Compliance and Risk: A Practical Guide to the Regulations of Herbal Medicine in Vietnam

Herbal medicines and traditional medicines are deeply embedded in Vietnam's healthcare system, representing a market rich with opportunity for foreign investors. A significant portion of the world population relies on herbal remedies for their primary health care and well-being. 

The country's abundant natural resources, competitive labor costs, and a strong government push to standardize quality have created a compelling investment landscape for natural products. However, capitalizing on this potential requires a thorough understanding of Vietnam's multi-layered regulatory framework, which directly impacts investment costs, time-to-market, and export strategies for any herbal medicinal product.

The foundational legal document, the Law on Pharmacy 105/2016/QH13, establishes the core scope of management for herbal materials and traditional herbal medicines, including clear business conditions. 

This legal basis is critical. For any investor, navigating these regulatory frameworks is not just a matter of compliance; it is a strategic necessity. This article analyzes the three central pillars of this regulatory environment for herbal medicine: quality standards, market authorization, and risk management.

Key Takeaways:

• A Multi-Layered but Structured Framework: Vietnam's regulations for herbal medicines are governed by the Law on Pharmacy, supported by specific guidelines on GACP and GMP standards, creating a clear but complex system for investors.
• Quality is Non-Negotiable and Drives Export: Strict adherence to GACP for cultivation and Good Manufacturing Practice for production is mandatory. Meeting these quality standards is the primary factor enabling access to the lucrative global market.
• Market Authorization is a Critical Timeline Factor: The registration process for an herbal product can be lengthy. M&A with already-licensed local companies has become a key strategy to accelerate market entry for their herbal medicinal products but investors must strictly comply with the mandatory Economic Concentration Notification to the National Competition Commission (UBCG) if the transaction meets the thresholds under Vietnam's Competition Law.
• Due Diligence is Essential for Risk Mitigation: Investors must conduct comprehensive due diligence covering technical compliance (GACP/GMP), legal status, and supply chain integrity to manage significant operational and financial risks associated with herbal drug products.
• Government Policy Supports a High-Value Industry: The Vietnamese government is actively promoting the herbal medicine sector, with new regulations aimed at increasing transparency and expanding exports of its medicines.

Legal and Institutional Framework for Herbal Medicines

Vietnam has established a clear legal hierarchy for the governance of herbal and traditional medicines, providing a structured environment. The Law on Pharmacy 105/2016/QH13 serves as the backbone of the entire regulatory framework. 

It provides detailed provisions on the conditions for trading in herbal materials, sets national quality standards, and aims to regulate the entire supply chain. This legislation is similar in intent to the Drugs and Cosmetics Act seen in other countries.

Beneath this law, a series of supporting regulations adds further detail. These include:

• Mandatory standards like GACP (Good Agricultural and Collection Practices) for the cultivation of medicinal plants.
• Good Manufacturing Practice (GMP-WHO) for facilities producing medicines from these materials.
• Additional circulars providing specific guidelines on quality control, testing protocols, and product recalls.

For foreign investors, this multi-layered system presents both clarity and complexity. Unlike the more unified regulatory frameworks in the European Union, managed by bodies like the European Medicines Agency, Vietnam's system requires careful interpretation. 

The specific regulatory requirements for licensing can directly influence project timelines, making expert guidance in regulatory affairs essential. The primary regulatory authority is the Ministry of Health.

Quality and Safety Requirements for Herbal Medicines

The cornerstone of Vietnam's regulatory framework for herbal medicines is an uncompromising focus on quality and safety, enforced at every stage. This is crucial for public health and building trust in traditional herbal medicine.

National Standards for Herbal Materials

Vietnamese law mandates strict quality control from cultivation through to processing and storage of herbs. Cultivation facilities are required to meet GACP standards to ensure the consistency and safety of raw materials derived from plant parts. 

Manufacturing facilities producing traditional medicines must, in turn, comply with GMP standards. Every batch of herbal drug material must meet established criteria.

