Vietnam Pharmaceutical Investment Policies: A New Era For Foreign Investment

The year 2025 marks a turning point for Vietnam's pharmaceutical industry, transforming it from a high-potential yet complex consumer market into a strategic hub for high-value pharmaceutical manufacturing and research. 

The primary driver for this shift comes from groundbreaking legal reforms, particularly the amended Law on Pharmacy, Law No. 44/2024/QH15. This is a crucial move in modernizing Vietnam's pharmaceutical regulations.

This new law, effective July 2025, represents a strategic overhaul designed to attract sophisticated foreign investment. With the Vietnamese pharmaceutical market projected to reach USD 10 billion by 2026, these changes signal that the door is now wide open for foreign investors who know how to leverage the new legal environment and improve the healthcare infrastructure.

Key Takeaways:

• Expanded FDI Scope: The 2024 Amended Law on Pharmacy permits foreign investors to engage in manufacturing, quality control, clinical trials, and crucially, self-distribution for specific pharmaceutical products produced via technology transfer.
• Attractive Incentive Package: The Vietnamese government offers access to preferential corporate income tax rates, significant R&D deductions, and land rental reductions to stimulate the pharmaceutical sector.
• Legal Clarity as a Competitive Edge: The new pharmaceutical regulatory framework creates clarity that reduces licensing risks, giving Vietnam's pharmaceutical sector a distinct advantage over regional competitors.
• Shift to High-Value Production: Government policy is actively encouraging investment in biotech, vaccines, and brand-name drugs, a clear move to bolster Vietnam's pharmaceutical industry beyond generic drugs.
• Strategic Entry is Key: Despite reforms, distribution remains partially restricted. Success for foreign pharmaceutical companies requires smart entry models like joint ventures, contract manufacturing, or technology transfer agreements.

Core Legal Reforms Reshaping Investment Access

The cornerstone of the evolution of Vietnam's pharmaceutical sector is Law No. 44/2024/QH15, which amends 50 articles Abolish 2 points, 2 clauses and 1 article of the 2016 Pharmacy Law and add 3 new articles, marking the most significant regulatory shift in nearly a decade. 

According to an analysis by LuatVietnam (2024), these amendments are specifically designed to expand foreign investment participation and streamline processes that previously created bottlenecks for investment. This legal certainty is a prerequisite for attracting significant capital from foreign investors.

Unpacking the New Regulations

The amended law is supported by Decree 163/2025/ND-CP, which details the implementation of the incentives details the implementation of the incentives: Supplementing the Special Investment Incentive Sectors and Trades of Appendix II of the List of Investment Incentive Sectors and Trades, such as: Research and development of technology, production or technology transfer to produce herbal medicines, traditional medicines from domestic medicinal materials, pharmaceutical ingredients, new drugs, original brand-name drugs, rare drugs, the first domestically produced generic drugs, high-tech drugs, vaccines, biological product... 

This provides a clear, actionable roadmap for any pharmaceutical business looking to enter the Vietnamese market.

A legal update from Tilleke & Gibbins (2025) confirms that these new guidelines offer foreign investors the same treatment and procedures as domestic firms in manufacturing and export, leveling the playing field. This is a crucial departure from the past, where international pharmaceutical companies often faced additional administrative procedures.

Further clarification from Allen & Gledhill (2025) highlights the expanded scope for foreign investors, which now includes manufacturing, quality control, and clinical trials. The ability to sell self-produced drugs to local distributors is a change that transforms the FDI model from simple importation to integrated local production and supply chain participation. Vietnam's pharmaceutical industry is clearly opening up.

This newfound certainty is a powerful competitive advantage for Vietnam's pharmaceutical sector, significantly reducing risks associated with drug licensing and long-term operational planning for any pharmaceutical business. This move will help align Vietnam's pharmaceutical sector with international standards.

Incentive Mechanisms Catalyzing Foreign Investment

The Vietnamese government is backing its legal reforms with one of the most competitive incentive packages in the region. This signals a strategic pivot and highlights the pharmaceutical sector's designation as a strategic priority sector.

The government is not just offering tax breaks; policy is now linked to industrial development, specifically targeting high-value R&D and biotechnology to create an innovative domestic pharmaceutical ecosystem. The financial incentives for pharmaceutical investment are substantial.

• Preferential Policies: Preferential policies encompass projects in high-tech or biotech, offering CIT rates of 10-17% for up to 15 years, according to the general corporate income tax incentives under Law No. 67/2025/QH15 Law on Corporate Income Tax and Decree 268/2025/ND-CP on science and technology enterprises. The general investment law provides a solid foundation for these benefits. In addition, there are incentives on tax exemption and reduction for up to 04 years and 50% reduction of tax payable for no more than the next 09 years for projects that meet the regulations.
• R&D Deductions: A 200% deduction for R&D expenses is available to encourage local innovation in pharmaceutical production.
• Import Tax Exemption: A 0% import tax applies to raw materials and APIs that cannot be produced domestically, a key factor for domestic manufacturing.

