Duong Thi Mai Hoa - Managing partner Indusviet Legal LLC

Such development has its roots in many factors, among which the drawing-in of domestic and big foreign players in medicine and pharma along with their willingness to invest in Vietnam via mergers and acquisitions (M&A) is considered one of the key elements in creating breakthrough in growth.

The M&A trends in the previous decade seemed to reflect the focus and attention of major foreign pharmaceutical corporations and enterprises to investing and collaborating with local enterprises to improve and further develop such enterprises’ manufacturing lines and establish research and development centres for higher-quality pharma products and generic drugs for the public.

M&A in healthcare has effectively served as a pathway for foreign investors to distribute their products to the Vietnamese market in the context of the limited drug distribution rights according to the law.

By 2019, Vietnam witnessed a shift of the investment direction from foreign pharmaceutical corporations to medical, healthcare services, and insurance with major deals. And in the upcoming year, FV Hospital is expected to be taken over by Thomson Medical Group in an attempt to create a strategic position for the latter in Vietnam as well as create new advantages for the development of both parties.

Such dealings in medical and healthcare services started strongly in 2019, which effectively created momentum for the growing number of deals in such aspects. As a result, several experts have speculated that in the upcoming years, M&A will turn its focus on medical technology with the instalment and enhancement of applications for online appointment booking, online, and video check-ups with doctors as well as increasing the number of private specialised clinics and high-quality healthcare facilities.

From our perspective, such predictions may be formed and impacted by three main factors. The first is the ageing of Vietnam’s population. According to the United Nations Population Fund, Vietnam is among nations with the highest population ageing rate on a worldwide basis, with its percentage of senior citizens ranging from 60 years old and above to take up 11.9 per cent of Vietnam’s total population number in 2019.

Such a rate is predicted to grow to 25 per cent by 2050. As such, the ageing of its population has catapulted Vietnam to make certain changes to its insurance and healthcare policies, correspondingly, the need to take care of one’s health has, in general, risen significantly.

The second is overcrowded public hospitals. The emergence of private hospitals and clinics plays an important part in relieving the burden of public hospitals and simultaneously ensuring medical and healthcare services provided to the public are of high quality.

The third aspect is medical technology catching investors’ attention. With the growing popularity of online appointment booking and online doctor check-ups applications in developed countries, Vietnam has learned from such success stories to promote and encourage the digitalisation of healthcare services.

It is highly likely that in the coming years, M&A will place heavier emphasis on healthcare and medical services with an aim to satisfy the current need of the public.

From the perspective of corporate M&A rights, Vietnamese laws have recognised the right to conduct dealings of enterprises as well as the right to engage in transactions of investors in written legislation under various forms. Many forms have taken shape in practice, such as total acquisition, consolidation, and swap of shares. Such dealings are subjected to parallel legal procedures on registration at and/or the acceptance of competent authorities.

Nevertheless, Vietnam has yet to produce a specific legal framework for such activities in healthcare. This causes a great of confusion and hesitance for foreign investors executing their investment plans in Vietnam due to the complexity and ambiguity among Vietnam’s web of legal provisions and procedures.

Especially with medicine being a highly complex professional field, the implementation of the standard due diligence process in healthcare M&As can create invisible barriers to potential investors due to the uncertainty in the common legal framework in Vietnam coupled with the intricate, overlapping web of specialised legal provisions on medicine and pharmaceuticals, including limitations to market approach.

Illustrations of such limitations can be seen from foreign investors’ limited rights to drug distribution, drug processing, or technology transfer on drug manufacturing.

M&As play a crucial part in pushing for industry growth, and Vietnam’s medicine and pharmaceuticals in particular. Therefore, establishment of a comprehensive framework with specific legal instructions is needed for a strong foundation.