Published by BUSINESS MONITOR INTERNATIONAL LTD Vietnam Pharmaceuticals & Healthcare Report Q4 2009 ISSN: 1748-2305 Including 5-year industry forecasts Business Monitor International Mermaid House, Puddle Dock London EC4V 3DS UK Tel: +44 (0)20 7248 0468 Fax: +44 (0)20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2009 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd. All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content. Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Including 5-year industry forecasts by BMI Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Publication date: September 2009 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2009 Business Monitor International. All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Pharmaceuticals & Healthcare Report Q4 2009 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 CONTENTS Executive Summary .5 Vietnam Pharmaceutical And Healthcare Industry SWOT Vietnam Political SWOT . Vietnam Economics SWOT . Vietnam Business Environment SWOT . Vietnam – Business Environment Rankings .10 Table: Asia Pacific Pharmaceutical Business Environment Rankings For Q409 . 10 Limits Of Potential Returns . 10 Risks To Realisation Of Returns 11 Market Summary 13 Regulatory Regime .15 Pharmaceutical Advertising . 15 Intellectual Property Environment . 16 IP Shortcomings . 16 Counterfeit Drugs 18 Other Regulatory Issues . 18 Pricing And Reimbursement Regime . 19 Industry Trends And Developments 22 Epidemiology . 22 Healthcare Financing . 25 Healthcare Insurance 26 Healthcare And Pharmaceutical Reforms 27 Foreign Partnerships 28 Domestic Pharmaceutical Sector 28 Foreign Pharmaceutical Sector 30 Traditional Medicines 31 Retail Sector 32 Table: Key Aspects Of Good Pharmacy Practice (GPP) In Developing Countries 34 Research And Development . 34 Vaccine Sector . 35 Biotechnology Sector . 37 Industry Forecast Scenario .39 Overall Market Forecast 39 Table: Vietnam – Pharmaceutical Expenditure, 2003-2013 . 40 Key Growth Factors – Industry 41 Table: Vietnam – Health Expenditure, 2004-2013 . 42 Key Growth Factors – Macroeconomic . 43 Vietnam - Economic Activity, 2006-2013 . 46 Prescription Drug Market Forecast 47 Table: Vietnam – Prescription Drug Market Indicators, 2003-2013 (US$mn unless otherwise stated) 49 OTC Medicine Market Forecast . 50 Table: Vietnam - OTC Medicine Market Forecast . 51 Patented Product Market Forecast 52 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Patented Product Market Forecast 52 Table: Vietnam – Patented Product Expenditure, 2003-2013 . 53 Generic Drug Market Forecast . 54 Table: Vietnam – Generic Drug Expenditure, 2004-2013 55 Pharmaceutical Trade Forecast 56 Table: Vietnam – Pharmaceutical Trade Indicators, 2004-2013 (US$mn) . 57 Medical Device Market Forecast . 58 Table: Vietnam’s Medical Device Market (US$bn unless otherwise stated) 60 Other Healthcare Data Forecasts 60 Key Risks To BMI’s Forecast Scenario . 60 Competitive Landscape .62 Company Profiles .63 Leading Multinational Manufacturers . 63 Pfizer . 63 Sanofi-Aventis . 65 Novartis . 67 Merck & Co . 69 Indigenous Manufacturer Profiles . 70 Vietnam Pharmaceutical Corporation (Vinapharm) . 70 Vietnam OPV Pharmaceutical Co 72 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 73 Vidipha Central Pharmaceutical Joint Stock Company 75 Country Snapshot: Vietnam Demographic Data .76 Section 1: Population . 76 Table: Demographic Indicators, 2005-2030 . 76 Table: Rural/Urban Breakdown, 2005-2030 77 Section 2: Education And Healthcare 77 Table: Education, 2002-2005 . 77 Table: Vital Statistics, 2005-2030 77 Section 3: Labour Market And Spending Power 78 Table: Employment Indicators, 1999-2004 78 Table: Consumer Expenditure, 2000-2012 (US$) 78 BMI Methodology .79 How We Generate Our Pharmaceutical Industry Forecasts . 79 Pharmaceutical Business Environment Ratings Methodology 80 Ratings Overview 80 Table: Pharmaceutical Business Environment Indicators . 81 Weighting 82 Table: Weighting Of Components . 82 Sources . 