# Pharmaceutical Industry in Vietnam: Sluggish Sector in a Growing Market
## 2 The Development of the Health Care Market  
According to multiple reports, Vietnam is a fast growing market for pharmaceutical products that is very attractive to foreign firms at present and in the near future [2; 17; 18]. The market's growth rate averaged 17-20% during 2010-2015, making it one of the fastest markets in the region [19]. Total expenditure on health accounted for 5% of GDP in 1990s, increasing to over 7% in 2014, which is higher than almost all other countries in developing Asia [5]. At the same time, out-of-pocket expenditure reduced from around 70% (1990) to 45% (2014) (see Figure 1). Growth in drug spending per capita has been continuous and stable. The average drug expenditure per capita was 9.85 USD in 2005, 22.25 USD in 2010 and up to 44 USD in 2015 [20]. The average growth rate reached 17.7% per year between 2005 and 2010 and 14.6% between 2010 and 2015. Supposing that the expenditure maintains a growth rate of at least 14%/year up to 2025, it is estimated that drug spending per capita will double to 85 USD in 2020 and quadruple to 163 USD in 2025 (see Figure 2). Figure 1: Expenditure on health as %GDP and out-of-pocket expenditure. Figure 2: Drug spending per capita in Vietnam. The rapid growth of pharmaceutical demand in Vietnam can be attributed to a series of economic and social trends. Among these, we identify three key drivers including: (i) high economic growth and increasing personal income; (ii) rising population and rapid urbanization; and (iii) rapid ageing, which all contribute to people's higher living standards, stimulating the aggregate consumption of pharmaceutical products. On the other hand, several negative effects such as pollution, insufficient food safety or unsafe living and working conditions also exert impacts on the demand as well. In this regards, such dynamics look similar to other emerging countries such as China, where higher longevity, combined with environmental and pollution problems, are increasing chronic diseases like respiratory illnesses, cancer, diabetes, as well as obesity [21]. (1) High economic growth and enhanced personal income: For the past 20 years, Vietnam's economy rapidly expanded at an average yearly rate of 7%. In the same time, GDP per capita increased from 288 USD in 1995 to 2110 USD in 2015 [22], equivalent to growth of over 10% per year in nominal terms. Strong income growth and increasing health awareness are favorable conditions to increase expenditure in healthcare in general and in pharmaceutical products in particular [23; 24]. (2) Rising population and rapid urbanization: During the last two decades, Vietnam has experienced a dramatic increase in the population, passing from 72 million people in 1995 to 91 million in 2015 [25] and resulting in a consistent expansion in the domestic market size. At the same time, urbanization triggered a spatial and demographic expansion. According to the World Bank, urban areas in Vietnam have developed spatially at 2.8% per year, which is among the fastest rates in the Asian region World Bank [26]. As of 2015, the urban population is about 33.5% and it is expected to reach 40% by 2020 and 50% by 2030 [27]. In these contexts, the emergence of new urban middle-classes is likely to be associated with changes in people's behaviors and consumption patterns positively affecting the demand for healthcare and pharmaceutical products [28; 29]. Moreover, the mass migration from rural areas leads to a concentration of healthcare services in the two biggest cities of the country, Hanoi and Ho Chi Minh City. Such a dynamic makes urban hospitals seriously suffering from ongoing undercapacity. It is estimated that while Hanoi and Ho Chi Minh City account for less than 20% of Vietnam's population, their hospitals need to serve 60% of all patients in the country [30]. The unsatisfied demand of public healthcare services has encouraged the activities of private companies providing additional channels for domestic consumption of pharmaceutical products [18].