Restrictions on the activities of representative offices of foreign pharmaceutical companies in Vietnam

Currently, in addition to investing in the establishment of companies in Vietnam, foreign company operating in the pharmaceutical industry (“foreign pharmaceutical companies”) can establish representative offices in Vietnam. This can be seen as a first step for foreign pharmaceutical companies to enter the Vietnamese market. In the case of establishing representative offices in Vietnam, the activities of the representative office of foreign pharmaceutical companies must comply with both the Commercial Law, the Decree No. 07/2016/ND-CP[1], the Law on Pharmacy, and related guidance documents.

Given the nature of the sector, which is directly related to the health and lives of consumers, the representative offices of foreign pharmaceutical companies also have certain restrictions on their activities. In this article, HM&P will highlight some notable regulations regarding the activity restrictions on the activities of representative offices of foreign pharmaceutical companies in Vietnam.

1. General restrictions on representative offices of foreign companies in Vietnam

According to the provisions of Article 30 of Decree No. 07/2016/ND-CP, a representative office performs functions such as liaison, market research, and promotion of investment and business opportunities for the represented business, except for service sectors for which the establishment of representative offices is regulated in specific legal documents. In addition, a representative office of a foreign enterprise may not directly engage in profit-making activities in Vietnam, nor may it enter into contracts, amend, or supplement contracts entered into by the foreign enterprise, unless the Head of the representative office is legally authorized by the foreign enterprise, or in the following cases:

(i). Leasing premises, renting, purchasing necessary equipment for the activities of the representative office.

(ii). Recruitment of Vietnamese or foreign labor to work in the representative office in accordance with Vietnamese law.

(iii). Opening accounts in foreign currency or in Vietnamese dong with foreign currency origin at banks licensed to operate in Vietnam, and only using such accounts only for the activities of the representative office.

In addition, notwithstanding its function to promote investment and business opportunities for the represented foreign enterprise, the representative office is restricted from engaging in certain commercial promotion activities, including:

(i) With regard to promotional activities

The representative office of a foreign enterprise is not allowed to conduct promotional activities in Vietnam for the enterprise it represents, or hire other operators to conduct promotional activities in Vietnam[2].

(ii). Regarding commercial advertising activities

The representative office of a foreign enterprise is not allowed to conduct commercial advertising activities. If a foreign enterprise wishes to advertise its goods and services in Vietnam, it must hire a Vietnamese enterprise providing commercial advertising services to carry out the advertising. In cases where authorized by the foreign enterprise, the representative office has the right to sign a contract with a enterprise providing commercial advertising services to carry out advertising for the represented enterprise[3].

(iii). Regarding the display and introduction of goods and services

The representative office of a foreign enterprise may not directly display or introduce the goods and services it represents, except for displaying and introducing in its own premises. Where authorized by the foreign enterprise, the representative office has the right to enter into a contract with an enterprise that provides display and introduction services for goods and services to conduct display and introduction activities for the represented enterprise[4].

(iv). Regarding trade fairs and exhibitions

The representative office of a foreign enterprise may not allowed to directly organize or participate in trade fairs and exhibitions. In cases where authorized by the foreign enterprise, the representative office has the right to sign a contract with a enterprise providing trade fair and exhibition services to organize or participate in trade fairs and exhibitions for the represented enterprise[5].

The representative office of a foreign pharmaceutical company, which is essentially a representative office of a foreign company in Vietnam, will be limited by these regulations.

2. Special restrictions for representative offices of foreign pharmaceutical companies

As mentioned above, representative offices of foreign pharmaceutical companies are subject to some specific restrictions compared to representative offices of foreign enterprise in other sectors. Specifically:

2.1 Signing Employment Agreement with Drugs Introducers (Medical Communication Specialists)

Although the Commercial Law allows the representative office to employ Vietnamese and foreign worker to work at the representative office, and the representative office may display and introduce the goods and services of the trader it represents at its premises[6], there is an additional requirement that the representative office of a foreign pharmaceutical company must comply with the legal regulations related to pharmaceuticals if it intends to enter into employment contracts with individuals who introduce pharmaceuticals.