The regulations also specify rigorous quality assessment protocols, including:

• Evaluation for microbial contamination, heavy metals, and pesticide residues.
• Robust traceability systems to track medicinal plants from origin to final product.
• Strict enforcement of proper packaging and labeling to avoid adverse effects.

For new entrants, these stringent quality requirements translate into a higher initial investment. This has made M&A an attractive alternative. As emphasized by an analysis in the Vietnam Law Magazine (2024), standardizing quality is a critical challenge but is absolutely essential for "efforts needed to help Vietnamese herbs go global." The importance of a thorough safety assessment cannot be overstated.

Registration and Market Authorization Requirements

Gaining legal permission to sell herbal medicinal products in Vietnam involves a detailed registration process overseen by the Ministry of Health. 

To obtain market authorization for a herbal product, companies must submit a comprehensive dossier. This includes data on the product's quality, safety, and efficacy, often requiring scientific evidence and sometimes even clinical trials.

The government is actively working to streamline these procedures. According to an article by Vietnam.vn (2024), Vietnam is "completing regulations on registration and circulation of traditional medicines" to enhance transparency and create a clearer pathway for local products to enter international markets. 

This is different from the process for conventional pharmaceuticals or dietary supplements. For most herbal products, demonstrating a history of traditional use is a key part of the evaluation.

Compliance and Risk Management

Vietnam’s legal framework includes strict enforcement mechanisms for non-compliance, making robust risk management a top priority. The law imposes severe penalties for violations.

Investors must watch for several inherent risk factors, including:

• Variable quality of raw materials from medicinal plants.
• Price volatility in the raw materials market.
• The risk that a target company in an M&A deal may not meet the latest quality standards.

Comprehensive due diligence is the most effective tool for mitigating these risks. This must include technical verification of certifications, legal confirmation of all licenses, and a thorough audit of the raw material supply chain. This helps ensure the safety and efficacy of the herbal medicinal products.

Outlook for Herbal Medicine Regulation and Investment

The Vietnamese government's policy direction indicates a strong commitment to transforming the herbal medicine sector into a high-value, export-oriented industry. Future regulation is expected to focus on increasing market transparency, enhancing traceability, and aligning Vietnamese standards with international norms, such as those promoted by the World Health Organization.

This strategy is positioning Vietnam, a key player among developing countries, as a reliable international supplier of GACP-standard herbal materials for the global market, including for developed countries. Investors who move early can gain significant advantages. 

By applying international best practices, foreign-invested enterprises are well-positioned to achieve high quality standards and demonstrate the therapeutic value of their traditional herbal medicinal products through evidence-based research.

Conclusion

Vietnam has developed a comprehensive regulatory framework for herbal medicines and traditional herbal medicine, built on the three core pillars of quality, registration, and compliance. For foreign investors, a deep and nuanced understanding of these regulations is the key to optimizing their investment strategy.

Mastering this regulatory framework allows investors to effectively manage risks and build a sustainable business with strong potential for export. The current guidelines, coupled with supportive government policies, are successfully laying the groundwork for Vietnam to become a highly attractive destination for investment in herbal medicine for the next decade.

Frequently Asked Questions

What are the biggest regulatory challenges for a foreign company entering Vietnam's herbal medicine market?

The primary challenges are navigating the multi-layered legal status and regulations of herbal medicine, managing the lengthy market authorization process for new herbal products, and ensuring a consistent supply of high-quality raw materials. Overcoming these hurdles often requires local expertise and significant investment in quality control.

How long does it typically take to get market authorization for a new herbal product in Vietnam?

The timeline can vary, but it is a lengthy process that can often take between 12 and 24 months. The duration depends on the complexity of the herbal medicinal product, the completeness of the dossier, and the current workload of the regulatory authorities. This is a key reason M&A is often a faster strategy.

Is it better to build a new GACP-certified farm (greenfield) or acquire an existing one (M&A)?

Each strategy has distinct trade-offs. An M&A approach is typically faster, providing immediate access to land, but it requires extensive due diligence to ensure the existing operations truly meet GACP quality standards. A greenfield project offers complete control over quality and safety from the start but involves a longer timeline.

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