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(Nov 02, 2007) On September 7, 2007, the Ministry of Health (MOH) of the Socialist Republic of Vietnam (SRV) issued a decree on new regulations aimed at stabilizing rising drug prices in the country. Heretofore, the means of enforcing SRV price controls has been mandatory reporting of prices to the state Drug Administration and posting of the prices on the Internet. There was a loophole in the law, however, because pharmaceutical companies could sell their products without having to wait until the prices were approved, making retail prices higher than the real ones. (Additional Regulations to Restrain Drug Prices in Vietnam, 7:10 ASIAN MEDICAL NEWSLETTER (Oct. 5, 2007), available at http://www.pacificbridgemedical.com/newsletter/newsletter_v7n10.htm; Pharmaceutical Prices to Be Placed Under Stricter Control, VIETNAM ECONOMY, May 16, 2007, available at http://www.vneconomy.com.vn/eng/?param=article&catid=11&id=69c15756b2e2e6; New Drug Decree May Cure Swelling Prices, VIETNAMNET BRIDGE, Sept. 10, 2007, available at http://english.vietnamnet.vn/social/ 2007/09/739191/.)

The new regulations prescribe that price controls will be more directly administered, with pricing split into three sets, each differently regulated by the government. The first set covers prices of drugs directly purchased by the government; the MOH and provincial people's committees will determine these prices. The second set of prices is for essential drugs used by State-owned medical institutions. The drugs are to be sold to the institutions on the basis of a tender system; the distributor with the lowest bid automatically wins the tender. The third set is prices for drugs sold on the open market. The prices may be proposed by retailers but the government will regulate and approve them, and drug companies and vendors must publicize each drug's cost and retail price. Among the penalties prescribed for violators of the regulations, it is stipulated that the MOH will temporarily suspend the import license of a trading company found to engage in price gouging. (Id.)

Aside from the issuance of the above-mentioned decree, the Ministries of Health, Finance, and Industry and Trade recently issued a circular prescribing that importers compile a list of CIF (Cost + insurance + freight) prices in Vietnam and in countries in the region to enable authorities to determine whether the SRV drug prices are reasonable. If they are found to be unreasonable, the authorities will not permit the imported pharmaceuticals to circulate on the domestic market. (Ministry Investigate [sic] Drug Price Hike, VIETNAMNET BRIDGE, Oct. 15, 2007, available at http://english.vietnamnet.vn/biz/2007/10/749447/.) In addition, the MOH issued Decision No. 151/2007/QD-TTg of September 12, 2007, promulgating the Regulation on the Import of Drugs Without Registration Number in Vietnam (New Regulation on Import of Drugs, VIETNAMNET BRIDGE, Sept. 15, 2007, available at http://english.vietnamnet.vn/social/2007/09/741203/.) The MOH had announced in May 2007 that it would issue regulations governing requirements for distributors, "including good storage practices (GSP), good distribution practices (GDP) and good pharmacy practices (GPP)" (Pharmaceutical Prices to Be Placed Under Stricter Control, supra.)

A study recently conducted by the SRV's Social Science Institute attributed the steep rise in pharmaceutical prices in Vietnam to "[l]imited regulation of pharmacies, lack of market information and inefficient domestic production." The relevant government agencies, according to the head of the study's research group, "consistently failed to provide timely and updated price information on the [medicines] that circulate on the domestic market" and "[t]he listing of prices, in fact, has been merely a formality, an empty exercise as authorities lack information about the costs of medicines as a reference point." A key factor in the price rise, the study noted, was the monopoly of pharmaceutical distribution by importers (the SRV restricts domestic production of drugs, and 95% of the raw materials for drugs are imported, according to the Drug Administration), with the result that the foreign producers and domestic distributors have been able to "fully decide on prices" and the importer-distributors could raise them "without any control." (Ministry Investigate [sic] Drug Price Hike, supra.)

Author: Wendy Zeldin More by this author
Topic: Commerce More on this topic
Jurisdiction: Vietnam More about this jurisdiction

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Last updated: 11/02/2007