Pharma investment can unlock new opportunity
Pharma investment can unlock new opportunity
Vietnam has a unique opportunity to unlock sector development in the area of innovative healthcare amid the successful conclusion of international trade agreements and the regional integration through the ASEAN Economic Community. Exclusive to VIR, Pharma Group of the European Chamber of Commerce in Vietnam (EuroCham) analysed this window of opportunity to spur innovative life sciences sector development in Vietnam.
Currently in Vietnam, 78 per cent of medicines by volume and 34 per cent of medicines by value are locally produced, according to 2017 figures from IQVIA, a leading global provider of healthcare information. In order to achieve the government’s objective of 80 per cent local production by 2020, it will be important to increase the value of products produced locally – this is where innovative, high-quality, and high value-added medicines can play a key role.
Ensuring that Vietnamese patients have fast and sustainable access to high-quality, safe, and innovative medicines in collaboration with the Vietnamese government – this is the mission of Pharma Group Vietnam, and one of the cornerstones to help achieve this is the initiative for Innovative Lifesciences Sector Development. Pharma Group believes that these activities will create opportunities for partnerships with the local pharmaceutical industry that will accelerate capacity- and capability-building through technology and know-how transfer.
What is the opportunity?
The opportunity does not relate to foreign direct investment (FDI) alone: The benefits of attracting foreign innovative pharmaceutical manufacturers relate to patients, the government, and industry – local as well as foreign. In particular, patients will have increased access to high-quality medicines and new treatment options on par with other countries in the region. As a result, the government may benefit from a high-quality healthcare environment, creation of more high-skilled jobs, potential for export growth, and reduced overseas medical tourism.
Finally, local industry will be able to increase capabilities through partnership with multinational corporations, expand their product portfolio to more valued-added medicines, and technology know-how for export-quality medicines. The innovative pharmaceutical industry should be seen in the context of it being one of the most innovative sectors, with approximately $140 billion being invested in research and development (R&D) annually.
According to a Pugatch Consilium Bio-Competitiveness Index (BCI) analysis, around 60 per cent of the $140 billion invested in R&D is directed at clinical research. Vietnam’s share of global R&D-related FDI is miniscule: It accounts for around $23 million, or 0.04 per cent. However, if Vietnam was to improve its performance indicators in the BCI score, this could lead to an additional $32-55 million of FDI in clinical trial activity and associated monetary transfers alone.
Pharma Group and Vietnamese medical universities have already joined forces to support the development and education of pharmacists and other life science specialists with a view to sustaining their human resource needs, as demonstrated through the recent signing of an memorandum of understanding on Pharmacy Excellence at the sidelines of the 2017 APEC Economic Leaders’ Week in the central city of Danang. Such efforts in co-ordination with authorities will help foster the long-term growth of a research-based pharmaceutical and biotechnology industry in Vietnam and support the acceleration of the socio-economic development of the country.
According to the Hanoi University of Pharmacy, international harmonisation and integration in education is key in supporting Vietnam’s universities toward step-by-step self-control and strengthening the universities’ positions in the regional and global education system. With the objective to contribute to the healthcare sector in Vietnam in improving the quality of healthcare services, the Hanoi University of Pharmacy is collaborating with the University of Medicine and Pharmacy of Ho Chi Minh City, Pharma Group, and others to provide Vietnamese pharmacy training institutions with a training programme that integrates theory and practice. Such modern and advanced training methodology will contribute to the improvement of the quality of pharmaceutical training in Vietnam.
A government strategy to foster growth in innovative life sciences sector development would also set a strong foundation for public-private partnerships which could develop over time and expand into novel areas building on other strategic priorities for Vietnam, such as ICT and e-health.
Why now?
The successful conclusion of international trade agreements (in particular the EU-Vietnam Free Trade Agreement) and Vietnam’s regional integration through the ASEAN Economic Community has put Vietnam in the spotlight. Domestic developments such as the approval of the Ministry of Health’s patient-focused Pharmaceutical Law, by the National Assembly last year, sends a positive signal to multinational corporations and helps pave the way for a new era for Vietnam’s healthcare landscape. This strategic opportunity is time sensitive, with EU trade pacts scheduled for Philippines, Indonesia, and Malaysia over the next two to three years.
Attracting sustainable FDI is not an easy task, and hence, many countries compete to attract this high value-added industry, a point that will become increasingly evident with ASEAN harmonisation and integration. Vietnam has a limited window of opportunity to demonstrate its desire and commitment to incentivising such high-value and sustainable FDI. It is therefore imperative that regulations provide a predictable and sustainable environment where investments are incentivised through an integrated government strategy.
What is needed to unlock this opportunity?
It needs a holistic approach, which combines a clear legal framework to establish operations and protect investors through all phases of development. Consequently, there is a need for a clear roadmap with different levels of incentives, to allow for the natural development of the industry.
Thirty years ago, Ireland was in similar socio-economic situation to Vietnam, predominantly focused on agriculture. Today, Ireland is recognised for its best practices in incentivising sector development in the innovative biopharmaceutical sector, by having a clear roadmap for innovative pharmaceutical sector development. Pharmaceuticals currently generate over 50 per cent of the country’s exports and contribute to making Ireland the largest net exporter of medicines in the world, with a total of €55 billion ($65 billion) exported each year. Furthermore, Ireland manufactures five of the world’s top 12 medicines and directly employs over 24,500 people, over half of which are third-level graduates. Another 24,500 people are employed in provision services to the sector.
Ireland is a good success story of economic transformation based on industry partnership with an open, transparent, and pro-investment approach, driven by consistent policies. Vietnam’s economic journey mirrors that of Ireland, and hence understanding Ireland’s progress – especially in the space of biopharmaceuticals – can provide important insights to policymakers and other stakeholders as they work toward an accelerated economic roadmap.
If done correctly, this would help create a burgeoning pharmaceutical industry in Vietnam, propelling Vietnam’s ability to produce high-quality pharmaceuticals, increased tax revenue, export grade products, and R&D investments to meet domestic demand – and over time help cover healthcare expenditure through pharmaceutical export revenue. It would also result in an increase in knowledge-intensive jobs, develop the talent pool, and bring back Vietnamese skilled labour from abroad for local innovative production in Vietnam.
Based on the successful experiences from Ireland and other countries, a roadmap for sector development must be supported by the relevant ministries and carry strong support at the highest levels of the government. Such political commitment would provide companies with strong arguments to convince their global headquarters to invest in Vietnam – which could prove a game-changer at a time when many ASEAN countries are trying to position themselves as the regional manufacturing hub of the ASEAN Economic Community.
