# Pharmaceutical Industry in Vietnam: Sluggish Sector in a Growing Market
## 3 Evolution of Pharmaceutical Industry
### The Evolution of Government Policies in the Pharmaceutical Industry
#### 3.2.1 Transition Period (1990-2005)  
Prior to 1990, the pharmaceutical industry was under-developed and dominated by state-run companies with low production capacity. Average drug expenditure per capita was just about 0.5-1 USD per year and the quality of drugs was not of great concern [3]. The economic reform process known as \"Doi Moi\", initiated in 1986, led to important policy shifts in the health care system in the early 1990s.  
First, several market-oriented measures were implemented, such as the introduction of user fees at public health facilities, the legalization of private pharmacy and medical practices, and the liberalization of the production and sale of pharmaceuticals. Free access to health care was gradually replaced by a system of direct payment by patients [41]. The implementation of Central Resolution 4 (dated 14 January 1993) and Decision 58/QD-TTG (dated 3 February 1994) supported the opening of pharmaceutical industry to the private sector which led to an explosive growth of drugstores and pharmaceutical companies with increasing variety of drugs. It is estimated that pharmaceutical production increased by 300% while importation of pharmaceutical products raised tenfold between 1988 and 1992 [42].  
The provision of free medicines dispensed through the public health system was also discontinued [41]. As a result, Vietnam's near universal, publicly funded and provided health services were converted into an unregulated public-private mix [43].  
In 1996, the Government issued the Resolution No. 37/CP (dated 20 June 1996), approving two influential and important policy milestones affecting the pharmaceutical sector, namely: (1) Strategic orientation on people's health care to 2000 and vision to 2020; and (2) the Vietnam National Drug Policy. The Resolution was issued to improve the coordination of pharmaceutical policies with two basic goals: (1) ensuring regular and adequate supply of good quality medicines at affordable prices; (2) and ensuring a rational use of medicines. The Resolution 37 was strongly credited for its initial crucial support to the development of pharmaceutical industry substantially in all aspects of state management of pharmaceuticals including manufacturing and supply of drugs, quality assurance and safe and rational use of drugs [20].  
However, the negative side of the Resolution 37 is that the rapid shift to free market regulation made medicine prices unaffordable for many people. In 2005, after adjusting for Purchasing Power Parity, the prices for innovator brands and lowest-priced generic equivalents in the public sector were 46.58 and 11.41 times the international reference price respectively [44].  
Acknowledging the weaknesses of such legislation and regulations, MoH began drafting the first Pharmaceutical Law in 1997, which was finally enacted in 2005 after almost a decade of consultation, discussion, drafting and development. The new law provided a comprehensive legislative framework for all aspects of the pharmaceutical sector, including specific medicine pricing provisions [44].  
Overall, between 1990 and 2005, the pharmaceutical industry has partially undertaken a transition from state monopoly to a competitive market mechanism attracting public capital and foreign direct investments. In addition, the industry regulations gradually started to address the requests of the private sector allowing private pharmaceutical companies to be involved in import and export of medicines (subject to eligibility criteria in terms of capital, manpower, facilities, technology and customer relationship).