Prevent "sheltering" behavior in drug distribution

Vietnam has not yet committed to opening its pharmaceutical distribution services. Photo: ST.

Inadequate regulations?

The Ministry of Health has issued a circular draft guiding in detail Point d, Clause 1, Article 44 of the Pharmacy Law (Law assigning the Ministry of Health to guide drug selling of pharmaceutical units that have importing but not distributing allowance) and the specific guidance on the implementation of the provisions of Clause 10, 11 and 12, Article 91 of Decree No. 54/2017/ND-CP relating to the scope of activities and responsibilities of the units that have the right to import but not to distribute drugs in Vietnam. In the opinion of some enterprises and trade specialists, some new regulations in Decree 54 and the circular draft guiding some articles of Decree 54 are not fully in line with Vietnam's international commitments and other related laws. Moreover, there are many regulations that intervene deeply in the autonomy of enterprises should be considered before officially issuing these regulations.

Lawyer Chung Yee Seck – representative of the legislative subcommittee of the American Trade Association – said that The Decree 54 and the circular draft guiding some articles of Decree 54 do not allow FDI enterprises to provide preserving and transporting drug services, which are not prohibited or restricted by the Pharmacy Law. In addition, Mr. Chung Yee Seck stated that the law of Vietnam does not allow legal documents to be retrospectively applied, except for some special cases stipulated in the Law on promulgation of legal documents. However, the draft of the Circular stipulates that 100% foreign invested enterprises must comply with Decree 54, stopping activities of preserving and transporting medicines as soon as this Circular takes effect. According to Mr. Chung Yee Seck, this provision is not only contrary to the international commitments that Vietnam is participating in, contrary to the open spirit of the Pharmacy Law, but also does not conform to the principle of investment protection under the Investment Law, and the non-retrospective principle of the Law on Promulgation of Legal Documents and Vietnam's Commitment to the WTO.

Lawyer Le Net (Le Net law firm) also said that the circular draft restricts the business rights of enterprises which are regulated in other legal documents. "The draft regulating goods issue and delivery to drug wholesalers must be carried out at the importer’s drug store. This provision raises the operating costs of drug importers or distributors, contrary to the Civil Code 2015 and the Commercial Code, allowing parties to agree on the place of delivery; and medical facilities and wholesalers are required to invest in additional storage facilities and transport drugs by themselves from the importer’s warehouse to their warehouses, causing unnecessary expenses for distribution activities and indirectly increase the price of medicine, while the existing warehouses are not leveraged", said lawyer Le Net.

According to Ms. Nguyen Thi Thu Trang, Director of the Center for WTO and Economic Integration, Vietnam Chamber of Commerce and Industry (VCCI), Vietnam has not committed to open distribution services for pharmaceuticals. In principle, if the services have not been opened yet, enterprises have not been allowed to participate in the activities prescribed for distribution, including the transport and storage services associated with the resale. In our opinion, this draft does not violate the WTO commitments on opening import services but not opening distribution services.

Not violating WTO commitments

Currently, because of the special nature of pharmaceutical goods, Vietnamese authorities continue to reserve the right to distribute drugs. FDI enterprises are not allowed to distribute drugs in Vietnam. This, on the one hand, prevents the FDI companies from dominating and manipulating the market; on the other hand, protects the domestic pharmaceutical industry. Therefore, according to Mr. Tran Duc Chinh, General Secretary of the Vietnam Pharmacists Association, the guiding documents of the Pharmacy Law only prohibit direct distribution activities, such as prohibiting transportation, preservation or investment,... in order to prevent "sheltering" behavior to direct distribution, which is still happening in FDI businesses. According to Mr. Chinh, right after joining the WTO, we need to implement the WTO regulations on this issue, but so far, we need to implement the new regulations promulgated by the authorities.

Mr. Nguyen Huy Quang, General Director of Department of Legal Affairs, Ministry of Health, said that, when drafting the circular, the Ministry of Health always ensured five principles: ensuring the right of business for the ownership of enterprises in Vietnam; creating favorable conditions for FDI enterprises as well as domestic ones; ensuring publicity, transparency; ensuring equality between economic sectors; ensuring the constitutionality and legality of documents as well as the regulations of international organizations that Vietnam has joined.

According to Mr. Quang, in the drug business in Vietnam there is a small problem that FDI companies are allowed to import but not to distribute drugs. In WTO commitments, we have not committed that FDI enterprises have right to import but not to distribute. However, the fact that we have not done it yet does not mean that we will not do this in the future. And now, we are gradually institutionalized by the regulations for enterprises, including the right to import but not to distribute drugs for FDI units.

"One point to consider is that previously there were FDI companies that are under the shadow of Vietnamese enterprises to distribute drugs in Vietnam. The Ministry of Health has also held meetings with Vietnamese authorities such as the Ministry of Industry and Trade, the Ministry of Planning and Investment, and the Ministry of Justice to address such outstanding issues. We want to affirm our consistent view is to always facilitate a stable environment for enterprises in general and units investment in pharmaceutical business in particular", stated Nguyen Huy Quang.