Specifically, Point b Clause 6 Article 76 of the Law on Pharmacy 2016 stipulates: “Employees of pharmaceutical enterprises who introduce drugs to medical practitioners and health care providers in accordance with regulations of the Minister of Health”. Pharmaceutical businesses are defined in Clause 2 Article 32 of the Law on Pharmacy 2016, which does not include representative offices of foreign pharmaceutical companies. Therefore, employees of representative offices of foreign pharmaceutical companies are not allowed to introduce drugs, and consequently, these offices cannot enter into employment agreement with drug introducers to facilitate the introduction of drugs to medical practitioners and health care providers.

Pursuant to Clause 1 Article 21 of Circular 07/2018/TT-BYT, a drug introducer is a person who is employed by a pharmaceutical company and who is authorized by the head of that company to hold the "drug introducer" card in order to provide information about drugs to doctors and health care providers. Therefore, if the representative office wishes to introduce drugs in its premises, it must do so through the personnel of the foreign pharmaceutical company, i.e. its employees. If the representative office wishes to introduce drugs in places other than its own premises, it may be authorized by the foreign pharmaceutical company to sign contracts with companies providing services related to the introduction of goods. In both cases, an employee of the foreign pharmaceutical company should be involved in the drug introduction process.

2.2 Pharmaceutical Advertising Activities

As mentioned above, if authorized by the foreign company, the representative office is entitled to sign contracts with companies providing commercial advertising services to conduct advertising activities. However, drug advertising activities require confirmation of the advertising content before the advertising is carried out. Therefore, before the company providing advertising services in Vietnam conducts drug advertising, the foreign pharmaceutical company must authorize its representative office in Vietnam to be named in the application for confirmation of advertising content. The representative office must follow the procedures for confirming the advertising content in accordance with the law[7].

2.3 Pharmaceutical Information Activities

As mentioned in Section 2.1, the representative office of a foreign pharmaceutical company may introduce drugs in its office premises through its appointed drug introducer or by concluding contracts with enterprises engaged in the introduction of goods and services while still through its appointed drug introducer. These cases are forms of medicine information method through medicine introducers. Apart from this method, the medicine information activity may also be conducted through the issuance of medicine information documents or through medicine introduction seminars[8]. According to the provisions of Clauses 1, 2 of Article 108 of Decree No. 54/2017/ND-CP, the dissemination of medicine information in the form of issuing medicine information documents or conducting seminars introducing medicines must follow the procedures to confirm the content of the medicine information. In addition, according to Point b Clause 1 of Article 106 of the same Decree, the representative office of the foreign pharmaceutical company may be authorized by the pharmaceutical company to be listed in the documents to confirm of the content of the medicine information.

As stated in Point b Clause 6 Article 76 of the Law on Pharmacy 2016, pharmaceutical companies, the representative offices of foreign pharmaceutical companies in Vietnam, and registered establishments dealing with medicines are responsible for providing medicine information to medical practitioners and healthcare providers, as well as users of medicine. However, there are no explicit regulations on whether the representative office may conduct drug information activity by issuing documents or by organizing seminars.

However, in Official Letters No. 4338/QLD-PCD dated 14 March 2018, and No. 9401/QLD-PCD dated 29 May 2018, issued by the Drug Administration of Vietnam under the Ministry of Health, it was clarified that the representative office of a foreign pharmaceutical company is only allowed to provide drug information through its appointed medicine introducers in the form of documents whose contents have been confirmed by the authorized authority.

2.4 Drug Registration Activities

As specified in Point b Clause 3 Article 54 of the Law on Pharmacy 2016, a foreign pharmaceutical company with a representative office in Vietnam can be named in the registration of medicines and pharmaceutical ingredients. However, unlike the cases of confirming the contents of drug advertisements or drug information, the representative office cannot be listed as the entity in charge of the drug registration; it is the foreign pharmaceutical company that must be named as the registrant. In cases where there’s authorization from the pharmaceutical company, the representative office can only perform procedures such as preparing dossiers, signing authorized delegation documents on designated papers, submitting dossiers, receiving results, etc.[9]