The Pharmaceutical Industry in Vietnam: Why Foreign Investors Cannot Establish Companies, Only Representative Offices

The pharmaceutical sector is one of the most important and sensitive industries in Vietnam’s economy. With a population of over 100 million and an increasing demand for healthcare, the Vietnamese pharmaceutical market is considered highly promising. However, one common question many foreign investors raise is: why can’t they establish pharmaceutical companies in Vietnam, but are only allowed to open representative offices?

1. Pharmaceuticals as a “conditional business” sector

According to the 2020 Law on Investment, pharmaceuticals fall under the category of conditional business lines, as they are directly related to public health and national medical security. As a result, the State exercises strict control over the distribution, production, and circulation of medicines.

Activities such as importing, distributing, or retailing pharmaceutical products are only licensed to domestic enterprises that meet legal, infrastructural, and professional human resource requirements. This ensures effective monitoring of the origin, quality, and pricing of drugs on the market.

See also: 59 Conditional Business Sectors for Foreign-Invested Companies

2. Why foreign investors can only open representative offices

Instead of setting up pharmaceutical companies to engage in direct business, foreign investors in Vietnam are only allowed to open representative offices. The main reasons include:

• Protecting the domestic healthcare industry: Preventing foreign enterprises from dominating distribution channels and creating excessive competition for local companies.
• Price control and medical security: If foreign companies were permitted to directly sell drugs, Vietnam would face difficulties in regulating pricing and supply.
• Limiting product risks: The government requires all medicines on the market to go through strict quality control, avoiding the circulation of substandard imported drugs.

Representative offices of foreign pharmaceutical companies in Vietnam are not allowed to conduct business activities, but may only carry out functions such as:

• Market research and trade promotion.
• Product marketing and connecting with local distributors.
• Supporting drug registration procedures.

See also: Guide to Extending Representative Office Licenses in Vietnam

3. Impact on foreign investors’ strategies

The restriction to representative offices compels international pharmaceutical corporations to adapt their strategies when entering the Vietnamese market:

• Partnering with local businesses: Through joint ventures or exclusive distribution agreements.
• Indirect investment: Some companies choose to purchase shares or cooperate in research with Vietnamese firms.
• Technology transfer: Many international groups build joint-venture factories, which ensures compliance with regulations while leveraging domestic resources.

4. Future outlook

As Vietnam joins numerous free trade agreements (FTAs) and deepens international integration, the potential liberalization of the pharmaceutical sector continues to attract investor interest. However, due to its specific nature, the possibility of allowing the establishment of a 100% foreign-owned company in the pharmaceutical industry is very low in the short term. Instead, the government encourages public - private partnerships, technology transfer, and joint ventures as sustainable ways to develop the domestic pharmaceutical industry while ensuring national medical security.

Vietnam’s pharmaceutical industry has significant growth potential but is tightly regulated. This explains why foreign investors cannot directly establish companies, and are only permitted to open representative offices for market research and trade promotion. For deeper market involvement, practical solutions include collaborating with local enterprises, transferring technology, and pursuing indirect investment.