EU pharma’s strategic imperative

EU pharma’s strategic imperative

February 29, 2024

The time is ripe to prioritize Vietnam

"Vietnam has traditionally been a distributor led market for mid-size EU pharma players, but with EVFTA and growth trajectory in the market , it’s time to invest in local commercially capabilities."
Portrait of Aditya Agarwal
Singapore Office, Southeast Asia

Vietnam is enjoying a COVID dividend and leading players in various sectors, led by technology, are seeing Vietnam as a promising location for supply chain diversification. Healthcare spending in Vietnam is expected to grow at nearly 6.5% in the next 3-4 years with an encouraging sign of share of public expenditure rising faster. While traditionally, the market has seen a strong growth in branded and unbranded generics, Vietnam lately shown a higher appetite for patented products, driven by better affordability and improved market authorisation protocols. As a result, the overall pharma market is expected to see a stronger growth than the healthcare market. Vietnam has a fast-growing middle class, demanding more from the healthcare system; it’s also an aging population. It is expected that by 2038, 20% of Vietnamese people will be over 60 years old.

In addition to rising demand, a few factors are leading to increased modernisation of healthcare:

  • Medical tourism: Vietnam has been positioning itself as a medical tourism destination. As per official statistics, nearly, 350,000 foreign visitors sought medical treatment last year. Treatments span the full range of medical services, with the most common choices of services including dental care, cosmetic surgery, cardiology intervention and fertility treatment. Plans also call for driving increased modernisation and international standards for outpatient and emergency care services.

  • Privatisation: international and regional private players are keen to tap into domestic demand. Until recently, 90% of the healthcare was provided by public hospitals. But public health stakeholders, have shown an interest in driving privatisation of healthcare, which also been supported by stake sales in public hospitals and a positive outlook towards private financing plus partnerships by public hospitals.

  • Increased sophistication of public players: public players, especially leading educational institutions have been forming cross-border partnerships to increase industry know-how and develop talent pool of the country. Similarly, beyond use of simple tools of external pricing referencing, pricing of the products in the recent years has started including other tools like cost-plus method. Government policy has also fostered a burgeoning health platform industry with several players emerging.

EU-Pharma could take advantage of these trends. Exchange of information, engagement of the broader set of stakeholders is easier for them compared to their non-EU peers, due to the strengthening of trade relations between EU and Vietnam.

Key considerations in Vietnam’s Pharma market.

  • Hospital channel management: hospitals are a key dispensing channel facing a multitude of challenges: talent, budgeting and capacity. EU pharma players, especially those which are mid-sized could go beyond the usual engagement techniques and adopt a solution driven approach to win share and advocacy. Such an approach might have a higher return on investment rather than deploying a large sales force. Additionally, KOLs in Vietnam are looking for better content, and a targeted approach focusing on their needs; digi of HCP engagement provides a strong opportunity to address this.

  • Solution oriented approach: from outdated equipment to shortage of medical staff; from budget shortages to overcapacity – public hospitals are looking at solutions across the board. Private hospitals, while benefiting from demand, also require help.

  • Tailored KOL engagement: while KOLs have adopted to digital engagement, a lot more is desired in terms of tailoring content for Vietnam. In a recent survey, nearly 60% KOLs felt they were not informed enough about the recent breakthrough drugs or indications, in their respective therapeutic areas.

  • Collaborating with distributors: with Decree 55, FIEs had to rely and work closely with local distributors or work with regional ones to manage them. While EVFTA allows for FIEs to develop warehouses and participate in tenders, distributors would continue to play a pivotal role, especially for small to midsized players. They would need support from distributors on provincial tenders, engaging with KOLs and increasing footprint in new channels. While working with regional players is an option, regional players also rely on local players due to factors like reach, presence and regulations. Hence working with local distributors at least for a part of the portfolio is recommended, with an eye to increasing local footprint and also managing risks of Decree 55. Local players might lack some capabilities, hence collaborating with them or investing is a key strategic consideration.

  • Bespoke models of distribution: given the varying nature of distribution reach and capability, established pharma players in Vietnam, also tend to adopt bespoke distribution models.

Setting up M&A’s / JVs has been a proven way for various MNCs to enter the market, but EU-pharma could also set up a trading company to avail the benefits of EVFTA. Investors are required to obtain an import license along with other certifications, obtain proof of origin for EU pharmaceutical
products. While several challenges in winning the market exist, starting now provides an opportunity to work with different stakeholders and shape the market.

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