Vietnam – Healthcare and Medical Devices – Investment – With Outlook on the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

1. Vietnam – Healthcare and Medical Devices – Investment – With Outlook on the Major
Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement
Author: Dr. Oliver Massmann
A. Overview of the future of Vietnam´s healthcare sector
There is no denying that Vietnam truly is an attractive investment destination in South East Asia. It has
great potential to develop a qualitative, self-sustaining life science sector. Improvements on the healthcare
sector will lead to several benefits. With increasing focus on healthcare, manufacturing, service providers,
clinical research organizations and others are being stimulated. As a result, small and medium-sized
enterprises (SMEs) are boosted and exports could replace the need for foreign aid by attracting sustainable
FDIs and PPPs.
Of particular importance for a positive development is the close cooperation between the major stakeholders
from the private and public sector. In this process, certain core goals should be set. Significantly, it is
important to ensure swift, sustainable access to medical treatment and to urgently improve the quality of
the treatment process. High-quality domestic treatments not only improve patient satisfaction but also
improve one's own economy by counteracting outgoing medical tourism.
Furthermore, it should be ensured that the existing investors remain in Vietnam and new ones are pulled
ashore. To do this, investors must be shown that the Vietnamese market does not contain undetected risks,
but is stable and predictable. Further, integrate opportunities for collaborations and partnerships to develop
local capability.
B. Outpatient: Home care and home-treatment
One major issue regarding Vietnams Healthcare sector is the limited capacity in hospitals. There is a gap
between bed capacity and demand of inpatient treatment. The Minstry of Health has his hands full to
counteract the overloading of hospitals. Even institutions with larger bed capacity have eventually set up a
home care service to enhance the follow-up monitoring of chronic and long-term illnesses for patients that
have been released from the hospital.
The patients in Vietnam are financially overburdened with the costs of treatment, therefore affordable
treatment is needed. This however, has to be reached without the loss of quality. Especially the indirect
costs of healthcare, such as travelling, meals during hospitalization and loss of income during treatment
put patients and their families under enormous financial pressure. Due to the overload and the fact, that the
home care services are not fully developed yet, patients tend to take care for themselves with the help of
their family. This causes eventually potential additional health complications due to the lack of professional
follow-up. Furthermore, patients will return often back to the hospital and subsequently, in some cases,
with more severe conditions.
The healthcare expanses are moreover, as in almost every country, a significant burden for the household.
Overall, professional homecare programs and access to them should be simplified and improved to
counteract hospital congestion. This is especially necessary for the chronically ill. Home care and home-

2. treatment can help to reduce public spending on chronic diseases and thus spare the health budget. At the
same time, easier access helps the chronically ill.
C. Implementation
There are two major requirements for putting the whole thing into practice. Firstly, the creation of a clear
legal framework. It contains incentives for small and large scale investors and creates transparency. This
encourages multinational companies to invest and transfer their know-how to Vietnam, eventually
ultimately work closely with the local companies. Secondly, to streamline the administrative process to
shorten the process of delivering new, high-quality patient care solutions, and to respond to the growing
need for a growing Vietnamese population for rapid and sustainable access.
D. Medical Devices Industry Code of Conduct
Background of the Code of Conduct for medical devices are the various risks associated with the industry,
in particular unfair competition between industry players. The Code is intended to facilitate ethical
interactions among members of society who develop, manufacture, sell, distribute or distribute medical
technology in Vietnam and individuals and organizations that apply, recommend, buy or prescribe medical
technologies in Vietnam. The content of the Code of Conduct should focus on 1) strict compliance with
laws and regulations in the area; 2) prioritization of people and health and safety of patients and 3)
promoting scientific and educational activities to best benefit the patient.
For multinational companies, the compliance area is usually very pronounced and strict. It is therefore
particularly important to invest in an ethical business environment, especially when investing in high-risk
jurisdictions. The commitment to uphold high ethical standards would certainly bring about long-term
benefits for the health sector in Vietnam and attract more investors.
E. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP.
In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing
forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that
it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating
countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement
will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has
officially become the seventh member of the CPTPP.
The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods
and commodities to 100%. An increase of trade will have great influence to the health- and medical sector.
The agreement is suitable to support Public-Private-Partnerships (PPPs), which could lead to a positive
impact in development of innovative technologies of medical devices and facilitate the transfer of necessary
know-how. Lower or no trade tariffs can lead to lower import costs for the essential components of medical
devices. This, in turn, results in lower acquisition costs for the medical practices and hospitals, thus
eventually lowering the treatment costs.
The annexes of the CPTPP (TBT chapter) deal with specific challenges of trading regarding
pharmaceuticals, medical devices and technology products. The provisions commit the Members to define
what medical products are and when they are subject to the state laws. These information have to be

3. published. Furthermore, the annexes will help to optimize regulatory approvals and make the regulations
clearer. Authorization decisions are made based on certain risk-based criteria. Moreover, the regulations
help to ensure timely mitigation measures if a product application is not approved or is deemed deficient.
Due to this new transparency, and the tariff elimination, the CPTPP will bring great benefits for all traders
of medical devices, employees in the medical industry as well as for patients.
A specific example would be, that Canada currently faces tariffs of 7% imposed by Vietnam regarding
exports of life sciences products such as medicines in doses for retail sale. With the agreement to become
effective, these tariffs will be fully eliminated. As a result, Canada and other countries are exporting more
and more products to Vietnam, gradually improving equipment in Vietnam's medical facilities.
One another notable major trade agreement is the European Union Vietnam Free Trade Agreement
(EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam
and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well
as obligation to provide better conditions for workers. In addition, the EUVNFTA will boost the most
economic sectors in Vietnam. Both agreements promise great benefits for the health- and medicine sector.
To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam
agreed to take provisions on investment, for which Member State ratification is required, out of the main
agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and
IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come
into force in the second half of 2019.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty
and enforceability and protection for investors. These standards should be used by every investor. It is going
to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes,
the investors have the right to bring claims to the host country by means of international arbitration. The
arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the
TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and
“investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on
10th and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA), which is going to be part of
the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat
bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government
buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely
publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain
confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair
and objective principles, evaluate and award bids only based on criteria set out in notices and tender
documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing processes.
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under
omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam
LLC.
Thank you very much!