Imported drugs continue to be a concern for domestic pharmaceutical enterprises

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The number of drug stores belonging to drugstore chains has increased rapidly.

Profits increasing positively

In the first quarter of 2022, according to the business results of the listed pharmaceutical companies and the hospital bidding results of the Drug Administration of Vietnam (DAV), SSI Research estimated that the total pharmaceutical revenue of the country increased by 7% over the same period, in which the revenue from the pharmacy channel increased by 23% and the hospital channel decreased by 5%, over the same period.

Normally, in the period before the Covid-19 pandemic, the country's pharmaceutical revenue increased by an average of 13% per year, while revenue from the pharmacy channel increased at only about 6% per year. Therefore, the recent outbreak of Omicron variant, with low hospitalization rates and commercialized Covid treatment drugs such as Favipiravir and Molnupiravir helped the pharmacy channel's revenue to increase dramatically and maintain the industry's revenue stably.

Meanwhile, due to recent legal issues in Vietnam's healthcare industry, along with a shortage of human resources to test drugs during outbreaks of pandemic, the drug approval process at DAV is very slow during the past two years (2020 - 2022), it is very difficult to register new drugs and renew previously registered drugs. The annual number of drug approvals has fallen from a peak of 3,703 registrations in 2019 to just 1,155 new registrations in 2021.

Therefore, the price level of many drugs has a relatively stable increase. Based on data from online drug stores, SSI Research estimates that the average retail price of fever-reducing, cough-reducing medicines, vitamins, functional foods and Covid-19 drugs in the first quarter of 2022 has increased by 5% compared to the first quarter of 2021 and an increase of 13% since the first outbreak in 2020.

Meanwhile, other drugs have seen a fairly stable increase, about 5-9% since 2020, due to the high cost of pharmaceutical raw materials during the strict lockdown period in the two main pharmaceutical supplying countries including China and India. The increase in drug prices at listed pharmaceutical companies was also recorded at a similar rate, enough to offset the high input costs and help maintain stable industry profits during the period.

Concerns from imported drugs

SSI Research forecasts that, in the second half of 2022, with a low growth rate in 2021 due to the fourth Covid-19 outbreak, pharmaceutical revenue at the hospital channel will have a strong recovery, especially in the southern provinces. This should help revenue growth of whole industry reach about 13% in the second half of 2022 and 11% for the whole of 2022 compared to the same period, recovering close to pre-Covid revenue levels.

Besides, the race to open a new pharmacy chain will stimulate the pharmaceutical industry's revenue to increase in the next few years. The three largest drugstore chains, Long Chau, An Khang, and Pharmacity, are rapidly expanding their number of stores across the country.

According to a survey from IQVIA (a provider of strategic information and consulting services for pharmaceutical and health companies), the total number of drug stores nationwide was 55,300 stores in 2016, with only 186 stores belonging to drugstore chain (about 1% market share). In 2021, after a long period of tightening regulations for the over the counter drugs and raising standards for each pharmacy, the total number of active drug stores was only 44,600 units, but there were 1,600 stores belonging to drugstore chain (about 4% market share).

Although the proportion of drugstore chains is still quite small compared to the market, the ambitious plan of the top three drugstore chains will bring the total number of drug stores in the pharmacy chain to 7,300 stores in 2025, equivalent to 16% market share. Stimulating the pharmaceutical industry's revenue to increase more than the actual demand of the people in the next two to five years, mainly because these new stores will promote drug inventory.

However, SSI Research notes that these drugstore chains still deal mostly in functional foods and imported drugs, so the sudden growth in the number of stores of these chains does not mean a growth equivalent to the revenue of domestic pharmaceutical enterprises.

The report of SSI Research cited data that the total value of Vietnam's drug imports increased by 21% over the same period in 2021 and continued to increase by 25% in the first quarter of 2022. Meanwhile, imported raw materials for domestic drug production only increased by 3% over the same period in 2021 and decreased by 11% over the same period in the first quarter of 2022. The growth of imported drugs in 2021 and 2022 is much higher than the average growth rate of 13% in the period 2015-2020.

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This may be due to the tightening of drug approvals leading to a decrease in domestic production and an increase in import demand for Covid-19 drugs in the recent period. Therefore, imported drugs continue to be a concern for domestic enterprises.