Vietnamese Government, Drug Industry Dispute Price Controls

Following the introduction of a new bill aiming to create a drug price control board in Vietnam, senior officials have indicated their displeasure at new requests to increase prices from a number of drugmakers. In February, authorities called on the industry to submit detailed pricing plans for official approval, apparently in return for speedier drug approvals and greater control over illicit copy drug production. In March, officials also threatened to "severely punish" firms imposing unauthorised price rises.

Drug importers have highlighted the local currency's recent fluctuations against the US dollar and the impact of inflation. Firms have also cited price differentials with other nearby countries, a factor which the government had hoped its price control drive, begun in mid-2004, would soon neutralise. However, it is clear that measures so far have not been effective, with selling prices on some antibiotics and other high-selling basic products rising by up to 50% since the start of the year.

The government is clearly keen to rein in a market that is regarded as poorly regulated, both in terms of pricing and competitive practices. However, authorities are dismayed about the lack of progress on efforts to restructure the industry. Only a minority of drug producers and retailers responded to the requests for pricing plans before last month's deadline, affecting prices on roughly 73 products.

It is now unclear whether the government can succeed in its plans to impose price controls, and thus clear a first obstacle toward greater reform efforts. Plans currently also envisage a new VND800bn (US$50.54mn) drug purchasing "bank," as well as expanding distribution to rural areas and tightening inspections of drug manufacturing facilities.