The Indonesian regulations seemed straightforward until we dug deeper. A Fortune Global 500 client was planning their market entry strategies, confident they had ticked all the regulatory compliance boxes. However, the reality on the ground was far more complex. The official pharma regulation stated one thing, but the unwritten rules of implementation at the National […]
Vietnam's pharmaceutical market, a fertile ground brimming with potential, is on the cusp of a significant legal transformation. This change is set to reshape the investment environment for foreign investors.
For years, the primary barrier for multinational pharmaceutical companies has been the regulation preventing foreign-invested enterprises (FIEs) from directly distributing drugs in Vietnam. This created considerable challenges in market access and supply chain optimization for many companies.
However, with new government policies and a clear national strategy for developing Vietnam's pharmaceutical industry, a new chapter is unfolding.
This new landscape presents both unique opportunities and challenges that demand a carefully planned, effective market entry strategy from any prospective international investors. The focus is now on attracting quality foreign investment to elevate the entire pharmaceutical sector.
Key Takeaways:
- Regulatory Shift: The amended Law on Pharmacy, effective July 1, 2025, grants FIE importers new rights related to logistics, improving the handling of pharmaceuticals.
- Core Barrier Remains: FIEs are still restricted from direct distribution, in detail foreign invested companies are not allowed to distribute pharmaceuticals in Vietnam (Circular 34/2013/TT-BCT). It is necessitating the establishment of a Vietnamese enterprise for the distribution.
- New Investment Incentives: The Vietnamese government is actively promoting local pharmaceutical production, technology transfer, and the development of world-class research and development centres.
- Strategic Entry Models: Approaches like joint ventures and M&A are becoming key strategies to navigate legal hurdles and accelerate entry into the Vietnamese market.
- Compliance is Key: A thorough understanding of new regulations on drug registration, clinical trials, and post-market surveillance is critical for the sustainable development of any pharmaceutical business.
Vietnam’s Evolving Legal Framework for Pharmaceutical Investment in 2025
The new law, passed by Vietnam's National Assembly, signals a significant shift in regulatory philosophy. It is aimed at creating a more transparent and predictable investment environment for the pharmaceutical industry. These new regulations officially come into effect on July 1, 2025, fundamentally altering the legal framework.
Key Changes in the 2024 Amended Law on Pharmacy
One of the most crucial updates is the expansion of rights for foreign invested enterprises involved in the import of drugs. According to an analysis from Tilleke & Gibbins (2024), the amended law grants FIEs that handle imported drugs additional operational permissions. Specifically, these companies now have the right to:
- Transport drugs and pharmaceutical ingredients they have imported from their warehouses to wholesalers.
- Deliver specific pharmaceuticals, such as those for clinical trials or humanitarian aid, directly to healthcare facilities.
Guiding Regulations Effective July 1, 2025
New guidelines will streamline several administrative procedures. Most notably, the timeline for appraising drug registration dossiers will be shortened, a key focus for all pharmaceutical businesses. According to Tilleke & Gibbins (2024), key changes include:
- Faster Appraisals: The review period for new drugs will be reduced, accelerating market access for pharmaceutical products.
- E-commerce Legalized: An article from RHTLaw Vietnam (2025) clarifies this allows online retail of over-the-counter drugs, opening new wholesale activities for the domestic market. This digital transformation is a major step for the industry.
Major Barriers in Vietnam Pharmaceutical Investment Foreign Investors Must Address
Despite these improvements, significant hurdles for foreign investment remain. Identifying and strategizing to overcome them is a prerequisite for any successful investment in Vietnam's pharmaceutical sector.
Restrictions on Drug Trading and the Mandatory Vietnamese Enterprise
This remains the single biggest barrier for foreign pharmaceutical companies. Vietnamese law prohibits FIEs from directly engaging in most business activities related to the distribution of drugs.
To conduct these operations, foreign investors can only conduct your drug distribution activities through a pharmaceutical company that is duly registered in Vietnam. Drugs also need to be fully licensed and registered according to regulations to be circulated on the market..
Lengthy and Fragmented Licensing and Drug Registration Processes
While reforms are underway, the process for registering drugs remains complex. Preparing a complete dossier that meets all regulations demands deep local knowledge. Any errors can delay the investment and affect the launch of both generic drugs and original brand name drugs.
Government Incentives Strengthening Vietnam’s Pharmaceutical Sector in 2025
In parallel with legal reforms, the Vietnamese government is actively deploying incentive policies to attract investment into pharmaceutical manufacturing, especially for high-tech drugs and biological products. This is part of a national strategy to bolster the domestic pharmaceutical industry.
Incentives for Local Production and Technology Transfer
The Prime Minister's vision is to transform Vietnam into a regional hub for pharmaceutical production. The government is offering powerful incentives for investment in manufacturing and technology transfer. The focus is on elevating domestic firms to meet international standards. Investors from regions like South Korea are watching these developments closely.
This push includes incentives for building R&D and development centres to foster innovation in new drugs, including specialised drugs and rare drugs.
New Opportunities Through Domestic Capacity Building
This national strategy creates immense opportunities for long-term investment. Instead of viewing Vietnam solely as a consumption market for imported drugs, international pharmaceutical companies can establish manufacturing bases. This approach leverages investment incentives and mitigates logistics risks for their pharmaceuticals.
Effective Market Entry Strategy Options for Foreign Investors
To navigate the legal barriers and fully capitalize on the potential of Vietnam's pharmaceutical market, a strategic entry is crucial. A successful strategy requires thorough legal due diligence.
1. Establishing an Enterprise; Joint Ventures (JVs) and Mergers & Acquisitions (M&A).
Under Vietnamese regulations, foreign-invested companies are not allowed to directly distribute drugs, except for drugs they themselves produce. Therefore, the safest and most compliant approach is to distribute through a local pharmaceutical company in Vietnam, ensuring legal compliance and minimizing regulatory risks.
2. Contract Manufacturing: The Risk-Mitigation Strategy
This model allows foreign companies to partner with a local factory for manufacturing. It is an excellent strategy for reducing upfront investment for both original brand drugs and generic drugs.
Compliance and Operational Solutions for Sustainable Investment
According to Baker McKenzie (2024), the new regulations will strengthen regulatory oversight. Companies in the pharmaceutical sector must have rigorous systems for providing healthcare services and monitoring product safety. Building compliant distribution networks is essential for all business activities in Vietnam's pharmaceutical industry.
Your Next Steps
The Vietnamese pharmaceutical market is at a promising inflection point. While regulatory barriers persist, the focus on improving the investment environment is creating unprecedented opportunities. Success will belong to international investors who develop a robust strategy for their pharmaceutical business.
Navigating this complex legal framework successfully requires a partner with deep local expertise. With extensive experience in FDI advisory, Viettonkin Consulting is ready to guide your investment.
Frequently Asked Questions
What is the single biggest change for foreign pharmaceutical investors in Vietnam in 2025?
The most significant change is that the new law allows FIEs that import drugs to perform certain logistics activities, improving supply chain efficiency for their pharmaceuticals. While not full distribution rights, it's a critical step for Vietnam's pharmaceutical industry.
How long does it typically take to establish a Vietnamese enterprise for drug distribution?
Based on our experience, the process for this form of investment typically takes 4 to 6 months. This timeline covers all administrative procedures, but can vary based on project complexity.
Should I choose an M&A strategy or a greenfield investment to enter Vietnam's pharma market?
An M&A strategy is ideal for investors who want to quickly enter the Vietnamese pharmaceutical market by acquiring an existing license. A greenfield investment offers complete control, making it suitable for long-term plans for manufacturing new technology or traditional medicines.
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