LAW NEWS

VIETNAM'S NEW PHARMACEUTICAL LAW

The National Assembly of Vietnam adopted a new Law on Pharmacy on June 4, 2016. The new law will take effect on January 1, 2017, replacing the current version which was passed in 2005. In an effort to update certain aspects of Vietnam’s legal framework to be more in line with international practices, the new pharmaceutical law is expected to provide quicker access to drugs for patients, increased consumer protection, and more incentives for local manufacturing of drugs.

Removing the Five-Year Rule for Clinical Trials

Under the Law on Pharmacy of 2005, which is currently in effect, before a new drug can be circulated in Vietnam, it must undergo clinical trials in Vietnam for registration purposes. The drug is only exempted from this requirement if it has already been circulated legally for at least five years in its country of origin. As a result, unless costly and cumbersome clinical trials are performed, Vietnamese patients have to wait at least five years to gain access to new drugs that have already been approved for circulation in other countries.

Under the new Law on Pharmacy, this barrier has been lifted. Accordingly, the clinical trial requirement would be waived for all new drugs, except vaccines, provided that they have sufficient clinical data on safety and efficiency and are circulated in at least one country anywhere in the world. With this change, Vietnamese patients will gain earlier access to new drugs, especially those that treat life-threatening diseases. Pharmaceutical companies will also benefit by not being forced to repeat clinical trials that have already been performed.

Expanding Retail of OTC Drugs

The new Law on Pharmacy allows certain non-prescription drugs, also known as over-the-counter (OTC) drugs, to be sold by a business establishment that does not have a certificate of eligibility for pharmaceutical business. These establishments include, among others, venues that have drug counters or cabinets, such as supermarkets.

Although the list of OTC drugs is not yet available and the relevant establishments still need to satisfy certain criteria on storage conditions and human resources, this is still a major change, as it appears likely to provide consumers with improved access to certain OTC drugs.

Acknowledging Patient Assistance Programs

Article 42 of the new law permits pharmaceutical companies to provide free drugs to health establishments through a patient assistance program. Previously, pharmaceutical companies always had to be concerned as to whether directly conducting such programs would be in breach of the law, as conducting promotional activities in relation to drugs targeting patients is prohibited in Vietnam.

Recognizing Clinical Pharmacology

The new Law on Pharmacy provides a separate chapter dedicated to clinical pharmacology, instead of scattered regulations as in the previous law. The purpose of this chapter is to ensure that drugs will be used in a reasonable, safe, and effective manner. While the contents of this chapter are cursory, its existence suggests that the government views clinical pharmacology and drug safety as an important issue.

Permitting Parallel Imports

The new Law on Pharmacy specifically allows parallel import of drugs as long as the price of the parallel-imported product is lower than the price of the original brand-name drug currently being circulated in Vietnam. Though the general concept of parallel imports is not new to the pharmaceutical industry in Vietnam, this is the first time that a regulation on parallel imports has been promulgated under a law.

Incentivizing Local Manufacturing

The new Law on Pharmacy clearly shows that national policy prioritizes the purchase of domestically produced products, including domestically manufactured generics and biosimilars, herbal and traditional medicines manufactured from domestic herbal ingredients, and drugs manufactured in domestic facilities meeting good manufacturing practice standards.

Moreover, the new law reflects a preferential treatment for domestically produced drugs over imported drugs that first appeared in the Law on Procurement. That is, when domestically produced drugs are available that satisfy the Ministry of Health’s requirements on medical treatment, price, and supply, the dossier for a drug tender must stipulate that tenderers are not allowed to offer imported drugs. As a result of those regulations, there are more foreign pharmaceutical companies considering the option of going “local.”

Summary

The new Law on Pharmacy represents a milestone achievement in healthcare in Vietnam and is likely to have a major impact on patients and pharmaceutical companies, with the key benefit for consumers being earlier access to pharmaceutical products, due to the removal of the clinical trial requirement. As the new Law on Pharmacy is of critical importance, the government will likely issue a large number of decrees and circulars that will guide the implementation of the new law when it takes effect next year.

PRODUCT LABELING IN LAOS - NEW REGULATIONS REQUIRE LOCAL LANGUAGE ON PACKAGING

The Laos government has recently stepped up its efforts to raise public awareness of health issues and the quality of products sold in the market. The impetus behind the government’s actions is largely attributable to one main factor — in Laos, most products still do not have labeling in the Laos language to provide consumers with information about the product, despite this being a requirement. In the past, the government generally turned a blind eye to this shortcoming in consumer protection, but this is now set to change.