82 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Executive Summary 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. © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Vietnam Pharmaceutical And Healthcare Industry SWOT Strengths Weaknesses Opportunities Threats ƒ Significant growth potential, given a population of approximately 86.8mn, which will grow to 92mn by the end of the forecast period. ƒ The government’s commitment to developing the health sector ƒ Sizeable local generics sector, which is being encouraged by the government ƒ Strong traditional medicines segment with potential to improve the non-prescription drugs market in the longer term, as long as sufficient investment can be found ƒ One of the least developed pharmaceutical markets in Asia, with low per capita spending on drugs ƒ Patent law notably below international standards ƒ Counterfeit drugs account for a significant amount of market consumption ƒ Little distinction made between prescription and over-the-counter (OTC) drugs, with most medicines available without a prescription ƒ Complex drug pricing policy biased towards local drug producers ƒ Import-reliant market, especially in terms of high-tech products and active pharmaceutical ingredients (APIs), which makes it vulnerable to international currency movements ƒ Domestic companies being forced to comply with international manufacturing standards (GMP), at a considerable expense ƒ Underdeveloped primary care services continuing to hamper access to medicines and improved product market penetration ƒ The ASEAN harmonisation initiative, including the adoption of Western regulatory standards such as ICH and WHO guidelines ƒ Introduction of five-year exclusivity for clinical dossier data encouraging researchbased multinationals ƒ The end of the price freeze has the potential to boost values despite a possible fall in volumes ƒ Radical restructuring of the pharmaceutical industry with an emphasis on foreign investment and biotechnology ƒ If investment can be found for technological improvements then there is great potential in the TCM market. ƒ Improvements in pricing and regulatory environment to boost foreign companies interest and investment in the country ƒ Full WTO membership will improve the trading climate and potentially, in the longer term, redress pharmaceutical trade issues ƒ Government resistance to aligning patent law fully with international standards deterring multinational sector expansion ƒ The government increasingly interfering in the industry, protecting indigenous firms through the use of legal trade barriers, which will affect competitiveness ƒ With a notably fragile regional economy, Vietnam is increasingly susceptible to regional and global economic fluctuations ƒ The legalisation of parallel imports negatively impacting performance of patented drugs © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Vietnam Political SWOT Strengths Weaknesses Opportunities Threats ƒ The Communist Party government appears committed to market-oriented reforms necessary to double 2000’s GDP per capita by 2010, as targeted. The one-party system is generally conducive to short-term political stability ƒ Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia ƒ Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party ƒ There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent ƒ The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. ƒ Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system ƒ The sharp slowdown in growth expected in 2009 is likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could easily develop into a full-on challenge of undemocractic rule ƒ Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable ƒ Relations with China have deteriorated over the past year due to Beijing’s more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Vietnam Economics SWOT Strengths Weaknesses Opportunities Threats ƒ Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averagingf 7.6% annually between 2000 and 2007 ƒ 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% in 2004 ƒ Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy enters into recession in 2009. The fiscal picture is clouded by considerable ‘off-the-books’ spending ƒ The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures ƒ WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition ƒ The government will, in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of the State-Owned Enterprises sector, and liberalising the banking sector ƒ Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population to rise from 29% of the population to more than 50% by the early 2040s ƒ Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis ƒ Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Vietnam Business Environment SWOT Strengths Weaknesses Opportunities Threats