TPP poses challenges for drug firms

Tuesday, Sep 13, 2016 10:00

Medicine being prepared at the Sao Kim Pharmaceutical Company in Ha Noi's Me Linh District. — Photo

HA NOI (Biz Hub) — Local pharmaceutical companies should improve their competitive advantage before Viet Nam signs the Trans-Pacific Partnership (TPP) Agreement in order to avoid losing their regional market share, experts said.

The Vietnamese sector has seen an annual growth rate of 16 per cent in the Southeast Asian region, with total consumption reaching approximately US$3.3 billion.

However, the market share is likely to shrink when foreign pharmaceutical firms enter the market once Viet Nam joins the TPP. The Vietnamese pharmaceutical business would find it difficult to compete with foreign companies since the country's pharmaceutical industry has been heavily dependent on raw materials.

Like other trade agreements, TPP will increase the amount of imported medicines being sold in Viet Nam.

According to the TPP, taxes on pharmaceutical products will be reduced from 2.5 to zero per cent. This will encourage competition from foreign businesses, where patent drugs have more advantages than branded generics.

Le Van Truyen, former Deputy Minister of Health, said domestic businesses would face difficulties if international pharmaceutical brands prolong their patent period by adjusting minor details in patent drugs.

They would also eliminate the opportunities for other countries to manufacture generic drugs.

This is the major challenge for local pharmaceutical businesses, which have predominantly manufactured branded generic drugs, Truyền added.

However, TPP would also bring certain benefits to the pharmaceutical industry, as well as local patents. Specifically, TPP calls for reducing the duration of patents on medicines to seven years. This would create an opportunity for all companies, and the local pharmaceutical industry would be able to manufacture branded generic drugs.

This has been consistent with the general policy, as the industry concentrated on producing generic medicines to reduce budgets and help patients seeking high-quality and affordable medicines.

Vo Tri Thanh, deputy director of the Central Institute for Economic Management, said that there was an opportunity being created from such challenges.

The importance for local businesses is how to seize the opportunity, Thanh noted.

He added that the country has multiple opportunities to form an entrenched global supply chain, made up of multinational corporations.

In the early period, domestic companies need to work together to learn from FDI businesses. Vietnamese firms could co-operate with multinationals.

TPP has been an opportunity for pharmaceutical businesses to increase investments in foreign firms and create more merger and acquisitions (M&A). This could be a large opportunity for domestic pharmaceutical companies to be transformed and take the initiative in acquiring resources, to not only serve the needs of the domestic market, but also export to foreign markets.

According to experts in the industry, pharmaceutical M&A deals result in mutual benefits to both parties. Vietnamese management agencies have encouraged foreign business to purchase shares of local businesses, as well as take advantages of their product and distribution channels.

The demand for healthcare and therapeutic products in Viet Nam has been on the rise. It is for this reason that many foreign companies seek to invest in the country's pharmaceutical industry.

Recently, Abbott – the global healthcare company – announced its acquisition of Glomed Pharmaceutical Co Inc (Glomed), a leading Vietnamese pharmaceutical manufacturer.

Through this acquisition, Abbott would continue to expand and focus on developing its established pharmaceutical products in emerging markets with fast growth rates, including in Viet Nam. Abbott would also use its global network technology and innovations at Glomed's two GMP manufacturing plants, to improve its capability. — VNS

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