Regulatory Framework

The Department of Internal Trade, Ministry of Industry and Commerce, recently issued Announcement 1285, restating the requirement to include labels in the Laos language on products. The Announcement also granted all business operators involved in the manufacturing, importing, wholesaling, distributing, and retailing of goods an extension, until August 29, 2016, to bring their labeling in line with the requisite regulations.

The Announcement follows Ordinance 2501/MoIC DDT concerning Product Labeling in the Laos Language, which the Ministry of Industry and Commerce introduced on December 16, 2015. The Ordinance entered into force this year on January 8, followed on March 11 by the Department of Internal Trade issuing Recommendation 0281/MoIC, which restated much of the Ordinance and provided additional information on how it should be implemented by affected business operators.

The main reason for the Announcement and the Recommendation, which restate the Ordinance, is that almost no changes were made in practice after the Ordinance entered into force. Unfortunately, the duties and responsibilities of the administration were not adequately clarified under the Ordinance, meaning that it could not be properly implemented. The private sector was also largely unaware of the Ordinance, and even those who were aware had generally not yet taken action to adhere to the product labeling requirements.

Purpose of the Ordinance

The Ordinance aims to help consumers gain a better understanding of the benefits and qualities of products before purchasing and using them. This helps consumers avoid purchasing low-quality or expired products, which could adversely affect their health, property, or the environment. In addition, under the Ordinance, domestic manufacturers and importers are encouraged to label their products in the Laos language prior to distribution. And the Ordinance also attempts to clarify the duties and responsibilities of the administration.

The Ordinance, rephrasing the Law on Consumer Protection 02/NA of 2010, also sets out the duties and responsibilities of local administrators in administering and monitoring product labels in the Laos language, and it includes product labeling obligations for manufacturers, importers, and distributors. It implores them to use product labels in the Laos language, particularly for products that could potentially endanger the life, health, and safety of consumers.

Product Labeling Requirements

Under the Ordinance, product labels must comply with Article 19 of the Law on Consumer Protection, which requires information on product labels regarding the type of goods; trademark registered by the manufacturer and the trademark used in trade by the importer in Laos; location of manufacture, the importer’s trading address in Laos, and the country of origin of the manufacturer, when this is not Laos; and price, amount, quality, weight and net weight, components and component percentage, directions for use, warnings, date of manufacture, and the expiration date.

The Recommendation of March 11 leaves open the possibility of adding more information requirements in the future. In line with Article 19 of the Law on Consumer Protection, descriptive product information must be accurate, and it must not exaggerate any benefits or qualities.

Penalties

The Law on Consumer Protection stipulates that any business operator supplying goods that are not labeled or that contain incorrect information will have their business license suspended. The Ordinance, however, specifies that business operators who are found guilty of infringement for the first time will not have their business license suspended immediately.

The Ordinance provides different levels of sanctions for different types of operators, with retailers being subject to more lenient treatment than manufacturers, importers, wholesalers, or distributors. First-time violators receive a notification of the violation and a warning. When a violation is found, business operators have one month to bring their product labeling in line with the requisite regulations. A failure to do so can result in fines of LAK 500,000 to LAK 1 million (USD 62 to USD 124) for retailers, and LAK 5 million to LAK 7 million (USD 620 to USD 871) for manufacturers, importers, wholesalers, or distributors.

If business operators continue to fail to adhere to the labeling requirements after the first and second violations described above, retailers are liable to a fine of LAK 1 million to LAK 2 million (USD 124 to USD 248) and they risk having their unlabeled goods seized. Manufacturers, importers, wholesalers, and distributors that are found guilty of the same offense are liable to even more severe penalties ranging from LAK 7 million to LAK 9 million (USD 871 to USD 1120) and the possibility of having their business license suspended for as long as the infringement continues.

Products Exempted from the Ordinance

The Ordinance does not apply to certain types of goods, and it also takes into account the final purpose of goods. Therefore, certain products in the Ordinance are exempted from labeling requirements, including goods temporarily imported for subsequent export, goods temporarily imported for exhibition before being exported back to the original country, and goods in transit; gifts and souvenirs; fresh food and condiments without packaging directly sold to consumers; and raw materials without packaging imported for manufacturing in an industrial factory or for construction.

