Retailers Rush To Invest In Drug Distribution Market

VietNamNet Bridge - FPT Retail, the digital device retailer, The Gioi Di Dong, the biggest smartphone distributor, and Vingroup, the real estate developer and retailer, all have spent big money to set up their drug retail and manufacturing chains.

Retailers rush to expand drug distribution chains

The Gioi Di Dong in late 2017 took over Phuc An Khang drug store chain, officially joining the drug distribution market.

At the same time, FPT Retail took a step to expand its business ecosystem by investing in Long Chau drug store in HCM City.

Most recently, Vingroup announced the establishment of Vinfa, a subsidiary pharmaceutical and kicked off a project on setting up Vinfa Medicinal Drug R&D center, with investment capital of VND2.2 trillion. 

The center, once operational, will develop and trade high-quality Eastern and Western medicine for domestic consumption and export.

According to Rong Viet Securities, Vietnamese pharmaceuticals have to import up to 90 percent of materials needed to make medicine, and their products hold only half of the market. 

Meanwhile, the potential of the medicine industry is great with a predicted spending level of $55 per head per annum by 2021. Euromonitor International believes that stable growth rate of 10-15 percent will be maintained in the upcoming years, reaching $7.3 billion in value by 2019.

The drug demand is attributed to the longer life expectancy as well as increased rates of respiratory diseases, cancer, diabetes and obesity. 

The amended Pharmaceutical Law taking effect on January 1, 2017 paves the way for drug trading activities and encourages Vietnamese companies to expand production to meet 80 percent of domestic demand by 2020.

The law offers preferences in drug manufacturing, drug materials, essential drugs, specialized products, and vaccines. It also encourages the improvement of the distribution network.

According to VIRAC, a consultancy firm, Vietnam cannot control input materials for drug manufacturing because of high investments needed for technology and R&D.  

There are only 130 pharmaceutical firms which make drugs meeting GMP standards, a small figure compared with the high healthcare demand from 94 million Vietnamese.

Vietnam puts high hopes on foreign invested expanded projects and newly registered projects, either under the mode of FDI (foreign direct invetsment) or through M&A as the impetus to improve low production.

Singapore now ranks third among foreign investors in Vietnam. The expanded investment project registered by OPV, located in Bien Hoa 2 IZ in Dong Nai province alone, was capitalized at $47.7 million, accounting for 7.3 percent of the investor’s total capital registered in March.

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Mai Lich