The medicine melodrama
Vietnamese have been spending big money on imported
pharmaceuticals-close to US$420 million last year. Now,
consumers are hoping to put a stop to overpricing on the
medicines they take.
Unlike rice, which has helped Vietnam become
one of the world's leading rice exporters, most
of the medicine used by Vietnamese is
imported. A report prepared jointly by officials
from the Ministry of Health and experts from the
Swedish Agency for Development
Cooperation (SIDA) has shed some light on
this issue. The two-year project, conducted in
822 hospitals countrywide, found that only
19-20% of the medicines used there were
produced locally. That means the remaining
80% had to be imported.
A Lucrative market.
Before the 1990s when the open-door
economic policy took effect, Vietnamese had
to rely on local pharmaceutical producers.
Only some pharmaceuticals were imported,
but mostly from the former Eastern bloc. The
situation has been reversed since then.
Foreign-made pharmaceuticals are being
imported at an increasingly
fast pace, making the market share of local drug producers smaller and
smaller.
With a population of almost 80 million, Vietnam is a lucrative market for
pharmaceutical producers and traders. Statistics show that in 1990,
Vietnam spent more than US$61 million importing pharmaceuticals. This
figure soared to US$280 million in 1995 and to US$418 million last year-an
increase of almost seven times in just 11 years (see chart).
Thanks to the abundant supply, Vietnamese can easily buy almost any
type of medicine. However, experts in the industry argue that local
consumers are overpaying for the medicines they need.
High prices.
Speakers at a recent conference on medicine prices held
in HCM City said according to statistics recorded by the HCM City
Pharmaceutical Association, in many cases prices of imported medicines
were raised at least to double their original price. The overpricing, said the
speakers who are local pharmaceutical producers, stemmed from the
monopoly given by the Ministry of Health to some foreign companies. The
ministry rules that only those who register their product quality are
authorized to import pharmaceuticals. The authorization is given only to
companies with capital of at least US$3 million and sales of US$5 million.
This rule has created a monopoly in pharmaceutical import in Vietnam.
In the distribution process, intermediate companies raise medicine prices
between 5% and 10%. In their turn, retailers further raise prices to 40% or
50%.
Some Vietnamese doctors and physicians have played an important role
in the overpricing of imported medicines. According to Huynh Kim Hoang,
director of Yteco, there is a relationship between doctors and medicine
distributors in which a doctor will receive a commission for their
prescription of the latter's drugs. Commissions have continuously risen. "It
is no less than 30% of the price of medicines," said Dinh Ba Ai from
Pharmedic.
The result is that Vietnamese consumers are faced with unnecessarily
high prices for medicines. Nguyen Tien Hung, director of the Central
Pharmaceutical Import-Export Company, estimated that Vietnam itself had
to spend twice as much as it should for medicine import due to
overpricing. If what Hung said is true, last year Vietnamese consumers lost
some US$200 million, or VND3 trillion, because of price margins.
The domestically produced pharmaceutical market is not less chaotic,
said speakers at the conference. They said the price difference of the
same medicine made by domestic companies can be from three to 10
times. A typical case is cold pills. A Vietnamese drug manufacturer sells
its cold pills at less than VND100 each. Yet another charges VND500 a
pill. "We make a cold pill with imported materials from the U.S. and sell it at
VND80 to earn a profit of VND5," said a speaker. "While a competitor
offers its pills at VND500. It's incomprehensible. The losers are
consumers."
Needed measures.
During an interview with the Sai Gon Giai Phong
(Saigon Liberation) daily, Vu Cong Chinh, head of the Department for
Industrial-Consumer-Service Prices, under the Government Pricing
Committee, said in 1999 the department in cooperation with the
Pharmaceutical Management Department instructed local governments in
controlling medicine prices at drugstores. Two years later, the
Government Pricing Committee
once
again
proposed
provincial
and
municipal
governments
enforce
the
management
of
medicine
prices
by
issuing maximum prices of some of popular drugs.
However, said Chinh, currently, related government agencies failed to get
a grip on the prices of imported medicines. "Given the function of price
control, we have no concrete mechanism of setting prices of every
imported drug," he said. "Moreover, pharmaceuticals include a huge
variety of products by many companies from many countries. Their prices
of each pharmaceutical element vary depending upon [producers']
technology. It's very hard for an administrative agency [the Government
Pricing Committee] to set standard prices, price lists or price limits."
According to Nguyen Xuan Lap, chairman of the HCM City Pharmaceutical
Association, medicine should be controlled by the State. Based on CIF
(Cost-Insurance-Freight) prices or factory prices, he added, the State
should impose price lists which drugstores must comply with. Other
speakers also said to cope with the overpricing on the market, detailed
regulations on medicine trading must be issued without delay. For
instance, they said, retailers must have price labels attached to their
products and profit rates for medicine wholesalers must be set.
Asked what measure could be taken to exercise a better control on
pharmaceutical prices, Vu Cong Chinh from the Government Pricing
Committee said medicine prices were included in the draft of the decree
on the implementation of the Ordinance on Prices. "However, the
Ordinance on Prices has clearly stipulated that trading and manufacturing
establishments must list prices and comply with them," said Chinh. "This
stipulation is to prevent drugstores from raising prices.
To enforce this
measure, inspections must be conducted, especially on medicine
retailers."
Other measures should comprise, said the speakers, of more forceful
handling of unknown origins on the market and compulsory memberships
of business associations. However, the crucial remedy to the current ailing
medicine market in Vietnam, they said, is the elimination of the monopoly
in medicine import and distribution.
Strategy for pharmaceutical industry development by 2010
The Prime Minister has signed Decision No. 108/QD-TTg endorsing the
strategy for Vietnam's pharmaceutical industry development by 2010. The
strategy aims to transform the industry into a modern one, suitable for
active integration into the region and the world. It also ensures the industry
will adequately supply quality medicine for the people.
By 2010, all Vietnam-based drug-manufacturing establishments must
reach GMP standards. Domestic manufacturers must account for 60% of
the people's demand. By 2010, the per capita spending on
pharmaceuticals in Vietnam should be between US$12 and US$15 per
year. The number of pharmacists will be 1.5 per 10,000 people.
To reach these goals, the main measures encompass: planning of
pharmaceutical industry; selective investments in chemical entities and
pharmaceutical materials; development of scientific research on
pharmaceutical technology and biological engineering; training of human
resources; and enforcement of quality control.
The following mechanisms and policies will be issued: adjustment and
completion of the legal framework related to the pharmaceutical industry;
incentives for medicine manufacturers who invest in technological
renovation; and encouragement of foreign investment in the industry.
By Ha Vy - The Saigon Times Weekly - September 29, 2002.
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