For products that are imported before August 29, the number of products without a Laos language label to be sold in the Laos market needs to be reported to the administration, to allow them to be “distributable” in the country.

Despite these limited exemptions, the Ordinance and its related regulations provide for far-reaching requirements for all businesses in the consumer goods sector. Businesses should take action immediately to comply with the new requirements, while closely monitoring the practical enforcement by local authorities.

NEW REGULATIONS OF INVESTMENT LAW 2014

After 8 years of implementing the Investment Law 2005, on 26 November 2014, the National Assembly enacted Investment Law 2014 with 7 chapters and 76 articles (amending 31 articles, supplementing 9 new articles, and removing 31 articles), providing for the business investment activities in Vietnam and business investment activities from Vietnam to foreign countries, and taking effect on 1 July 2015.

Firstly, the most notable reform of the new Investment Law is the change in approach method for legislating. By this day, the approach method was positive list approach, meaning whatever is permissible, then it is recorded in laws. The new approach method is negative list approach, which is an advanced and transparent approach method as this means whatever is restricted, then it is recorded in laws; for the rest, corporations and investors are allowed to conduct business and investment activities in accordance with the laws.

Secondly, in respect of some basic definitions, the Investment Law 2014 amends a number of concepts in comparison with Investment Law 2005, and simultaneously supplements a number of definitions on the basis of codifying previous regulations. Specifically:

• The new Law amends the definition of “Business investment” that means the expenditure of capital by an investor to conduct business activities via establishment of an economic organization; investment by capital contribution, purchase of a portion of capital contribution or shares in an economic organization; investment on the basis of a contract or implementation of an investment project.
• The Investment Law 2014 confirmed that “Foreign investor” must be an individual with foreign nationality or an organization established in accordance with foreign laws conducting business investment activities in Vietnam. [So the Law ignored statelessness people => “Foreign investor” should be defined as an entity that is not national of Vietnam…].
• The new definitions of “new investment project” and “expanded investment project” are supplemented by the Law to create an important legal basis to apply the investment procedures and investment incentives in accordance with the provisions of Investment Law and relevant laws. Accordingly, a new investment project is the project conducted for the first time or project operating independently with the current project; an expanded investment project is the investment project developing the current project to expand the scale, increase the power and business capacity, renew technology, improve the quality of products, and reduce the environmental pollution.
• PPP Contract is supplemented as one of the investment forms in accordance with the new Investment Law. Specifically, an investor or project enterprise signing a PPP contract with competent State authorities for implementation of an investment project for new construction or renovation, upgrading, expansion, management and operation of technical infrastructure facilities or for provision of public service. The fields, conditions, and procedures for the implementation of investment projects in the form of PPP contract shall be detailed in the Government’s decree providing guidelines for the implementation of the new Investment Law.
• In addition, the Investment Law 2014 removed a number of definitions such as “direct investment” and “indirect investment”.

Thirdly, the Law also amends and supplements industries and trades in which business investment is prohibited, and list of industries and trades in which business investment is conditional. Article 6 of Investment Law 2014 provides for a total of 6 industries and trades in which business investment is prohibited, clarifying the provisions of conducting business freely of citizens. Therefore, the number of industries and trades in which business investment is prohibited has been reduced dramatically compared to previous regulations (from 51 to 6). The number of industries and trades in which business investment is conditional is also narrowed to 267 industries and trades (Appendix 4 of Investment Law 2014).

Fourthly, an amended content, which is welcomed by the investor, is investment procedures and State management on investment activities. Currently, the procedures for issuance of the Investment certificate apply too widely, including all foreign investment projects and several domestic investment projects, including even projects on conducting trade activities or providing ordinary services only and not falling into conditional investment fields. Meanwhile the current laws have detailed the business conditions for and management of these activities, the issuance of Investment certificates for the above-mentioned projects not only imposes more administrative procedures on the investors, but also leads to the duplication in the State management activities.

Investment Law 2014 uses the definition of “Investment registration certificate” alternating the ”Investment certificate” to reflect the purposes and nature of this document being the recogization for registration by the investor of the implementation of an investment project, but not the State’s confirmation that the investor has implemented the project.

