Amended law on pharmacy: unfulfilled expectations remain

At the 8th Session of the 15th Assembly, the National Assembly passed the Law amending and supplementing a number of articles of the Law on Pharmacy ("Amended Law on Pharmacy"). This is a necessary adjustment after nearly 8 years of implementation of the 2016 Law on Pharmacy - the legal framework governing the production, trade, distribution and use of medicines in Vietnam. In the context of deep international integration and the focus on developing the pharmaceutical industry into a key economic sector, the amended Law on Pharmacy is expected to improve management efficiency and attract investment. However, many of the new regulations are not yet complete, which poses certain challenges in achieving the long-term goals set. This article will focus on the remaining limitations that the Amended Pharmacy Law has not yet resolved, which could pose obstacles to the implementation of the newly adopted reforms. 

Pharmacy chain registration regulations

First of all, the Amended Law on Pharmacy has expanded and diversified the business system of the pharmaceutical market by adding a number of new business types and methods such as the pharmacy chain model and other forms of drug business, as well as clearer regulations on the rights and obligations of participating entities[1]. These changes are aimed at creating an appropriate legal corridor to manage the types of business that are emerging in practice. However, the new regulations also pose significant challenges to small and medium-sized enterprises, forcing them to invest in technology and compete directly with large pharmaceutical companies. In addition, while the development of the chain pharmacy model is encouraged, the failure to adjust the regulations for registering the operations of chain pharmacies means that actual implementation may not make a breakthrough. While companies still have to comply with the current regulations on business registration for each establishment, such as the registration of branch operations and business locations according to the current Decree 01/2021/ND-CP on business registration. 

Currently, the draft amendment to Decree 01/2021/ND-CP is being finalized and does not mention the simplification of business registration procedures for pharmacy chains, a specific type of business. At the same time, Decree 54/2017/ND-CP, the guiding document for the Law on Pharmacy 2016, also does not have any proposed adjustments related to a more favorable mechanism for registering pharmacy chains, creating a worrisome legal gap for businesses. 

Need for an accurate drug registration solution

Drug registration, also known as drug registration, has long been a complicated and time-consuming administrative process for enterprises. This is also the reason why Vietnam is always in a state of drug shortage. Although the number of pharmaceutical enterprises in Vietnam is quite large, including drug manufacturers, importers, and distributors, difficulties in drug registration activities are still an obstacle for enterprises to bring drugs to the market soon.

Currently, the Amended Law on Pharmacy has made certain reforms to the drug registration procedures. Specifically, the Amended Pharmaceutical Law has reduced the number of documents required to be submitted when renewing, amending and supplementing the circulation license for drugs and drug materials. In addition, establishments are allowed to continue using the distribution license after its expiration and submitting an application for its renewal in accordance with the regulations, until it is renewed or there is a document from the Ministry of Health, in order to ensure the continuous circulation of drugs and drug materials and avoid disruptions in the market supply.

In addition, the stage of examination of documents and consultation of the Advisory Council is skipped in the process of granting a license to distribute medicinal products and medical materials. The time for processing applications for extension, change and addition will also be reduced from three months to less than one month in some cases where the product does not have any changes in quantity, composition, etc. and does not seriously affect the health of users.

Although there have been positive changes in the drug registration regulations, in order for these regulations to be truly effective in practice, the competent authorities still need to prepare resources and strengthen inspection and supervision in drug registration approval activities. This is because, although the maximum time for processing drug registration applications is 12 months according to the current regulations, the actual time is still longer than the regulations in many cases. This problem does not lie in the legal regulations, but in the history of management and supervision in law enforcement activities related to the implementation of administrative procedures. Due to the large amount of records that need to be strictly checked to ensure the quality of drugs before they are put on the market, the registration records of drugs are still delayed. Therefore, in order to thoroughly solve the problem of drug registration procedures, administrative agencies need to more strictly control the implementation of legal regulations for this procedure in practice.

