Investors set ambition in Vietnam’s drug distribution system

The Hanoitimes – More investors have planned to take part in the country’s medicine retail system through merger and acquisition (M&A), expecting to gain higher value from owning completed chains from production to distribution.

Brad Silcox, chief representative of multi-national pharmaceutical group Pfizer, told the media that American investors in general and Pfizer in particular have planned to boost investments in Vietnam in the near future as they see the country’s health care sector has been very positive recently.
Vietnam’s drug market is attractive given by its large population, high demand for health care and rising middle-income population, Brad said.
Notably, he said, the pharmaceutical distribution system is growing, which helps to increase the accessibility of pharmaceutical users.
According to analysts, the nationwide distribution network of Hau Giang Pharma JSC (DHG) is also one of reasons that make it attractive to Japan’s Taisho Pharmaceutical Holdings.
It is known that Taisho is one of the companies with a relatively large ratio of over-the-counter (OTC) sales in Japan (accounting for some 13.5 percent market share). Taisho’s presence in Vietnam’s market thus is completely in its strategy of promoting sales in countries around ASEAN as well as Southeast Asia.
According to the current legal regulations, foreign-invested enterprises and their branches are prohibited from operating in Vietnam’s pharmaceuticals distribution and retailing, unless they establish a joint venture with local partners.
Foreign enterprises including France’s Sanofi, Abbott of the US, Germany’s Stada and Japan’s Nipro have so far also directly invested in joint venture facilities and bought shares of local companies.
Many domestic investors have so far also jumped in the drugs retail market, such as Mobile World Investment Group (MWG) acquiring Ho Chi Minh City-based Phuc An Khang pharmacy, FPT Digital Retail JSC acquiring Ho Chi Minh City’s biggest drugstore chain Long Chau pharmacy, Nguyen Kim Group acquiring Lam Dong Pharmaceutical JSC, and Digiworld Corp signing up with Vinamedic to distribute food supplements.
Big change ahead
Analysts said that the participation of retail giants with strong financial strength and modern technology and management is expected to create a big push for the drug distribution market but actual changes are expected to take place over the next 5-10 years.
According to the Health Ministry, Vietnam’s 57,000 drugstores are fragmented, with many of them being small businesses run by families.
Phan Van Hieu, chairman of CVI Pharmaceutical and Cosmetics JSC, said that this year would not see any big change in the drug distribution market as now is still a period of exploration and evaluating market approach for new players.
The pharmaceutical retail market is not an easy sector for even big distributors such as MWG or FPT, Hieu forecast, explaining the pharmaceutical market has a lot of barriers and is different from other markets.
Mai Hai Ninh, a founder of drugstore chain, said the biggest risk for drug retailers is the lack of medical expertise as drug sales depend on prescriptions or just a patient’s declaration on their health status.
The pharmaceutical industry is a specific industry, so from managers and salespeople need to have strong medical knowledge, Ninh said, adding that training of medical staff requires 2-3 years.
According to Business Monitor International, Vietnam’s drug market turnover is expected to reach US$7.7 billion by 2021, up from US$4.7 billion in 2017. Drug spending per capita quadrupled to US$40 over the 10 years through 2015. The figure looks poised to reach US$55 by 2021, aided by high economic growth and rising incomes as well as rapid urbanization and a population that is both growing and graying.