View of arbitrators

Should Foreign Pharma in Vietnam Start Incorporation?

14/12/2017 10:39

Mr. Michael Kuman Lee | Partner at Dilinh Legal, VIAC Arbitrator

 

Hình ảnh có liên quan

Employment of Medical Representatives by Representative Offices

Under previous laws, foreign pharma representative offices (“ROs”) in Vietnam were allowed to employ medical representatives. Presently, Article 76.6(b) of the Law Pharmacy No. 105/2016/QH13 (“2016 Pharma Law”) disallows ROs from employing medical representatives and unless the government reverses the situation, this rule will to stand. 

While it is likely the government will provide ROs a grace period to comply, we believe a reversal of the law is unlikely because the 2016 Pharma Law and Decree 54/2017/ND-CP allows foreign invested enterprises (“FIEs”) to engage in the import of pharmaceuticals, hire medical representatives, hold marketing authorizations, and conduct all of the other pharma related activities that ROs were and are allowed to do. Under previous laws, operating as a FIEs was not viable. Hence, foreign pharma companies had no choice but to operate as a RO. Now these barriers appear to have been removed. 

Given the foregoing and the fact that, according to a recent EuroCham Pharma Group survey, many foreign investors believe it would take at least 2 years to establish a pharma FIE, foreign investors need to consider when is the appropriate time to start the incorporation process and the challenges they might face if they do. We outline the factors to consider below.

The Incorporation Process and Challenges

Investment activities of foreign investors are framed by Vietnam’s WTO Commitments, the Law on Enterprises No. 68/2015/QH13 (“LOE”), the Law on Investment No. 67/2014/QH13 (“LOI”), laws subordinate to LOE and LOI, and laws specific to an industry, in our case, the 2016 Pharma Law and its subordinate laws. 

For the establishment of foreign direct investment projects, foreign investors must first obtain foreign investment approval through an Investment Registration Certificate (“IRC”) and then obtain the Enterprise Registration Certificate (“ERC”) which serves as an incorporation document. After obtaining the IRC and ERC, the pharma FIE would need to obtain a Certificate of Eligibility for Pharmacy Business (“CEPB”) to start operations. 

Investors must wait for a Circular to outline the exact requirements for a CEPB. Presently, there is great concern about the language contained in Article 32.2(b) of Decree 54/2017/ND-CP because it may be interpreted to require pharma FIEs to directly operate a GSP warehouse without an option to outsource. This requirement would be commercially burdensome to many foreign pharma companies.   

The first set of steps, obtaining the IRC and ERC should not take two years. Incorporation of FIEs in sensitive or politized sectors take a bit more time than other sectors but, even still, we believe incorporation of a pharma FIE can be done in five to seven months from start to finish. That said, there is a slight risk that the uncertainties presently surrounding the CEPB might creep into licensing process for the IRC because the authorities have wide discretion. We believe the chances of this occurring is low because authorities have allowed for the incorporation of two pharma import entities, GSK and MSD, despite the fact that when they were incorporated, obtaining what was then equivalent to the CEPB was impossible.

How long it would take to obtain the CEPB is more difficult to assess and there would have to be a Circular addressing the CEPB before investors can even apply. Thus, there is a risk of undue delay is the issuance of such Circular. Furthermore, investors might want to know the detailed requirements for a CEPB prior to deciding on whether the establishment of a pharma FIE is commercially feasible or desirable in the first place.

For more information on the incorporation of pharma FIEs, please contact Michael Leeat michael.lee@dilinh.com.

Credit: Mr. Michael Kuman Lee | Linkedin

Share Post
SOME OTHER NEWS
  • Local businesses advised to capitalize on FTAs 12/11/2018 11:17

    Despite its involvement in in numerous Free Trade Agreements (FTAs) and new-generation FTAs, Vietnam has yet to take full advantage of incentivesand opportunities it receives from its participation in FTAs.

  • Farm produce needs improved quality to unlock EU market 23/08/2018 11:46

    Vietnam is one of the important suppliers of farm produce to the EU, ranking 12th among all exporting nations and meeting 2.2% of the demand, above Thailand, New Zealand, Malaysia and Canada. However, the EU has paid due attention to food value, quality, safety and hygiene and has issued stringent regulations on antibiotics, pesticides and tracing product origin.

  • US-China trade war evolves into battle for power 10/08/2018 11:18

    Last week, international media reported that the Trump administration was considering slapping a 25 per cent tariff on US$200 billion of imported Chinese goods, 10 per cent higher than its initial proposal, in a bid to pressure Beijing to make trade concessions.

  • Concerns about Multiple Sublicenses from National Competition Committee Model 17/05/2018 13:46

    The National Competition Committee should be an independent governmental body rather than a ministerial affiliate, said at a Consultative Workshop on Revised Law on Competition, raising concerns about the birth of multiple sublicenses, monopolistic behaviours and power abuse in the public service. 

  • Forgiving tax debts must be done transparently 06/04/2018 14:08

    Tax losses caused by enterprises that have received contracts to be paid from the State budget, but haven’t yet paid their taxes, are also under consideration for tax clearance. The amount of tax arrears is estimated at over VNĐ542 billion (roughly $24 million).

  • Tough odds for VN market upgrade 19/03/2018 09:43

    Việt Nam’s securities market has a 25 per cent chance of being upgraded to the “emerging market” status from its current “frontier market” level by 2021, according to Võ Trí Thành, senior economist at the Central Institute for Economic Management (CIEM) cum VIAC arbitrator.

  • Mine declines: Good news for sustainability 07/03/2018 10:54

    Statistics from the General Statistics Office of Việt Nam (GSO) showed that the mining industry has posted a record slump since 2011, with the growth rate dropping by 7.1 per cent in 2017 and 4 per cent in 2016. This could be a small disappointment amid lots of bright spots in the country’s wider socio-economic picture last year. But this could also lead to an alarming conclusion – the mining industry will be unable to return to growth, and so the growth pattern must be transformed. 

  • Insurance books should not be used as collateral 06/03/2018 17:09

    Lawmakers, lawyers and leaders from Vietnam Social Security (VSS), a State agency in charge of the country’s social insurance programme, have all advised against the practice of using social insurance books as collateral by banks, credit institutions and small loan businesses at a conference last week on the subject.  

    REGISTER EMAIL WITH VIAC