VIETNAM – INVESTMENT IN THE HEALTHCARE AND MEDICAL DEVICE SECTORS

A. Overview of Vietnam´s healthcare sector

There is no denying that Vietnam truly is an attractive investment destination in South East Asia. It has great potential to develop a qualitative, self-sustaining life science sector. Improvements on the healthcare sector will lead to several benefits. With increasing focus on healthcare, manufacturing, service providers, clinical research organizations and others are being stimulated. As a result, small and medium-sized enterprises (SMEs) are boosted and exports could replace the need for foreign aid by attracting sustainable FDIs and PPPs.

Of particular importance for a positive development is the close cooperation between the major stakeholders from the private and public sector. In this process, certain core goals should be set. Significantly, it is important to ensure swift, sustainable access to medical treatment and to urgently improve the quality of the treatment process. High-quality domestic treatments not only improve patient satisfaction but also improve one’s own economy by counteracting outgoing medical tourism.

Furthermore, it should be ensured that the existing investors remain in Vietnam and new ones are pulled ashore. To do this, investors must be shown that the Vietnamese market does not contain undetected risks, but is stable and predictable. Further, integrate opportunities for collaborations and partnerships to develop local capability.

B. Outpatient: Home care and home-treatment

One major issue regarding Vietnams Healthcare sector is the limited capacity in hospitals. There is a gap between bed capacity and demand of inpatient treatment. The Ministry of Health has its hands full to counteract the overloading of hospitals. Even institutions with larger bed capacity have eventually set up a home care service to enhance the follow-up monitoring of chronic and long-term illnesses for patients that have been released from the hospital.

Patients in Vietnam are financially overburdened with the costs of treatment therefore affordable treatment is needed. This however, has to be reached without the loss of quality. Especially the indirect costs of healthcare, such as travelling, meals during hospitalization and loss of income during treatment put patients and their families under enormous financial pressure. Due to the overload situation at hospitals and the fact that home care service is not fully developed yet, patients tend to take care for themselves with the help of their family. This leads to potential additional health complications due to the lack of professional follow-up. Furthermore, patients will often have to come to the hospital eventually and in some cases, with more severe conditions.

As such, professional homecare programs should be further investigated and developed, with access to the programs should be simple for everyone. This is especially necessary for the chronically ill. Home care and home-treatment can help to reduce public spending on chronic diseases and thus spare the health budget.

C. Implementation

There are two major requirements for putting the homecare structure into practice. First, the creation of a straightforward, transparent legal framework that contain incentives for investors. This encourages multinational companies to invest and transfer their know-how and technology to Vietnam, improving the revenues and quality of the country health care sector. Second, to streamline the administrative process to shorten the process of delivering new, high-quality patient care solutions, and to respond to the growing need for a growing Vietnamese population for rapid and sustainable access.

D. Medical Devices Industry Code of Conduct

Background of the Code of Conduct for medical devices is the various risks associated with the industry, in particular unfair competition between industry players. The Code is intended to facilitate ethical interactions among members of society who develop, manufacture, sell, distribute or distribute medical technology in Vietnam and individuals and organizations that apply, recommend, buy or prescribe medical technologies in Vietnam. The content of the Code of Conduct should focus on 1) strict compliance with laws and regulations in the area; 2) prioritization of people and health and safety of patients and 3) promoting scientific and educational activities to best benefit the patient.

For multinational companies, the compliance area is usually very pronounced and strict. It is therefore particularly important to invest in an ethical business environment, especially when investing in high-risk jurisdictions. The commitment to uphold high ethical standards would certainly bring about long-term benefits for the health sector in Vietnam and attract more investors.

E. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. On 12 November 2018, Vietnam officially became the seventh member of the CPTPP.

The CPTPP targets to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. An increase of trade will have great influence to the health- and medical sector. The agreement is suitable to support Public-Private Partnerships (PPPs), which could lead to a positive impact in development of innovative technologies of medical devices and facilitate the transfer of necessary know-how. Lower or no trade tariffs can lead to lower import costs for the essential components of medical devices. This, in turn, results in lower acquisition costs for the medical practices and hospitals, thus eventually lowering the treatment costs.

The annexes of the CPTPP (TBT chapter) deal with specific challenges of trading regarding pharmaceuticals, medical devices and technology products. The provisions require the Members to define what medical products are and when they are subject to the state laws, and this information have to be published. This requirement helps to ensure timely mitigation measures if a product application is not approved or is deemed deficient. Such increased transparency brings great benefits for all traders of medical devices, employees in the medical industry as well as for patients.

A specific example is before the CPTPP comes into force in Vietnam, Canada faced tariffs of 7% imposed by Vietnam regarding exports of life sciences products such as medicines in doses for retail sale. From 14 January 2019, these tariffs are fully eliminated. As a result, Canada and other countries are exporting more and more products to Vietnam, gradually improving the quality of Vietnam’s medical facilities.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EVFTA), which came into force on 1 August 2020. The EVFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers. In addition, the EVFTA boosts the development of (almost) all economic sectors in Vietnam. Both agreements promise great benefits for the health and medicine sector.

Both the CPTPP and the EVFTA include a chapter on Government Procurement, which deals with the requirement to treat foreign and domestic bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc. At the moment, Vietnam has implemented online bidding mechanism with easily accessible information for foreign investors.

The EVFTA comes with the EU-Vietnam Investment Protection Agreement (EVIPA) that is being reviewed for ratification by EU Member States. Foreign investors are given high level of protection under the EVIPA. This agreement is a combination of the New York Convention 1958 and the ICSID 1965. The EVIPA, and CPTPP, make it possible for foreign investors to sue the Vietnamese Government for its investment related decisions. The final arbitral award is binding and enforceable without any question from the local courts regarding its validity.

At the moment, Vietnam has reserved the right to fulfill the commitment on Investor-State Dispute Resolution for 5 years from the effective date of the EVIPA. Nevertheless, Duane Morris Vietnam has the legal and technical tools to make such provisions work in favor of investors from now.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.