Knowledge Highlights 5 February 2025
Vietnam expands foreign investors’ capabilities in pharmaceutical sector
On 21 November 2024, Vietnam’s National Assembly passed the Law on Amendments and Supplements to a number of articles of the Law on Pharmacy 2016 (“Amended Law”). The Amended Law will come into effect in phases, with some provisions effective from 1 January 2025 and the remaining on 1 July 2025.
This article highlights some key provisions of the Amended Law.
Expansion of rights for foreign-invested enterprises
The Amended Law seeks to further liberalise the pharmaceutical sector and reform its institutions in line with Vietnam’s commitments under several free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union - Vietnam Free Trade Agreement.
The rights and obligations of foreign-invested enterprises (“FIEs”) in the pharmaceutical sector have been significantly clarified and expanded, with a view to enhancing the sector’s attractiveness and streamlining foreign investment processes.
Key enhancements include:
- Enhanced supply chain participation: FIE manufacturers can now deliver and transport their manufactured medicines to healthcare establishments including but not limited to medical examination and treatment facilities, vaccination facilities, other healthcare establishments, and drug rehabilitation facilities. Both FIE manufacturers and importers can deliver and transport their manufactured/imported medicines to wholesale distributors or sponsored healthcare establishments as part of approved sponsorship programs.
- Expanded market access: FIEs (including FIE importers) are officially authorised to contract with or transfer technology to Vietnamese manufacturers and subsequently sell the resulting medicines and pharmaceutical ingredients produced by these Vietnamese manufacturers to Vietnamese wholesale distributors.
- Ingredient import and product repurchase: FIE importers can import pharmaceutical ingredients for use by contracted Vietnamese manufacturers. In cases of technology transfer, FIE importers are also permitted to repurchase the finished products from these manufacturers for sale to Vietnamese wholesale distributors.
These changes aim to establish a more robust and predictable legal framework for FIEs operating in Vietnam. This is important as previous ambiguities in the legal landscape presented significant challenges and uncertainties for FIEs in conducting their business activities.
Incentives for investment
It is noted that Vietnam’s National Assembly Standing Committee - the permanent body that manages the Assembly’s activities when it is not in session - agreed with the Government’s proposal to apply special investment incentives for new projects in the pharmaceutical sector with a total investment capital of at least VND3 trillion (approximately US$118 million). These projects must disburse a minimum of VND1 trillion (approximately US$39.45 million) within three years from the date of investment registration certificate issuance or investment policy approval. It appears that these incentives are equally available to both domestic enterprises and FIEs that meet the criteria set out.
Other changes
In addition, the Amended Law makes the following changes to the Law on Pharmacy:
- Simplifies drug registration procedures and extends the validity period for drug registration certificates;
- Introduces new business models, by allowing the sale of medicine on e-commerce platforms and setting out a legal framework to allow the establishment of pharmacy chains; and
- Introduces corporate income tax and import tax exemptions for pharmaceutical ingredients not yet produced in Vietnam.