Especially, the new Investment Law removes the request for issuing the Investment registration certificate in respect of investment projects, except for:

1. Investment projects of foreign investors; or
2. Investment projects of economic organizations, which are:

1. Corporations of which 51% or more of their charter capitals is held by foreign investor(s) or partnerships that have a majority of partners being foreign individuals;
2. Corporations of which 51% or more of their charter capitals is held by economic organization(s) prescribed in paragraph a above;
3. Corporations of which 51% or more of their charter capital is held by foreign investor(s) and economic organization(s) prescribed in paragraph (a) above.

When this organization makes investment in the establishment of an economic organization or investment on the basis of a BCC contract. The time-limit to implement the procedures for issuing Investment registration certificate is shortened from about 45 days as before to 15 days.

Fifthly, another new point compared to Investment Law 2005 is Investment Law 2014 supplements authority of the National Assembly in the assessment and making decision on investment policy, and at the same time provides clearly for the assessment and making decision on investment policy in respect of each kind of investment projects subject to such authorities of the National Assembly, Prime Minister and provincial People’s Committees.

Sixthly, with regard to investment incentives, the new Investment Law continuously confirms the principle of the investors’ entitlement to investment incentives when they have investment projects conducted in the preferential investment sectors and geographical areas. Accordingly, to ensure the unity of the legislation, the preferential investment sectors and geographical areas where investments are couraged as stipulated in the Investment Law shall be taken as the basis to apply the investment incentive forms stipulated in different laws (such as corporation income tax, import tax, and land use incentives, etc.).

However, Investment Law 2014 only provides for the sectors and geographical areas where the investments are encouraged and principle applicable to the investment incentives; and the incentive levels shall be detailed in the relevant laws. The preferential investment sectors are supplemented with projects on new energy, clean energy, production of industrial products that support development priority, industrial products that support high technologies, or main point mechanical products; and criteria for determining a number of projects in the preferential investment sectors are also particularly specified. In addition to the investment incentives based on sectors and geographical areas, Investment Law 2014 also supplements the policy on incentives and supports for a number of enterprises and investment activities such as policy on supporting small and medium-sized enterprises, and policy on encouraging investments in agriculture and rural areas.

Seventhly, according to Investment Law 2014, foreign investor may hold an unlimited portion of charter capital in an economic organization, except for the following cases: (i) the ratio of ownership of foreign investor in listed companies, public companies, securities trading organizations and other securities investment funds is subject to the laws on securities; (ii) The ratio of ownership of foreign investors in State enterprises, which conduct equitization or convert their ownership into another form, is subject to the laws on equitization and conversion of State enterprises; and (iii) The ratio of ownership of foreign investors not covered by paragraphs (i) and (ii) is subject to other relevant laws and international treaties to which the Socialist Republic of Vietnam is a member.

Eighthly, the new Investment Law re-confirms the principle of implementing the offshore investment activities, and simultaneously states that the State encourages the investors to carry out offshore investment activities to exploit, develop and expand the market; to increase the export potential for goods and services, to earn foreign currencies, to have access to modern technologies, to improve the ability of management and provide additional resources to socio-economic development of the country.

The offshore investment forms of the investors are also provided for more specifically than before, including 5 forms:

(a) Establishment of an economic organization in accordance with the laws of the investment recipient country;

(b) Performance of an offshore BCC contract;

(c) Purchase of the whole or a part of the charter capital of an offshore economic organization to participate in management and conduct business investment activities in a foreign country;

(d) Purchase or sale of securities or other valuable papers or investment via securities investment funds or other intermediary financial institutions in a foreign country; and

(e) Other investment forms in accordance with the laws of the investment recipient country.

Ninthly, Invesment Law 2014 also improves the provisions on compulsory purchase and requisition of assets of the investors in compliance with the Constitution, specifying the commitment of the State to equal treatment between investors in consistence with the commitments of Vietnam in international treaties.

Finally, to maintain the stability of activities of the investment projects conducted or enterprises operating before the effective date of the new Investment Law, the Law stipulates that the investors who are conducting investment projects in accordance with Investment license or Investment certificate issued prior to the effective date of this Law may continue to conduct investment projects in accordance with the issued Investment license or Investment certificate. If requested by the investor, the investment registration agencies shall issue a replacing Investment registration certificate to the investor.