Management of pharmacy chains requires specific regulations

In this article, our Managing Partner, Nguyen Van Phuc will analyze the regulations related to the challenges faced by pharmaceutical companies operating pharmacy chains. This article was part of HM&P's series of articles about pharmaceutical, published in The Saigon Times No. 20-2024, dated on May 16, 2024. Below is the English version:

Retailing pharmaceuticals through pharmacy chains is no longer a new business model for pharmaceutical companies. There are many well-known pharmacy chains in the market. However, this business model was not regulated by law. As a result, pharmaceutical companies operating pharmacy chains faced numerous obstacles when trying to implement this model. In the Draft Law on Amending and Supplementing Certain Provisions of the Pharmaceutical Law of 2016 ("Draft Law"), the provisions governing pharmacy chains were included therein. However, in order to promote the expansion of pharmacy chains and regulate this model, there should be more groundbreaking provisions.

Urgent addition for the pharmaceutical business

Under According to the Draft Law, “pharmacy chain” means the system of pharmacies that comply with the GPP (Good Pharmacy Practice) standards and belong to a drug manufacturing enterprise, drug wholesale enterprise, examination and treatment enterprise, and pharmaceutical business activities according to a unified quality system of the enterprise.

(Source: Internet)

The term "pharmacy chain" in the Draft Law is not new, as it has been regulated in the past. In particular, there was Circular 03/2009/TT-BYT, which was specifically issued to regulate the establishment, management and operation of GPP pharmacy chains. However, the said circular expired at the end of 2018, and pharmacy chains have been unregulated since then. In particular, the period before and after the COVID-19 pandemic was a boom period for pharmacy chains. Without mentioning pharmacy chain giants such as Pharmacity, Long Chau, or An Khang, other smaller companies opened more pharmacies in different areas to meet the growing demand from customers. At the same time, promoting the growth of pharmacy chains is included in the master plan for the development of the pharmaceutical industry in Clause 9 Article 7 of the existing Pharmaceutical Law 2016.

However, the lack of specific regulations on the establishment, operation and management of pharmacy chains poses many challenges for companies to implement this model. With the addition of regulations on pharmacy chains in the draft law, the model is expected to take off soon. Pharmacy chains will provide pharmaceutical companies with certain advantages over other small business models. Specifically, according to Article 17, Clause 1 of the Draft Law, companies participating in pharmacy chains have the right to circulate drugs or personnel within the pharmacies of the pharmacy chain. The above provisions create a favorable condition for pharmacy chains, as it would allow flexible allocation of drugs or personnel among pharmacies within the chain, which is different from traditional pharmacies that require fixed registered personnel.

The need for more specific regulations

The new regulations for pharmacy chains are necessary to manage the model, but they should be more innovative and specific.

Pharmacity, one of the largest pharmacy chains in Vietnam (Source: Internet)

Especially with regard to the establishment of pharmacy chains. Currently, the provisions added in the Draft Law do not represent a breakthrough compared to the establishment of pharmacy chains in Circular 03/2009/TT-BYT. Accordingly, in order to establish a pharmacy chain, pharmaceutical companies must open each pharmacy separately, and each store should meet the requirements under the law. After that, the company must conduct a procedure to announce the establishment of the pharmacy chain. Regardless of the size and number of pharmacies in the chain, pharmaceutical companies must still conduct the procedures for opening each pharmacy and then announce the establishment of a pharmacy chain. The above mechanism is unreasonable because it forces companies with the potential to open a large-scale pharmacy chain to open each pharmacy step by step. In the author's opinion, in order to encourage pharmaceutical companies to open pharmacy chains, there should be special administrative procedures for the establishment of pharmacy chains. Accordingly, companies should be allowed to establish pharmacy chains by opening several pharmacies at once, if each pharmacy meets the conditions of a drug retail business. This direction will reduce unnecessary administrative procedures for new players to enter the market. At the same time, with the pre-determination of pharmacies in the pharmacy chain, pharmaceutical companies will be more proactive and cost-effective in investing in equipment, systems and technology that are prerequisites for establishing a pharmacy chain.

It is also important to mention the responsibilities of pharmaceutical companies in the operation of pharmacy chains. Nowadays, except for technical conditions, pharmacy chains and small pharmacies are subject to the same administrative regulations. With the advantage of a large number of individual pharmacies, the pharmacy chain model can reach a wide range of customers. However, the more accessible a product is to customers, the greater the pressure from the drug administration. Due to the expansion of the pharmacy chain, it will be extremely complicated to deal with the consequences, such as suspension of sales, product recall, or compensation to users, if defective drugs cause harm to users. This requires the relevant authorities to take stricter measures against pharmacy chains, especially those with many pharmacies throughout the country. 

In conclusion, the regulatory approach for pharmacy chains in the Draft Law is no different from that for small pharmacies. Therefore, in order to facilitate the growth of pharmacy chains, there should be revolutionary administrative procedures that are designed in a way that would benefit the companies that intend to implement the model. At the same time, the relevant authorities must also formulate stricter regulations for pharmacy chains to ensure that pharmacy chains, once they enjoy their own "privileges," are aware of their responsibilities to the community and consumers.

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