ƒ Vietnam has a large, skilled and low-cost workforce, which has made the country attractive to foreign investors ƒ Vietnam’s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond ƒ Vietnam’s infrastructure is still weak. Roads, railways and ports are inadequate to cope with the country’s economic growth and links with the outside world ƒ Vietnam remains one of the world’s most corrupt countries. Its score in Transparency International’s 2008 Corruption Perceptions Index was 2.7, placing it in 20th place in the Asia-Pacific region ƒ Vietnam is increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan. This offers the possibility of the transfer of hightech skills and know-how ƒ Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector. This should offer foreign investors new entry points ƒ Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern ƒ Labour unrest remains a lingering threat. Should the authorities fail to boost skills levels, Vietnam could be rendered a second-rate economy for an indefinite period © Business Monitor International Ltd Page Published by BUSINESS MONITOR INTERNATIONAL LTD Vietnam Pharmaceuticals & Healthcare Report Q2 2009 ISSN: 1748-2305 Including 5-year industry forecasts Business Monitor International Mermaid House, Puddle Dock London EC4V 3DS UK Tel: +44 (0)20 7248 0468 Fax: +44 (0)20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2009 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd. All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content. Vietnam Pharmaceuticals & Healthcare Report Q2 2009 Including 5-year industry forecasts by BMI Part of BMI’s Industry Survey & Forecasts Series Published by: Business Monitor International Publication date: April 2009 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2009 Business Monitor International. All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Pharmaceuticals & Healthcare Report Q2 2009 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2009 CONTENTS Executive Summary .5 Vietnam Pharmaceutical And Healthcare Industry SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT . Vietnam – Business Environment Rankings .10 Table: Asia Pacific Pharmaceutical Business Environment Rankings For Q109 10 Limits Of Potential Returns 10 Risks To Realisation Of Returns 11 Market Summary 12 Regulatory Regime .14 Pharmaceutical Advertising . 14 Intellectual Property Environment . 15 IP Shortcomings . 15 Counterfeit Drugs 17 Other Regulatory Issues . 17 Pricing And Reimbursement Regime 18 Industry Trends And Developments 20 Epidemiology . 20 Healthcare Financing 23 Healthcare Insurance 24 Healthcare And Pharmaceutical Reforms 24 Foreign Partnerships . 25 Domestic Pharmaceutical Sector . 26 Recent Pharmaceutical Industry Developments . 28 Foreign Pharmaceutical Sector . 29 Traditional Medicines 29 Retail Sector 30 Table: Key Aspects Of Good Pharmacy Practice (GPP) In Developing Countries 30 Research And Development . 31 Vaccine Sector . 32 Biotechnology Sector . 33 Industry Forecast Scenario .35 Overall Market Forecast 35 Table: Vietnam – Pharmaceutical Expenditure, 2003-2013 36 Key Growth Factors – Industry 37 Key Growth Factors – Industry 37 Table: Vietnam – Health Expenditure, 2003-2013 . 38 Key Growth Factors – Macroeconomic . 39 Table: Vietnam - Economic Activity . 41 Prescription Market Forecast 42 Table: Vietnam – Prescription Market Indicators, 2004-2013 (VNDmn unless otherwise stated) . 43 OTC Market Forecast 44 Table: Vietnam – OTC Medicine Expenditure, 2004-2013 (VNDmn unless otherwise stated) . 45 © Business Monitor International Ltd Page Vietnam Pharmaceuticals & Healthcare Report Q2 2009 Patented Market Forecast 46 Patented Market Forecast 46 Table: Vietnam – Patented Product Expenditure, 2003-2013 47 Generic Market Forecasts . 48 Table: Vietnam – Generics Drug Expenditure, 2003-2013 49 Export/Import Forecasts 50 Table: Vietnam – Pharmaceutical Trade Indicators, 2003-2013 (US$mn) 51 Medical Device Market Forecast . 52 Table: Vietnam’s Medical Device Market (US$mn unless otherwise stated) . 54 Other Healthcare Data Forecasts 55 Table: Vietnam – Other Healthcare Indicators, 2003-2012 . 55 Key Risks To BMI’s Forecast Scenario 56 Competitive Landscape .57 Company Profiles .58 Leading Multinational Manufacturers 58 Pfizer . 58 Sanofi-Aventis 60 Novartis . 62 Merck & Co . 