Vietnam Market Lacks CMOs Despite Local Content Requirements

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While its rapid growth has made Vietnam an attractive target for bio/pharmaceutical companies, local content restrictions pose a challenge to entry into the market. At least one CMO has made a commitment to the country, but bio/pharmaceutical companies looking to do business in Vietnam may need to partner with one of the relatively unsophisticated local drug manufacturers.

The population of Vietnam is growing at a slow 1% annually but is expected to reach 96 million by 2019, but the economy is growing at a healthy 6.5% p.a., according to US Chamber of Commerce data. The Vietnamese bio/pharmaceutical market grew to $3.92 billion in 2014 from $3.3 billion in 2013, according to a 2014 report from Business Monitor International, and IMS Health expects the market to grow 12% p.a. between now and 2018.

The high rate of growth is attracting attention from global bio/pharmaceutical companies, but breaking into the Vietnamese market is not an easy task. Vietnam has traditionally used a combination of local content requirements, high tariffs on imported products and outright import restrictions to limit foreign bio/pharma companies from entering its market. For instance, Vietnam’s July 2014 Law on Tendering specifically favors purchase of domestic drugs over foreign ones by hospitals and pharmacies.

Vietnam joined the World Trade Organization (WTO) in 2007 and has made some progress toward improving the international investment climate in the pharmaceutical market according to an analyst from the Office of the United States Trade Representative (USTR). Nonetheless, it remains one of the more challenging countries for foreign pharmaceutical companies to enter.

Because there just two true CMOs operating in Vietnam, drug companies looking for local manufacturing capacity will likely be forced to turn to a Vietnamese pharma company that might have excess capacity.

This article is reprinted from the September issue of Emerging Markets Outsourcing Report. The full article addresses the challenges to entering this market. To learn more, click here.

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Jim Miller is the founder and president of PharmSource Information Services, Inc. A preeminent expert in bio/pharmaceutical outsourcing, Jim established and presides over the industry’s principal resource for serious consumers of information on contract drug development and manufacturing, PharmSource STRATEGIC ADVANTAGE. He is editor and publisher of Bio/Pharmaceutical Outsourcing Report and Emerging Markets Outsourcing Report.

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