■ Vietnam. .. Med Review reports that medicine prices in Vietnam are high, both for 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 © Business Monitor International Page 21 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 27 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 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 30 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Pharmaceutical Trade Forecast Vietnam is highly reliant on pharmaceutical imports Latest data from UN Commodities Trade Database Pharmaceutical... 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 35 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Macroeconomic... 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 23 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Patented Drug Market Forecast Value development of the patented drugs segment - Patented Drug Market Forecast and... total sales 23.80 23.43 23.08 22.69 22.33 21.94 21.54 21.14 20.72 f = BMI forecast Source: BMI, Drug Administration of Vietnam (DAV), Vietnam Ministry of Health, domestic companies, local press © Business Monitor International Page 25 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Generic Drug Market Forecast Although the overall generic drug market is sizeable, Generic Drug Market Forecast standing... spend savings generated elsewhere to boost health services, such as improving health infrastructure © Business Monitor International Page 18 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Table: Healthcare Expenditure Indicators, 2009-2017 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f Health expenditure (US$bn) 6.5 7.1 8.4 9.7 11.1 12.9 14.9 17.0 19.3 Health expenditure (US$bn), % chg y-o-y 9.0... 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 28 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Market research also established that it is common for people in Vietnam to ask the advice of unlicensed pharmacists or friends... 160.0 180.5 203.3 Health expenditure (% GDP) 6.4 6.3 6.2 6.2 6.3 6.5 6.6 6.7 6.7 Source: BMI, WHO © Business Monitor International Page 19 Vietnam Pharmaceuticals & Healthcare Report Q1 2014 Table: Healthcare Governmental Indicators, 2009-2017 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f Government health expenditure (US$bn) 2.5 2.6 3.4 3.9 4.4 5.1 5.8 6.5 7.4 Government health expenditure (US$bn), . 199 0-2 020 (% of total) 120 Table: Vietnam& apos;s Key Population Ratios, 199 0-2 020 121 Table: Vietnam& apos;s Rural And Urban Population, 199 0-2 020 121 Vietnam Pharmaceuticals & Healthcare Report. Q1 2014 www.businessmonitor.com VIETNAM PHARMACEUTICALS & HEALTHCARE REPORT INCLUDES 10-YEAR FORECASTS TO 2022 ISSN 174 8-2 305 Published by:Business Monitor International Vietnam Pharmaceuticals. infrastructure. Vietnam Pharmaceuticals & Healthcare Report Q1 2014 © Business Monitor International Page 18 Table: Healthcare Expenditure Indicators, 200 9-2 017 2009 2010 2011 2012 2013 2014f 2015f