These measures directly address the high upfront costs, such as the minimum investment capital, associated with establishing advanced manufacturing facilities. Beyond tax relief, the government offers significant support for healthcare investment.

Eligible projects can receive up to a 70% reduction in land rental fees and access state-funded investment credits. This is particularly beneficial for biotech, vaccines, and projects focused on traditional medicines derived from indigenous medicinal resources. Unlocking these benefits requires navigating the specific channels for an in-principle investment approval.

Opportunities And Market Transformation 2025–2030

The new legal framework is creating fertile ground for growth, promoting domestic manufacturing and enhancing local production. The government is actively seeking foreign direct investment in several key domains:

• API and Generic Production: Building domestic capacity for active pharmaceutical ingredients and generic drugs manufactured domestically.
• Advanced Facilities: Establishing designated clinical trial facilities to meet the standards of stringent regulatory authorities.
• Local Procurement Advantages: Offering priority to locally produced pharmaceutical products within the national health insurance system, creating a built-in market for new foreign investors.
• Digital Transformation: Encouraging the development of digital health solutions to improve healthcare services and pharmaceutical information compliance.

These policies are aligned with ambitious national targets, including Decision 1165/QD-TTg, which aims for 60% of pharmaceutical demand to be met by local production by 2030, a clear strategy for sustainable development.

The strategic goal is to leverage technology transfer, building a resilient regional supply chain to avoid potential supply chain disruptions. This positions Vietnam's pharmaceutical industry as an export hub, with a special focus on the global pharmaceutical industry. This active market participation is seen as the catalyst for achieving technological sovereignty.

How Vietnam Pharmaceutical Investment Policies Shape Investor Challenges And Strategic Entry Pathways

Despite positive reforms, navigating the pharmaceutical sector still requires strategic expertise. Regulatory oversight remains stringent, and the new law imposes stricter criteria in some areas to ensure quality.

The timeline for achieving full operational setup, including navigating all administrative procedures, typically ranges from 12 to 18 months. Key challenges remain for foreign pharmaceutical companies:

• Pharmaceutical Distribution: Foreign-invested enterprises are still barred from full retail and wholesale activities. They cannot independently manage logistics operations, sell imported drugs, or handle transporting imported drugs to end-users.
• Regulatory Compliance: Navigating strict standards for manufacturing and a complex environment governed by rules like Vietnam's infectious disease laws requires specialized knowledge.
• Talent and IP: A shortage of trained personnel and the need for stronger IP protection persist, though commitments under international agreements are driving improvements.

Successful pharmaceutical companies overcome these challenges through intelligent entry strategies instead of direct investment alone.

They often utilize models like joint ventures with local manufacturers or engage in a domestically manufacturing contract. Structuring investments around technology transfer is another effective approach that mitigates regulatory barriers and accelerates market access for foreign investors. The framework is encouraging active market participation from all sides.

Conclusion: The Future Of Pharmaceutical FDI In Vietnam

The reforms solidified by Law 44/2024 have fundamentally redefined the opportunity for pharmaceutical investment in Vietnam's pharmaceutical sector. By facilitating streamlined administrative procedures and offering a clear strategic vision, the government has created a highly compelling investment case.

The focus has decisively shifted, with the pharmaceutical sector aligning toward high-value R&D and biotechnology. Looking toward 2030, Vietnam is on a trajectory to become a regional leader in specialized domestic drug production.

For foreign investors, the question is no longer "if" but "how" to enter the market. The path forward requires a nuanced understanding of the legal landscape and a strategic approach to partnerships, contributing to the country's healthcare infrastructure. Navigating these complexities is essential to align with Vietnam's ambitious vision and achieve long-term commercial success.

Frequently Asked Questions

What is the single biggest change for FDI investors in the new 2024 Pharmacy Law?

The most significant change is the expanded scope of permitted activities. Foreign investors can now manufacture, conduct clinical trials, and, crucially, distribute certain pharmaceutical products they produce in Vietnam under a technology transfer model, providing a much clearer path to market control.

How long does it realistically take to set up a pharmaceutical manufacturing plant in Vietnam?

Industry analysis suggests a realistic timeline from initial investment approval to full operational compliance is approximately 12 to 18 months. This includes securing all approvals through a now more streamlined marketing authorization process and other necessary accreditations.

Should I enter via a joint venture or a 100% foreign-owned entity?

While a 100% foreign-owned entity offers maximum control, a joint venture with a strong local partner can significantly accelerate market entry. This model often proves more efficient for navigating local distribution networks while maintaining fair market conditions and regulatory relationships.

You may also like: Opportunities For Growth In The Pharmaceutical Drug Business In Vietnam