64 Indigenous Manufacturer Profiles 65 Vietnam Pharmaceutical Corporation (Vinapharm) 65 Vietnam OPV Pharmaceutical Co 67 Vietnam Pharmaceutical Joint Stock Company (Ampharco) . 69 Vidipha Central Pharmaceutical Joint Stock Company . 50 -54 50 -54 40 -4 40 -4 30 -3 30 -3 20 -2 20 -2 10 -14 10-14 0-4 0-4 -6.0 -4.0 -2.0 0.0 Male 2.0 4.0 6.0 -10.0 -5.0 0.0 2030 Female 5.0 10.0 2005 Source: UN Population Division Table: Demographic Indicators, 2005-2030 2005 2010f 2020f 2030f Dependent population, % of total 34.1 29.9 30.4 31.2 Dependent population, total, ‘000 28,318 26,225 30,950 34,499 Active population, % of total 65.8 70.0 69.5 68.7 Active population, total, ‘000 54,650 61,263 70,706 75,927 Youth population*, % of total 28.8 25.0 23.4 20.3 Youth population*, total, ‘000 23,972 21,887 23,807 22,508 Pensionable population, % of total 5.2 4.9 7.0 10.8 Pensionable population, total, ‘000 4,346 4,338 7,143 11,991 f = forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 76 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Table: Rural/Urban Breakdown, 2005-2030 2005 2010f 2020f 2030f Urban population, % of total 26.7 29.4 34.7 41.8 Rural population, % of total 73.3 70.6 65.3 58.2 Urban population, total, ‘000 22,509 26,395 35230 46,123 Rural population, total, ‘000 61,729 63,323 66426 64,306 Total population, ‘000 84,238 89,718 101,656 110,429 f = forecast. Source: UN Population Division Section 2: Education And Healthcare Table: Education, 2002-2005 2002/2003 2004/2005 Gross enrolment, primary 98 93 Gross enrolment, secondary 73 75 Gross enrolment, tertiary 10 16 Adult literacy, male, % na 93.9 Adult literacy, female, % na 86.9 Gross enrolment is the number of pupils enrolled in a given level of education regardless of age expressed as a percentage of the population in the theoretical age group for that level of education. na = not available. Source: UNESCO Table: Vital Statistics, 2005-2030 2005 2010f 2020f 2030f Life expectancy at birth, males (years) 68.4 69.9 74.2 75.8 Life expectancy at birth, females (years) 72.4 73.9 78.4 80.0 Life expectancy estimated at 2005. f = forecast. Source: UNESCO © Business Monitor International Ltd Page 77 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Section 3: Labour Market And Spending Power Table: Employment Indicators, 1999-2004 1999 2000 2001 2002 2003 2004 Employment, ‘000 38,120 38,368 39,000 40,162 41,176 42,316 – % change y-o-y 3.1 0.6 1.6 2.9 2.5 2.7 – male 19,029 19,292 19,744 20,356 20,959 21,649 – female 19,091 19,076 19,257 19,807 20,217 20,666 — female, % of total 50.0 49.7 49.3 49.3 49.1 48.8 Unemployment, ‘000 909 886 1,107 871 949 926 – male 439 468 458 398 402 410 – female 470 418 650 473 547 517 – unemployment rate, % 2.3 2.2 2.7 2.1 2.2 2.1 Source: ILO Table: Consumer Expenditure, 2000-2012 (US$) 2000 2007 2008 2009e 2010f 2012f 110 265 301 368 386 427 Poorest 20%, expenditure per capita 49 119 136 166 174 192 Richest 20%, expenditure per capita 243 587 668 815 855 946 Richest 10%, expenditure per capita 316 763 868 1,060 1,112 1,230 Middle 60%, expenditure per capita 85 206 235 286 301 332 Consumer expenditure per capita 556 1,196 1,297 na na na Poorest 20%, expenditure per capita 250 538 583 na na na Richest 20%, expenditure per capita 1,231 2,649 2,872 na na na Richest 10%, expenditure per capita 1,600 3,444 3,734 na na na 433 931 1,009 na na na Consumer expenditure per capita Purchasing power parity Middle 60%, expenditure per capita e/f = BMI estimate/forecast. na = not available. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 78 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 BMI Methodology How We Generate Our Pharmaceutical Industry Forecasts Pharmaceutical sub-sector forecasts are generated using a top-down approach from BMI’s Drug Expenditure Forecast Model. The semi-automated tool incorporates historic trends, macroeconomic variables, epidemiological forecasts and analyst input, which are weighted by relevance to each market. The following elements are fed into the model: ƒ BMI’s historic pharmaceutical market data, which has been collected from a range of sources including: – regulatory agencies; – pharmaceutical trade associations; – company press releases and annual reports; – subscription information providers; – local news sources; – information from market research firms that is in the public domain. ƒ Data that has been validated by BMI’s pharmaceutical and healthcare analysts using a composite approach, which scores data sources by reliability in order