Vietnam Eases Foreign Investment Restrictions in Pharmaceutical Sector

Vietnam is taking significant steps to attract foreign investment into its pharmaceutical industry by amending the 2016 Law on Pharmacy. The latest revision, outlined in Law No. 44/2024/QH15 (issued on November 21, 2024), will take effect on July 1, 2025, easing restrictions on foreign-invested enterprises (FIEs) and expanding their business opportunities in the country’s growing pharmaceutical market.

Greater Market Access for Foreign Investors

The amendment to Article 53 of the Law on Pharmacy grants FIEs broader rights to operate in Vietnam’s pharmaceutical sector. Under the revised regulations, FIEs can now:

• Repurchase drugs and active pharmaceutical ingredients (APIs) produced in Vietnam through technology transfer agreements with their affiliated enterprises.
• Import API supplies for drug manufacturing by local pharmaceutical companies that have technology transfer agreements with the same FIE.
• Distribute imported, outsourced, or licensed-out drugs and APIs to wholesalers.
• Import and distribute drugs intended for humanitarian aid and disease prevention/control programs.
• Supply imported drugs and APIs for clinical trials sponsored by the FIE, ensuring direct delivery from warehouses to clinical trial facilities under technology transfer agreements.

Additionally, under the revised law, pharmaceutical companies will be allowed to import drugs without marketing authorization or import licenses if the products are exclusively used in government-approved clinical trials.

A Shift from Protectionism to Market Liberalization

Vietnam has historically maintained strict protectionist policies in its pharmaceutical sector, limiting the role of foreign investors. While the country extended import rights to foreign drug manufacturers in 2009—as part of its commitments to the World Trade Organization (WTO)—FIEs still faced substantial regulatory hurdles. To import pharmaceutical products, foreign firms had to establish wholly foreign-owned enterprises (WFOEs) or representative offices and navigate complex business arrangements between their local subsidiaries and parent companies.

A notable shift occurred in 2019 when the Ministry of Health (MoH), for the first time, granted an overseas drug manufacturer an import license, allowing them to introduce pharmaceutical products directly into the Vietnamese market. This decision was largely influenced by the European Union-Vietnam Free Trade Agreement (EVFTA), which pressured Vietnam to further open its pharmaceutical sector to foreign businesses.

However, despite these changes, foreign drug manufacturers remained restricted from engaging in direct drug distribution, as they were required to sell their products exclusively to local wholesalers or manufacturers.

Implications for Vietnam’s Pharmaceutical Industry

The upcoming amendments represent a major step toward liberalization, making Vietnam a more attractive destination for foreign pharmaceutical investment. By removing key restrictions, the government aims to:

• Boost domestic drug development and manufacturing through increased foreign participation and technology transfer.
• Enhance drug accessibility and supply chain efficiency by streamlining import and distribution processes.
• Encourage clinical research and innovation by allowing direct importation of drugs for trials.

While Vietnam continues to balance economic openness with regulatory control, the new law signals a more investor-friendly approach, potentially transforming the country into a regional pharmaceutical hub in Southeast Asia.

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Source: Vietnam Insider