Vietnam’s drug market is heavily dependent on foreign suppliers, and there are a few firms that are apparently strangling the competition unhindered, according to a report.
The report names multinational pharmaceutical distributors Zuellig Pharma, Mega Product and Diethelm as three major market players who have been controlling sources and prices for a long time.
Based on research conducted over six months by the Vietnam Competition Administration Department (VCAD) with support from Canada’s International Development Research Center and India-based Consumer Unity & Trust Society (CUTS), the report fingers both foreign suppliers and local importers for applying “dirty” solutions like predatory pricing, boycotts, exclusive deals and patent pooling to block more competition from new suppliers or importers.
The big distributors join hands to price a new entrant out of the market and after the latter are forced out, increase prices to higher levels than earlier. New distributors in the market also face concerted boycotts by the bigger players if they do not confirm to the demands of the dominant coterie. The entry of new, generic products into the market is prevented by patent pooling, the report says.
The big three mentioned above have maintained a complicated distribution network where they can control prices and volumes although they are not allowed to import pharmaceutical products.
Alice Pham, director of CUTS Hanoi Resource Center, said there seemed to be no competition in the Vietnamese medicine market as the domination of a few foreign suppliers is an entry barrier few potential rivals can overcome.
Nguyen Thi Ngoc Dung, logistics director of drug import-exporter Vimedimex II, said it is not easy for new foreign businesses to negotiate the supply of certain products if that meant they might break the monopoly of a local importer that has received the authorization for similar products.
The market is being run by suppliers not consumers, said the World Bank’s senior economist Nguyen Nguyet Nga.
The practices badly affected local patients, who have no other choices since their treatment was decided by doctors who, as well as pharmaceutical marketers, receive commissions from suppliers, Nga said.
The country spent about US$1.1 billion, or $13.40 per capita, on drugs in 2007. Half of the drugs were imported, according to the Drug Administration of Vietnam.
Business Monitor International estimates Vietnam’s per capita spending on medicines will increase to $18.90 by 2012. The country’s supply sources mainly come from the US, Thailand, India, France and Switzerland.
Weak price monitoring
Dung of Vimedimex II feels the country must reduce its reliance on imports or the local market will continue to be dominated by foreign suppliers and patients will have to pay higher prices.
Hoang Quoc Tuy, development manager for pharmaceutical firm Coduphar, said the government should break the monopoly by introducing “parallel import,” a practice applied in Europe that allows import of medicines from another country without the permission of the intellectual property owner.
He also said the government should have measures to monitor pricing by foreign suppliers and local importers and regulations on competition should expand their reach abroad as pricing occurred outside the country.
Bach Van Mung, head of the Drug Administration of Vietnam, said the report would help the government adjust the drug market and its regulations to deal with the dominance of foreign suppliers and the monopolistic practices of distributors.
The government has introduced a plan to develop the industry where it would invest $1.5 billion to increase market shares of local products to 60 percent by 2015.
The government will also spend $241 million to build four drug facilities over the next four years, he said.
Vietnam has seven large domestic distributors, 26 representative offices of foreign pharmaceutical companies, and there are many other firms that are both producers and distributors like the Hau Giang Pharmaceutical Company, Domesco and Mediplantex.