to ensure accuracy and consistency of historic data. ƒ Five key macroeconomic and demographic variables, which have been demonstrated through regression analysis to have the greatest influence on the pharmaceutical market. These have been forecast by BMI’s Country Risk analysts using an in-house econometric model. ƒ The burden of disease in a country. This is forecast in disability-adjusted life years (DALYs) using BMI’s Burden of Disease Database, which is based on the World Health Organization’s burden of disease projections and incorporates World Bank and IMF data. ƒ Subjective input and validation by BMI’s pharmaceutical and healthcare analysts to take into account key events that have affected the pharmaceutical market in the recent past or that are expected to have an impact on the country’s pharmaceutical market over the next five years. These may include policy/reimbursement decisions, new product launches or increased competition from generics. © Business Monitor International Ltd Page 79 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Pharmaceutical Business Environment Ratings Methodology Our approach in assessing the Pharmaceutical Business Environment Ratings is threefold. First, we have defined the risks rated to capture the operational dangers to companies operating in this industry. Second, we attempt where possible to identify objective indicators that may serve as proxies for issues/trends. Finally, we use BMI’s proprietary Country Risk Ratings (CRR) to ensure only the aspects most relevant to the industry are included. Overall, the system, which is integrated with all the industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings Overview Ratings System Conceptually, the new ratings system divides into two distinct areas: Limits of potential returns: Evaluation of sector’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. © Business Monitor International Ltd Page 80 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Table: Pharmaceutical Business Environment Indicators Indicator Rationale Limits to potential returns Market structure Market expenditure, US$bn Market expenditure per capita, US$ Sector value growth, % y-o-y Denotes breadth of pharmaceutical market. Large markets score higher than smaller ones Denotes depth of pharmaceutical market. High value markets score better than low value ones Denotes sector dynamism. Scores based on annual average growth over five-year forecast period Country structure Urban-rural split Pensionable population, % of total Population growth, 2003-2015 Urbanisation is used as a proxy for development of medical facilities. Predominantly rural therefore states score lower Proportion of the population over 65 years of age. States with aging populations tend to have higher per-capita expenditure Fast-growing states suggest better long-term trend growth for all industries Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Policy/reimbursements Markets with full and equitable access to modern medicines score higher than those with minimal state support for healthcare Approvals process High scores awarded to markets with a swift appraisal system. Those that are weighted in favour of local industry or are corrupt score lower Country risk Economic structure Policy continuity Bureaucracy Legal framework Corruption 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 Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy Rating from CRR denotes ease of conducting business in the state Rating from CRR denotes the strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies’ ability to compete Source: BMI © Business Monitor International Ltd Page 81 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 60% – Pharmaceutical market – 75% – Country structure – 25% Risks to realisation of potential returns 40% – Market risks – 60% – Country risk – 40% Source: BMI Sources Sources used include national industry associations, government ministries, global health organisations, officially released pharmaceutical company results and international and national news agencies. © Business Monitor International Ltd Page 82 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... 11 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Country Risk Vietnam is a stable Communist state and thus scores highly for policy continuity Its economic structure, which is characterised by increasing privatisation, is below global standards but improvements are expected Corruption is an issue, as is the sub-standard legal framework © Business Monitor International Ltd Page 12 Vietnam Pharmaceuticals. .. 