ESTABLISH PHARMACEUTICAL COMPANY IN VIETNAM: NEW POLICIES FOR FOREIGN INVESTORS IN 2025

Vietnam has emerged as a promising destination for foreign investors in the pharmaceutical sector. With its expanding healthcare market, revised legal framework, and incentives to attract foreigners to establish pharmaceutical company in Vietnam, the country is a hotspot for pharmaceutical ventures. By 2025, new policies will offer more opportunities for foreign enterprises. This article provides insights into the updated policies of Vietnam pharmaceutical regulations.

Overview to establish pharmaceutical company in Vietnam

Vietnam's pharmaceutical market is undergoing a significant transformation. Understanding its potential and the challenges involved is critical for success.

The potential of Vietnam's pharmaceutical market

Vietnam’s pharmaceutical sector has experienced consistent growth in recent years. As of October 2024, the country recorded a 2.1% month-on-month increase in industrial production within the sector. Compared to October 2023, the year-on-year growth reached 5.9%, while the cumulative increase from January to October stood at an impressive 9.8%. These numbers underline the expanding demand for pharmaceutical products, driven by improvements in healthcare infrastructure and efforts to localize production. The government’s focus on enhancing domestic manufacturing capabilities and reducing reliance on imports further boosts market potential.

The growing pharmaceutical industry has the potential to establish pharmaceutical company in Vietnam

Rising healthcare expenditures and increased consumer awareness contribute to a favourable environment for foreign investors. However, to maintain this momentum, Vietnam must invest in research and development and adopt international manufacturing standards. Additionally, Vietnam’s Consumer Price Index (CPI) for medicines and medical services rose by 7.54% from January to October 2024 compared to the previous year. This growth reflects increasing demand, supply chain pressures, and rising input costs. These factors highlight the market's potential but also indicate operational challenges foreign investors must address to succeed.

Challenges faced in Vietnam's pharmaceutical sector

Vietnam’s commitments to the World Trade Organization (WTO) exclude pharmaceuticals from its distribution service commitments. This means foreign-invested enterprises (FIEs) cannot distribute pharmaceutical products directly. FIEs may import drugs and raw materials but cannot participate in distribution unless the products are manufactured locally by the enterprise. These restrictions limit FIEs’ ability to compete with domestic firms in pharmaceutical distribution. Direct distribution is a crucial activity for investors, and its absence poses significant barriers.

As a result, foreign companies are compelled to focus on other activities such as manufacturing, research, and raw material importation. Furthermore, without the ability to distribute imported drugs, FIEs face limited market penetration. This restricts their ability to optimize supply chain efficiencies and compete effectively. Consequently, Vietnam’s regulatory framework remains a significant hurdle for foreign investors seeking to establish pharmaceutical company in Vietnam.

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Foreign companies still face hurdles due to restrictions on distributing imported pharmaceutical products

Key changes in the revised pharmaceutical law

Vietnam’s amended pharmaceutical law aims to align with international commitments and create a transparent legal environment for investors.

Timeline and reasons for the introduction of the new law

Vietnam’s participation in free trade agreements (FTAs) like the CPTPP and EVFTA has necessitated updates to its pharmaceutical regulations. The current Pharmaceutical Law, established in 2016, lacks clarity and transparency, particularly regarding the rights of FIEs. The new law, effective July 1, 2025, with some provisions starting January 1, 2025, introduces significant reforms. The updated Pharmaceutical Law aims to stabilize the regulatory framework and offer clarity for FIEs. Previously, their rights were governed primarily, creating uncertainty. The revisions focus on codifying the rights and responsibilities of FIEs within the law, promoting transparency and fairness. By clearly defining FIEs’ rights, the new law facilitates better market integration and investment opportunities. These changes represent a significant step forward in fostering a conducive environment for foreign investors to establish pharmaceutical company in Vietnam.

Expanded opportunities for foreign investors

The revised Pharmaceutical Law introduces provisions allowing FIEs to engage in broader supply chain activities. For example, they can distribute drugs produced locally through manufacturing, outsourcing, or technology transfer agreements. This change incentivizes foreign companies to invest in local production, improving domestic manufacturing capabilities. By removing barriers to the distribution of locally-produced drugs, the law enables FIEs to reduce intermediary costs and enhance market access. However, it also demands stricter compliance with quality standards and regulatory oversight.

While these opportunities benefit FIEs, domestic enterprises may face heightened competition due to the superior financial and technological capabilities of FIEs. In addition to distribution rights, the amended law encourages technology transfer and investment in innovative drug production. Developing generic drugs, biologics, and speciality medicines presents lucrative opportunities. The law’s incentives for research and development are expected to attract long-term investments, fostering collaboration between domestic and foreign companies.

The new provisions encourage local production by FIEs to increase market efficiency

Vietnam’s evolving pharmaceutical landscape offers significant opportunities for foreign investors. The revised Pharmaceutical Law marks a turning point, promoting transparency, enhancing local production, and aligning with international standards. By leveraging these changes, foreign investors can play a vital role in Vietnam’s healthcare evolution while contributing to its economic growth. Contact G2B today to learn more about how to establish pharmaceutical company in Vietnam! We are your dedicated partner who will stand by your side on the expansion journey in Vietnam.