#3 ABeam Consulting shares insight on Vietnam’s pharmaceutical sectors’ opportunities, challenges, and entry approaches for New Entrants

The increase in the population aged 65 and above in Vietnam, combined with rising GDP (Gross domestic product) per capita, is significantly driving the demand for pharmaceuticals in the country [Figure. 2]. As the aging population grows, particularly in a society with a rising life expectancy, there is a corresponding increase in the need for healthcare services, chronic disease management, and age-related treatments. This demographic shift contributes to a higher consumption of pharmaceutical products, especially those for managing conditions such as cardiovascular diseases, diabetes, and cancer. At the same time, Vietnam's rising GDP per capita reflects an improvement in the standard of living and disposable income, allowing a larger portion of the population to afford better healthcare services, including prescription medications. As both the elderly population and income levels increase, the demand for pharmaceutical products in Vietnam is expected to continue to grow, presenting opportunities for both local and international pharmaceutical companies.

However, Foreign pharmaceutical companies still face significant regulatory restrictions in Vietnam, as the government does not permit them to directly engage in the importation or distribution of pharmaceutical products. This creates a considerable challenge for foreign firms seeking market entry, as they must navigate complex licensing processes and rely on local distributors or establish partnerships with domestic entities to operate within the country. However, a notable advantage is that Vietnam does not strictly regulate pharmaceutical selling prices, allowing foreign companies greater pricing flexibility compared to markets with stringent price controls. This regulatory environment presents both obstacles and opportunities, requiring strategic approaches for foreign pharmaceutical firms to successfully enter and compete in Vietnam’s growing healthcare market.

Strict regulations by the government that prohibits foreign companies from directly engaging in importation and distribution of pharmaceuticals, necessitating partnerships with local entities. As depicted in the value chain [Figure. 3], foreign firms such as Sanofi and Hisamitsu can obtain import and manufacturing licenses but must outsource wholesale distribution to local partners or subsidiaries. Companies like DKSH and Zuellig Pharma specialize in import services but do not participate in direct retail distribution. Meanwhile, domestic companies such as Gigamed, Hoang Duc, and Imexpharm hold full-spectrum licenses, enabling them to manufacture, import, and distribute pharmaceuticals within the country. The retail sector is dominated by local pharmacy chains, reinforcing the necessity for foreign companies to navigate Vietnam's regulatory framework strategically.

To conclude, Vietnam’s pharmaceutical market presents significant growth opportunities for new entrants despite its regulatory challenges. The government’s ongoing investment in healthcare infrastructure create an encouraging environment for market entry. Success in Vietnam’s pharmaceutical sector requires a strategic approach, leveraging partnerships with local distributors, utilizing Contract Sales Organizations (CSOs) for market access, and capitalizing on the rising demand for high-quality, innovative medicines. By aligning with Vietnam’s evolving healthcare trends and regulatory landscape, businesses can establish a strong and sustainable presence in this rapidly expanding market.