Công văn 4338/QLD-PCD

On May 08, 2017, the Government promulgated the Decree No. 54/2017/ND-CP providing guidelines for implementation of the Law on Pharmacy (hereinafter referred to as “Decree No. 54”).

Upon the promulgation of the Decree No. 54, the Drug Administration of Vietnam affiliated to the Ministry of Health has conducted talks with relevant entities in different forms such as holding meetings for dissemination of the Decree No. 54, providing training courses in the Law on Pharmacy in 2016 and the Decree No. 54 according to themes thereof and as requested by enterprises, conducting direct talks or regular work sessions or sending written responses to queries or questions of relevant entities, and has summarized and published questions and answers thereof on the website of the Drug Administration of Vietnam affiliated to the Ministry of Health.

Relevant organizations and individuals have been implementing the Decree No. 54. Upon dissemination of, training in and organization of direct talks about the Decree No. 54, foreign companies that trade in pharmaceutical products in Vietnam have put the following questions:

I. Requirements to be satisfied by foreign invested enterprises (hereinafter referred to as “FIE”)

1. Issuance of Certificate of eligibility for pharmacy business - within the scope of drug import - for the entities that are entitled to import but not entitled to distribute drugs

Question:

May a FIE importing drugs use drug storage area which meets GSP requirements provided by a third party (including drug storage areas provided by FIEs providing storage and transport services) when applying for a Certificate of eligibility for pharmacy business which allows the import of drugs?

Answer:

- - Point b Clause 1 Article 33 of the Law on Pharmacy in 2016 stipulates one of eligibility requirements when applying for a Certificate of eligibility for pharmacy business that every importer of drugs/medicinal ingredients must have the premises, drug storage area, storage equipment, transportation vehicles, quality control system, technical documents and personnel that fulfill Good Storage Practice requirements. This regulation applies to both domestic enterprises and FIEs.

- A FIE may itself build storage facility to store drugs it manufactures or imports. If a FIE does not yet build its own storage facility or fails to legally own a storage facility, it may lease a storage facility that meets GSP requirements from a Vietnamese enterprise to store its drugs/medicinal ingredients.

In case of lease of storage facility, the FIE shall assume responsibility to directly operate and manage the storage of drugs/medicinal ingredients at that leased storage facility. A FIE must use a storage facility of drugs/medicinal ingredients that meets GSP requirements when it applies for a Certificate of eligibility for pharmacy business within the scope of import and export of drugs/medicinal ingredients. Currently, all Vietnamese importers of drugs maintain the fulfillment of drug storage requirements.

- If a FIE importing drugs is allowed to use storage services provided by another FIE, it cannot directly operate and manage drug storage facility as prescribed above.

- If giving permission to all importers (including Vietnamese importers and FIEs exercising the import rights) to use storage services provided by third parties, importers cannot fully discharge the responsibility to manage and ensure quality of imported drugs. In such cases, importers shall only play role as declarants who make customs declarations relating to drugs being imported.

2. Operations of FIEs providing drug/medicinal ingredient storage and transport services after the dates of entry into force of the Law on Pharmacy in 2016 and Decree No. 54.

Question:

Whether FIEs that have provided drug/medicinal ingredient storage and transport services before the dates of entry into force of the Law on Pharmacy in 2016 and Decree No. 54 may continue exercising the rights granted under Certificates of eligibility for business or Investment Certificates when they give up the import rights or not?

Answer:

- In principle, any foreign investments in pharmaceutical industry in Vietnam, in addition to the compliance with regulations of the Law on Investment, must be made in conformity with specialized regulations on pharmacy, including the Law on Pharmacy in 2016 coming into force from January 01, 2017 and the Decree No. 54 coming into force from July 01, 2017, their instructional documents and relevant laws.

- Clause 10 Article 91 of the Decree No. 54 applies to all “entities that are entitled to import but not entitled to distribute drugs“. A FIE’s relinquishment of the import rights does not mean that it is allowed to exercise the distribution rights or do any activities “related to distribution of drugs and medicinal ingredients in Vietnam” as prescribed in Clause 10 Article 91 of the Decree No. 54.

- Point c Clause 10 Article 91 of the Decree No. 54 stipulates that the entities that are entitled to import but not entitled to distribute drugs and medicinal ingredients in Vietnam (also FIEs) are not allowed to do activities related to distribution of drugs, including the transportation and storage of drugs/medicinal ingredients. This regulation is absolutely consistent with Vietnam’s WTO commitments, the Law on Pharmacy in 2016 and Vietnam’s national strategy for development of pharmaceutical industry by 2020 and the vision towards 2030 by the Prime Minister so as to make professional, modern and efficient arrangement of drug distribution systems of Vietnam, and ensure the timely and sufficient provision of high-quality, safe and good drugs to people with suitable prices.

Currently, all Vietnamese importers and exporters of drugs well maintain the fulfillment of GSP requirements and are ready to make efforts to improve and provide drug storage, transport and distribution services in a professional manner.