Although the extension of the drug registration approval period has many causes, one of the causes may be that Vietnam has too many finished drugs with registration numbers. This can be easily verified by looking up drugs in the Drug Administration's system. For example, for the active ingredient paracetamol, there are dozens of pharmaceutical companies that produce or import drugs containing this active ingredient with similar ingredients, dosages, and uses. This leads to an increase in the number of drug registration applications that the competent authority must receive and process. This is an issue that has not yet been addressed in the amended Law on Pharmacy.

Overly cautious in not allowing “online” sales of prescription drugs

At present, many pharmacies and large pharmacy chains have conducted drug sales and drug sales counseling activities on the e-commerce sales website of the enterprise itself. As a result of the above practice, the amended content of Article 42 of the Pharmacy Law allows entities that have been granted a certificate of eligibility for pharmaceutical business to engage in e-commerce for non-prescription drugs. Prescription drugs can be sold online only in cases of medical isolation, when there is an infectious disease in group A. According to the legislator's explanation, the sale of prescription drugs via e-commerce depends on management experience and guaranteed conditions, because drugs are not like ordinary goods, but are special goods related to people's health and life[2]. However, with the current digital technology reforms in the healthcare sector, typically remote health examinations, electronic health records or electronic prescriptions, the sale of prescription drugs online is also an inevitable trend. The author believes that although the Amended Law on Pharmacy only allows online drug trading for non-prescription drugs, it can be understood that the relevant authorities need more time to monitor and evaluate the actual situation of online drug trading, in order to use it as a basis for assessment and to build a suitable roadmap to allow online prescription drug trading in the near future. However, with the current rapid development of technology, social networking platforms and especially e-commerce platforms, we believe that this is a somewhat cautious step by the legislature.

Not "open" enough for FIE pharmaceutical enterprises

The new point of the Amended Law on Pharmacy is to allow foreign-invested pharmaceutical enterprises (“FIE”) to wholesale to other wholesalers drugs that they have ordered to be manufactured or technology transferred. However, compared to the current regulations, this provision does not seem to make any difference for FIE enterprises that import and distribute drugs. In particular, for both types of business, FIE enterprises are only allowed to distribute wholesale drugs to other wholesale enterprises, not to distribute retail drugs. The above-mentioned new regulation has solved the problem of FIE enterprises that do not directly produce drugs, but have to order another enterprise to produce drugs, and still be able to distribute drugs. However, in terms of openness, this regulation only stops at the wholesale level. It is still the same old story, for FIE enterprises, when choosing to outsource or transfer technology to produce drugs, in addition to saving investment resources, these enterprises must also evaluate the profit potential when implementing the above business forms. Not being allowed to retail drugs will limit the economic potential that these enterprises can achieve, thereby affecting the decision to outsource or transfer technology. As a result, the policy of promoting technology transfer in Vietnam's pharmaceutical sector may not achieve the expected results.

The issue of protection of the domestic pharmaceutical industry

Up to this point, from a certain perspective, it can be said that Vietnam is protecting domestic enterprises by restricting the rights of FIE enterprises. However, these solutions not only cannot protect domestic enterprises from the wave of foreign capital acquisition, but also limit the competitiveness and development of Vietnam's pharmaceutical industry. Therefore, the author believes that it is necessary to change the approach to prioritizing and incentivizing research and development activities in the pharmaceutical industry. Instead of protecting domestic pharmaceutical enterprises by restricting the rights of FIE enterprises, relevant authorities can consider encouraging these enterprises to focus on R&D activities and be willing to receive technology transfer. This is a way to help these enterprises have the ability to compete with FIE enterprises in the long term, and is also a solution to build the Vietnamese pharmaceutical industry to develop in a sustainable direction, less dependent on the world market.

Overall, it can be seen that the Amended Law on Pharmacy is a truly welcome reform for Vietnam in 2024. Pharmaceuticals, as an economic sector that directly affects human health, especially domestic people, it is therefore necessary for Vietnam's legislative bodies to take cautious steps. However, in some cases, being too cautious may lead to "missing the boat" and further hinder the development of this important and potential economic sector when the amended Law on Pharmacy is officially implemented in practice.