Epharmacy Vietnam

[Paz Warsager]

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The Vietnam government is considering a policy to facilitate the development of large eco-industrial parks and update preferential policies to encourage green investments. We discuss the proposed policy recommendations, pilot projects, and key goals.

The Vietnam labor market showed positive trends in H1 2024, with increased employment opportunities and salary growth. Additionally, the proportion of Vietnamese workers holding degrees or certificates rose to 28.1 percent in the second quarter of 2024.

Vietnam Briefing has developed into a premium source for insight on doing business in Vietnam. It publishes business news concerning foreign direct investment into Vietnam, including the most important tax, legal and accounting issues. The Vietnam Briefing Magazine was first published in 2009, and is contributed to by investment professionals based in Vietnam.

The COVID-19 outbreak certainly dampened economic activity in Vietnam, but it is unlikely to reverse ongoing socioeconomic changes. Rather, health stands firmly as the top priority and concern for both the Vietnamese people and the government.

We provide an overview of the opportunities for the healthcare industry in light of the current developments in Vietnam and survey three key sub-sectors: medical equipment and devices, pharmaceuticals, and digital healthcare.

The COVID-19 outbreak has proven that health is, and will certainly continue to be, a priority for most Vietnamese. Moreover, growing concerns over food safety, pollution, and unsafe living and working conditions have also made people more willing to spend on medicines and healthcare.

Social health insurance is the main public financing method for healthcare in Vietnam. With 87 percent of the population currently covered under this scheme according to the World Health Organization (WHO), the government continues to work towards achieving universal healthcare coverage.

Under a new document issued by the Ministry of Health (MoH), provincial departments of health and Vietnam Social Security branches are asked to encourage participation in and implementation of health insurance across the country. The government has also recently set new social insurance, employment insurance, and health insurance contribution rates that apply to both national and expatriate workers and employers.

To prevent overcrowding and ensure that both urban and local patients can access medical services, the government continues to finance the construction of new hospitals. Since public hospitals rely on a government budget, the country will need to mobilize various sources of investment to upgrade its medical facilities. Further, the healthcare system also suffers from a shortage of qualified physicians, especially those in specialized fields.

To help it shoulder the burden of rising healthcare costs, the government is increasingly looking at investment from the private sector and international firms. These changes mean that there will be more business opportunities in the healthcare sector in Vietnam in the upcoming years.

In February 2020, the government enacted Resolution No.20/NQ-CP to license the export of fabric face masks in response to high demand from different markets such as the US, the EU, and Canada. This has helped local businesses, namely textile and garment workers who reported rising orders after the enactment of the resolution. Face masks are not the only products that have been sought after during the pandemic: ventilators, gloves, gowns, and testing kits from Vietnam have also been accepted around the world. As a result, Vietnam shipped a total of 1.37 billion medical face masks as per the General Statistics Office (GSO) in 2020. Facemasks were exported to the US, the EU, Singapore, and South Korea among others

In public hospitals across the country, there is a lack of sufficient equipment for surgery and intensive care units. Furthermore, the existing equipment is outdated and needs to be replaced. As such, because local production cannot meet demand, the Vietnamese government encourages the import of medical equipment by setting low import duties and no quota restrictions.

Medical device producers can look forward to opportunities created by trade agreements such as the European Union Vietnam Free Trade Agreement (EVFTA). Improvements in regulatory standards, exchange of information on customs requirements, and the simplification of customs procedures are a few of the anticipated benefits from the implementation of the EVFTA.

Further, Vietnam imports more than 90 percent of drug inputs, half of which are from China. With the closure of many Chinese factories due to environmental concerns, the price of raw materials has surged, decreasing the profit margins of Vietnamese companies.

Currently, there are only two multinational companies, Sanofi-Aventis (France) and AstraZeneca (Britain-Sweden), that have medicine import licenses. Although the presence of more foreign pharmaceutical companies will improve the supply of high-quality medicines, domestic companies may be negatively affected by the increased foreign competition.

Seventy percent of drugs in Vietnam are sold through hospitals, while the remaining 30 percent comes from pharmacies. The growing number of private hospitals and a greater concern for health among the public has led to an increasing demand for drugs.

The hospital network in Vietnam is fairly extensive. There is a total of 1,531 hospitals, 86 percent of which are public and 14 percent are private mostly concentrated in major urban areas such as Ho Chi Minh City, Hanoi, and Da Nang. The 1,318 public hospitals are administered in a decentralized system, classified at the central, provincial, and district or commune level.

Though the system is well-established, Vietnamese hospitals are facing a number of important challenges. Most public hospitals in the country were built more than two decades ago and need to be upgraded.

Hospitals also face an overcrowding issue. The beds-to-inhabitants ratio, or bed occupancy rate in Vietnam far exceeds the threshold occupancy rate of 80 percent recommended by the World Health Organization (WHO).

Adding to the problem is the inequality of care: patients would rather get treated in overcrowded national level hospitals than provincial or district level ones due to the availability of higher quality medical equipment and staff in the former. Meanwhile, doctors and nurses have to tend to a large number of patients, working long hours under stressful conditions with relatively low wages.

Thus, the Vietnamese hospital system needs an upgrade to its facilities, equipment, and services. The current gaps create opportunities for foreign investment in the construction and management of infrastructure facilities, medical equipment, and vocational training.

The private sector was also quick to take advantage of the shift towards technology-enabled healthcare services. Many start-ups already present in Vietnam before the COVID-19 outbreak have expanded and optimized their operations.

However, the burgeoning health tech sector is still in its infancy, attracting significantly less investment than other related sectors such as payments or e-commerce. The sector also largely depends on the development of Industry 4.0 technologies such as 5G networks, artificial intelligence (AI), and the internet of things (IoT).

On June 22, 2020, the MoH approved a five-year project on remote medical examination and treatment involving 24 hospitals. Apps and medical services will be developed to manage files and knowledge systems, as well as helping patients find medical information, make their appointments, and consult doctors.

The private sector was also quick to take advantage of the shift towards technology-enabled healthcare services. According to a YCP Solidiance report, private hospitals have relatively advanced health management systems compared to their public counterparts for several reasons.

Their higher-income patients are more willing to pay for modern and high-quality healthcare services. Seeing digitalization as a competitive advantage, private hospitals have an incentive to invest and upgrade in their digital infrastructure. They also commonly use products and services from leading information and technology companies such as Oracle or SAP and have standardized systems in place across individual hospital branches. Therefore, the implementation of digital tools at private hospitals is less complicated compared with public hospitals.

A number of important barriers still hinder digital adoption in Vietnamese hospitals, both public and private. First, healthcare professionals and patients are reluctant to use digital-based systems due to unfamiliarity with these tools and technological constraints at home.

Second, unclear and complicated administrative processes slow digital adoption. Digital signature for national health insurance reimbursement is a notable example: doctors and nurses who are responsible for their registration need the approval of two different departments, the Electronic Health Administration under the MoH and the Vietnam National Security.

The start-up sector in Vietnam, albeit small in size compared to that of other Southeast Asian countries such as Singapore or Indonesia, is also actively contributing to the digitalization of healthcare.

Many start-ups already present in Vietnam before the COVID-19 outbreak have expanded and optimized their operations. Some provide booking services that allow patients to schedule appointments with doctors without visiting hospitals, thereby reducing long queues and minimizing infection risks. Patients are able to discuss their health concerns and obtain answers from healthcare professionals, which is difficult in public hospitals where consultation times are limited.

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