- With regard to drug storage and transport services provided by FIEs after the dates of entry into force of the Law on Pharmacy in 2016 and the Decree No. 54, the Drug Administration of Vietnam affiliated to the Ministry of Health has promulgated the Official Dispatch No. 9436/QLD-KD on July 05, 2017 to request FIEs providing drug storage and transport services to comply with regulations of the Decree No. 54 and make specific proposals for adjustment of activities which are not in consistent with the Decree No. 54.

FIEs that have provided drug/medicinal ingredient storage and transport services before the dates of entry into force of the Law on Pharmacy in 2016 and the Decree No. 54 must ensure that their investment and business activities are done in compliance with applicable regulations on investment (the Law on Investment in 2014 and relevant guidelines).

II. Recruitment of pharmaceutical sales representative and provision of drug information for medical practitioners by representative offices in Vietnam of foreign enterprises conducting drug/medicinal ingredient-related activities in Vietnam (hereinafter referred to as “representative offices”)

Question 1. May a representative office recruit pharmaceutical sales representatives?

Answer:

- Pursuant to Clause 3 Article 17 of the Law on Commerce and Article 30 of the Decree No. 07/2016/ND-CP detailing the establishment of representative offices and branches of foreign traders in Vietnam under the Law on Commerce, representative offices are entitled to directly recruit employees to work at the representative offices.

- Representative offices are not allowed to recruit pharmaceutical sales representatives with the following reasons:

+ Pursuant to Clause 2 Article 118 of the Law on Commerce in 2005, representative offices of foreign traders are not entitled to directly exhibit and introduce goods and services of such traders.

+ Pursuant to Point b Clause 6 Article 76 of the Law on Pharmacy in 2016, “employees of pharmacy business establishments shall introduce drugs to medical practitioners in accordance with regulations of the Minister of Health”.

+ Pursuant to Clause 2 Article 32 of the Law on Pharmacy in 2016, pharmacy business establishments do not include representative offices of foreign enterprises engaging in pharmaceutical industry in Vietnam.

Thus, the fact that representative office enter into employment contracts with pharmaceutical sales representatives who are employed to introduce drugs to medical practitioners is not consistent with the Law on Commerce in 2005, the Decree No. 07/2016/ND-CP detailing the establishment of representative offices and branches of foreign traders in Vietnam under the Law on Commerce, and the Law on Pharmacy in 2016.

Question 2. May a representative office provide drug information for medical practitioners and pharmacists via its pharmaceutical sales representatives or holding pharmaceutical conferences?

Answer:

- With regard to provision of drug information:

+ Pursuant to Clause 6 Article 76 of the Law on Pharmacy in 2016 and Clause 1 Article 106 of the Decree No. 54, representative offices are entitled to apply for certification of drug information provided for medical practitioners by means of publishing of documents containing drug information and organization of pharmaceutical conferences if they are duly authorized by the foreign establishments that apply for drug registration; and

+ Pursuant to Clause 2 Article 118 of the Law on Commerce in 2005, representative offices of foreign traders are not entitled to directly exhibit and introduce goods and services of such traders.

- Thus, representative offices are not allowed to hold pharmaceutical conferences. Representative offices are only allowed to provide drug information for medical practitioners via pharmaceutical sales representatives of pharmacy business establishments in the form of documents containing drug information certified by competent authorities.

III. Representative offices and FIEs exercising the import rights jointly enter into discussions about drug prices (price negotiation) with domestic drug distributors.

Question:

May FIEs exercising the import rights and representative offices jointly enter into discussions about drug prices (such as price negotiation and bidding for drug purchase) with domestic drug distributors to serve the bidding for drug purchase of public health facilities?

Answer:

- Pursuant to Article 78 of the Government's Decree No. 63/2014/ND-CP dated June 26, 2014 detailing the implementation of a number articles of the Law on Bidding regarding the selection of contractors, in principle, the drug price negotiations shall be conducted between the Drug Price Negotiation Council and contractors (they are domestic manufacturers or drug suppliers – they are not FIEs exercising the import rights or representative offices).

- Pursuant to Point d Clause 10 Article 91 of the Decree No. 54, “the entities that are entitled to import but not entitled to distribute drugs and medicinal ingredients in Vietnam are not allowed to do activities………, including:……. Impose prices for drugs or medicinal ingredients distributed by other pharmaceutical-trading establishments”.

The Drug Administration of Vietnam affiliated to the Ministry of Health shall consider the application of these regulations so as to ensure efficiency of price negotiation measures in the principle of compliance with applicable regulations on drug purchase and relevant regulations applicable to FIEs.

The Drug Administration of Vietnam affiliated to the Ministry of Health request relevant entities to strictly comply with regulations of the Law on Pharmacy in 2016, the Decree No. 54, their instructional documents and relevant laws. The Ministry of Health shall ensure the transparency of legal environment and facilitate enterprises, including multinational companies, which manufacture and provide drugs in Vietnam market in their operations and development.

The Drug Administration of Vietnam affiliated to the Ministry of Health is ready to hold bilateral and multilateral discussions with foreign enterprises engaging in pharmaceutical industry in Vietnam about any queries regarding the Law on Pharmacy and the Decree No. 54 in a spirit of cooperation and on the basis of specific proposals which must be feasible and consistent with applicable laws of Vietnam.