According to IQVIA, the value of Vietnam's pharmaceutical market is 103,912 billion VND (+2% YoY) with a compound annual growth rate (CAGR) of 6% in the period 2018-2020.
The growth rate of Vietnam’s pharmaceutical industry in 2020 slowed down compared to previous years due to the tightening of infection control measures in hospitals and the decrease in income of people.
The pharmaceutical production and business system in Vietnam has been expanded with about 250 manufacturing plants, 200 import-export facilities, 4,300 wholesale agents, and more than 62,000 retail agents.
ETC is the main growth driver of the pharmaceutical industry in 2020 with an increase of 5% to about 76 trillion VND, achieving a CAGR of 9% in the period 2018-2020.
Although the OTC channel had experienced an unusual growth before social distancing measures were applied, the decline in aggregate demand then reduced the value of the OTC channel in 2020 by 9% to 28 trillion VND.
By the end of April 2021, group 1 drugs accounted for the largest proportion in the ETC channel drug bidding structure (39%), equivalent to 12.5 trillion VND. In particular, foreign drugs still account for the dominant proportion of group 1 drugs (98%).
Vietnamese enterprises focus on bidding on group 3 and group 4 drugs which account for 18% and 21%, respectively, of the total winning value of ETC channel in the first four months of 2021.
Domestically produced drugs only meet about 47% of demand. According to the General Department of Customs, Vietnam imported more than 3.3 billion USD in pharmaceuticals (+7.4 percent YoY) in 2020, with a CAGR of around 9% in the period of 2018-2020.
Vietnam’s major drug import markets are France, Germany, India, the United States, Italy, Korea, and Belgium. Raw materials are mainly from China and India, accounting for 85% of total imported raw materials.
The Covid-19 pandemic has caused a serious shortage of API resources as API production in both China and India have been interrupted during lockdowns. This scarcity has caused the average price of most raw materials to increase.
Moreover, the cooperation progress between Vietnamese pharmaceutical enterprises and foreign partners continues to be delayed by travel restrictions. This hinders the progress of assessment and technology transfer approval process.
Although it is expected to grow positively in 2021, the reality shows that businesses in the industry are facing a lot of difficulties. In the first 6 months of 2021, leading pharmaceutical companies kept their profit growth momentum, but many others recorded stability or even decline in profits.
Many pharmaceutical enterprises recorded declining profits such as OPC Pharmaceutical Joint Stock Company (OPC), Ha Tay Pharmaceutical Joint Stock Company (DHT), Mediplantex Central Pharmaceutical Joint Stock Company (MED), and Joint Stock Company Central Pharmaceutical 3 (DP3).
Meanwhile, enterprises in the list of top 10 pharmaceutical companies in Vietnam by VietnamCredit including Hau Giang Pharmaceutical Joint Stock Company (DHG), Traphaco Joint Stock Company (TRA), Pymepharco Joint Stock Company (PME) witnessed positive business results.
Owning two factories meeting EU-GMP standards and being capable of producing high-quality drugs for hospitals, Imexpharm Pharmaceuticals is one of the largest pharma companies in Vietnam. According to the financial report of the second quarter of 2021, this business recorded more than 317.4 billion VND in net revenue, up nearly 10% over the same period last year. Its profit after tax is 49.3 billion VND, up slightly by 4.3%.
In the second quarter, Central Pharmaceutical I - Pharbaco (PBC) achieved net revenue of more than 256.3 billion VND and profit after tax of nearly 12.3 billion VND, an increase of more than 50% and 124 %, respectively, compared to the same period last year. Pharbaco has a charter capital of 900 billion VND, ranking second in the industry, only after DHG Pharma (DHG).
It is difficult for Vietnam's pharmaceutical industry to make a breakthrough because raw materials for production depend 90% on imports, and China and India account for more than 80% of the supply. The pandemic has increased the challenge.
Lockdowns and travel restrictions in many provinces and cities starting from the beginning of July may seriously affect the sales of pharmaceutical enterprises in the third quarter of 2021.
The 4th outbreak was raging in hospitals, so the ETC channel has seriously been affected because people limited access to medical examination and treatment. However, this contributes to the development of the retail channel at drugstores (OTC). The price of OTC drugs is not bound by the Bidding Law, so this will be an opportunity for pharmaceutical companies to compete, improve R&D and diversify product categories.
However, pharmaceutical enterprises are still facing the dual challenge of both ensuring production and business safety during the epidemic and having a reasonable inventory strategy when the global supply chain is fluctuating.
Alice Hoang Thao - VietnamCredit