Vietnam’s pharmaceutical sector is booming, fueled by rising demand for healthcare and the country’s global integration. To capitalize on this growth, however, domestic companies must refine their business strategies to navigate a dynamic market with intensifying competition.
At the “Vietnam Pharmaceutical Industry and the Journey to Globalization” seminar, co-held by Newtechco Group Joint Stock Company and the Saigon Times Group in Hanoi on July 31, Ali Ijaz Ahmad, CEO of Singapore’s Makara Capital Partners Pte., Ltd., emphasized the critical role of public health. He underscored that challenges like the Covid-19 pandemic highlight the urgent need to protect and improve public health, especially as global interconnectedness intensifies.
A market with immense potential
International experts and investors at the seminar said Vietnam is at the beginning of a transformative phase, marked by improved domestic manufacturing capabilities through strategic foreign investment. The pharmaceutical sector stands to benefit immensely, leveraging its strengths to cater to the healthcare needs of a burgeoning 100-million population while eyeing regional and global expansion.
It is no coincidence that Vietnam’s pharmaceutical industry has seen such robust growth in recent years. According to KPMG, the sector’s value surged from US$5.4 billion in 2018 to US$6.5 billion in 2021, with a compound annual growth rate of 6.5%.[1] The upward trajectory is solidified by Dragon Capital Securities’ projection of about 10% annual growth from 2020 to 2023.
In the eyes of experts, the dual burden of communicable and non-communicable diseases and chronic conditions, such as diabetes, cardiovascular diseases, and cancer, have ignited huge demand for therapeutic interventions. Compounding this trend, Vietnam’s rapidly aging population has presented a substantial growth opportunity. According to the United Nations Population Fund (UNFPA), Vietnam entered the aging phase in 2011. Projections indicate that by 2036, the country will be an aged society, with 20% of its population aged 60 or older and 14% aged 65 or older. The demographic shift has led to creating a lucrative market for specialized pharmaceutical solutions.
In addition, Vietnam’s steady economic growth, averaging 6.1% from 2010 to 2022, has impactfully contributed to the expansion of the domestic pharmaceutical industry. Rising incomes, particularly in urban areas, have enhanced healthcare spending, stimulating demand for advanced medical services and pharmaceutical innovations.
A growing health consciousness among Vietnamese consumers, as evidenced by Nielsen Vietnam, has driven a shift towards healthcare products and services. This evolving consumer preference has provided the pharmaceutical market with high-value-added segments, including advanced technologies and comprehensive care solutions.
Challenges remain
Despite a promising outlook, the industry has seen several formidable challenges looming large. Intense competition and persistent concerns over product quality have posed major hurdles. The emergence of novel diseases and the escalating threat of antimicrobial resistance necessitate sustained innovation and development of advanced therapies.
Christian Schlennstedt, CEO of Germany’s Cermed GmbH, highlighted the pharmaceutical industry’s vulnerability to supply chain disruptions, as exemplified by the pandemic. He underscored the imperative for companies to deeply understand the domestic market while cultivating robust global partnerships.
Navigating this complex landscape requires manufacturers to adopt agile business strategies, prioritizing innovation while adhering to global safety standards. Currently, the pharmaceutical industry is bound by stringent Good Manufacturing Practice (GMP) and Good Laboratory Practice (GLP) standards, with priorities underscoring a fundamental commitment to consumer well-being.
The proliferation of counterfeit, substandard, and spurious drugs remain a threat to the industry’s reputation and public trust. In response, companies must invest in advanced production facilities and robust quality control systems. Still, they have been left with little choice as substantial financial investments and a shortage of skilled talent and limited R&D capabilities present obstacles for sustainable growth.
Schlennstedt said Cermed GmbH has chosen Newtechco as its strategic partner in Vietnam following an extensive search. During the event in Hanoi, Cermed GmbH and Newtechco Group signed a memorandum of understanding (MOU), with cooperation covering research, development, technology transfer, distribution, and commercialization of pharmaceutical products to address domestic demand.
Foreign investment as a driver
Nguyen Cong Chien, chairman of National Phytopharma Joint Stock Company, a distributor of over 30 global pharmaceutical giants with 2,000 products, noted the growing interest of foreign partners in Vietnam. Once a foothold is established, he said, these companies often seek to localize operations, transferring technology and manufacturing domestically to leverage preferential policies, particularly streamlined product registration processes.
Chien underscored the mutual benefits of such collaborations, enabling local enterprises to partner with multinational corporations in delivering high-quality, affordable medicines to the domestic market. He expressed confidence that the Government’s efforts to establish pharmaceutical industrial parks with attractive incentives will accelerate industry growth, particularly when leveraged by the expertise and resources of global investors.
To address surging domestic demand, the Government approved the development of a biomedical and pharmaceutical (bio-pharma) industrial park in the northern province of Thai Binh in late December 2023. The initiative, outlined in the province’s 2021-2030 master plan, with a vision to 2050, aims to attract investment and establish production, and research and development facilities. In a similar vein, HCMC is actively pursuing the establishment of a pharmaceutical industrial park focused on innovative drug development, technology transfer, and drug manufacturing.
As Ahmad put it, the Government’s proactive stance and commitment to regulatory reform are pivotal to modernizing Vietnam’s pharmaceutical industry.
Douglas Foo, chairman of Singapore-based Sakae Holdings, highlighted the potential of international partnerships, including with Singapore, in advancing Vietnam’s pharmaceutical industry. Prof. Dr. Lee Beom Jae, chairman of the Korea Association of Science and Technology Businesses (KASTAB), stressed the promising avenues for cooperation between Vietnamese and South Korean companies in pharmaceuticals and biotechnology. He expressed confidence in KASTAB’s ability to contribute to this growth path.
Makara Capital Partners Pte., Ltd., Sakae Corporate Advisory Pte., Ltd., and Newtechco Group have formed a strategic partnership to invest in and develop a bio-pharma industrial park in Thai Binh Province. Spanning 300 hectares, the project is expected to create over 18,000 jobs, foster research and development, and facilitate technology transfer. To complement this initiative, KASTAB has entered into an agreement with Newtechco Group to connect Korean biotechnology firms with local opportunities.
Given the potential of the domestic market, Vietnam has sought to drive on this momentum by encouraging domestic companies to integrate into the pharmaceutical supply chain. Collaborative ventures with foreign partners will be instrumental in upgrading domestic capabilities, fostering innovation, and enhancing the competitiveness of Vietnamese pharmaceutical products.
As the industry evolves, domestic enterprises face both challenges and opportunities. While the path forward is demanding, it also presents a unique chance to shape the future of Vietnam’s pharmaceutical sector.
As Assoc. Prof. Dr. Le Van Truyen, former Deputy Minister of Health and senior advisor to Newtechco Group, aptly stated, the success of Vietnam’s pharmaceutical industry hinges on domestic enterprises. “No one can replace Vietnamese businesses in turning the nation’s pharmaceutical strategy into reality.”
