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Drug makers accused of collusion

Update: June, 24/2013 - 09:29
A customer buys medicine at a drug store in Ly Thuong Kiet Street in Ha Noi. Experts have called for more detailed regulations to better supervise medicine distribution in Viet Nam. — VNS Photo Thai Ha

HA NOI (VNS)— Experts have called for more inspections to prevent collusion between drug producers and distributors in Viet Nam that is allegedly pushing up retail prices for medicines.

According to the Viet Nam Competition Authority (VCA), there are more than 2,300 drug traders and about 39,000 pharmacies across the country.

At the same time, there are just 274 domestic pharmaceutical producers, meaning that the number of distributors is nine times higher than the number of producers.

Moreover, few companies have much market share in the Vietnamese pharmacy industry. The biggest producer, Hau Giang Pharmacy JS Co, holds only 10.79 per cent. Other leading competitors held less than 10 per cent each.

Speaking at a recent conference about competition in the pharmacy sector, Tran Phuong Lan, head of the VCA's Competition Supervision and Management Department, said that the current market structure created a paradox.

"A low concentration rate should go hand in hand with tough competition and decreasing prices for consumers," she said.

However, in Viet Nam, drug prices kept increasing despite the low concentration rate, she emphasized.

The 274 pharmaceutical producers in Viet Nam can only produce to satisfy about half of the domestic demand. The rest have to be imported.

Lan said the drug distribution network in Viet Nam was complicated with many intermediary steps.

Moreover, foreign enterprises were taking advantage of the lax laws, she said.

Under current regulations, foreign companies are not allowed to distribute drugs in Viet Nam, but those built around Merger and Acquisition (M&A) could.

Lan said that M&A had helped foreign companies penetrate the local market.

Experts warn that domestic enterprises need to improve their awareness about the laws to avoid being trapped in anti-competition agreements, for example, foreign companies merge and acquire domestic ones to be eligible to distribute their products.

Lan also noted that price rises were not common among locally-made medicines but often occurred among imported ones.

This prompted suspicions of collusion among foreign producers, importers and domestic distributors.

According to the Viet Nam Pharmacy Companies' Association, only 11.9 per cent of drugs used in central hospitals are domestically made. The percentage in provincial hospitals is 33.9 per cent. The domination of imported drugs is the main reason for increases in drug prices.

Lan also said Vietnamese businesses rarely imported the same products, adding that this was unusual.

The move could create monopolies in distribution which pushed drug prices up. — VNS


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