13 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 for sale in Vietnam Of these, 6,107 were locally produced, with the remaining 4,656 medicines sourced from foreign companies The figures represent a marked improvement on 1995 when the local sector produced only 80 substances and on 2002 when 384 products were manufactured © Business Monitor International Ltd Page 14 Vietnam Pharmaceuticals & Healthcare. .. 30 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 YSP may be financially exposed by the plan However, because Vietnam s generic drug and OTC sectors are forecast to post healthy growth through 2012, we are confident that the investment will pay off in the medium term The facility, which is awaiting approval from Vietnam s planning authorities, is expected to start production before the end of 2009. .. living in urban parts of Vietnam are resistant to penicillin © Business Monitor International Ltd Page 32 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Under GPP plans for Vietnam, all dispensed drugs will have to be safe and effective Pharmacies will be required to have proper facilities, including air conditioning to ensure the right temperature for certain medicines, and a monitoring system... Business Monitor International Ltd Page 19 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 proposed prices are reasonable before allowing them to be distributed However, the management of this system has been criticised as being lax In H109 there were three occasions when drug prices were hiked by between seven and 10% At the end of May 2009, distributor Diethelm Vietnam Corp increased the prices of... the course of 2007 According to a report by the Ministry of Health, even though the © Business Monitor International Ltd Page 25 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 government’s healthcare expenditure as a percentage of the state budget increased to 5.61% in 2006 from 4.98% in 2002, the country was 189th out of 191 countries surveyed on state budget healthcare spending State hospitals... Monitor International Ltd Page 26 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Healthcare And Pharmaceutical Reforms In June 2005 the government unveiled a new 10-year industry development plan aimed at increasing the domestic sector’s market share from 40% to 60%, by 2015 Officials hope that the strategy will reduce the country’s dependence on imported raw materials and finished drugs Some of the... typhoid and malaria, as well as sexually transmitted diseases Subsequently, in October 2007 the government approved a plan in which soft loans worth VND1.6bn (US$100mn) would be granted to the 15 leading hospitals within 12 years Funds will be used for buildings and equipment © Business Monitor International Ltd Page 27 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 Foreign Partnerships In 2005, Vietnam. .. expect Vietnam to improve its placing as the market matures, overtaking Pakistan and Bangladesh Limits Of Potential Returns Pharmaceutical market and country structure scores are weighed and combined to form limits to potential returns Vietnam s score of 37 is among the lowest in the table, with only Singapore scoring below Vietnam © Business Monitor International Ltd Page 10 Vietnam Pharmaceuticals & Healthcare. .. health officers via qualified representatives of pharmaceutical companies and through product conferences and health seminars Foreign firms are required to obtain permission from a provincial health © Business Monitor International Ltd Page 15 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 department before holding a conference and the department must be made aware of any pharmaceutical displays Meanwhile, . date: September 2009 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 © Business Monitor International Ltd Page 2 Vietnam Pharmaceuticals & Healthcare Report Q4 2009 ©. intellectual property (IP) regime. Vietnam Pharmaceuticals & Healthcare Report Q4 2009 © Business Monitor International Ltd Page 6 Vietnam Pharmaceutical And Healthcare Industry SWOT Strengths. Vietnam Pharmaceuticals & Healthcare Report Q4 2009 © Business Monitor International Ltd Page 9 Vietnam Business Environment SWOT Strengths  Vietnam has a large, skilled and