The document discusses opportunities for healthcare sector investment and public-private partnership (PPP) hospital projects in Vietnam. It notes Vietnam's growing healthcare market and need for investment in medical infrastructure. PPP projects are an allowed investment model, with criteria including large-scale, economically viable projects that take advantage of private sector expertise. The document also reviews regulations related to importing medical devices and procurement of medical supplies through public tenders.

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DUANE MORRIS VIETNAM LLC
Healthcare Sector - Legal aspects for
delivery of goods / services and
project development
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Agenda:
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• Regulations on Import of Medical
Device
• Rules for Procurement by Tender
• Opportunity in Public Private
Partnership (PPP) Hospital Project
• Practical Issues in Contract Negotiation

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REGULATIONS ON IMPORT OF
MEDICAL DEVICE
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Regulations on Import of Medical Device
• Overview of Medical Device Market in Vietnam:
 In 2013, an estimated 92% of the medical device market was supplied by
imports, and the sector is growing rapidly
 Japan, USA, Singapore and China are the leading suppliers, accounting for
50% of imports in 2012
 Local production is limited to basic items such as syringes and hospital beds
 The value of exports reached US$536.4mn in 2012, with 32.5% of medical
products exported to Japan
 The value of exports has been growing fast, as overseas companies, mainly
Japanese, use the country as a manufacturing base
 Vietnam receives a large amount of international aid in the form of loans and
donated medical equipment. A number of small projects are currently taking
place in Vietnam, including those funded by the World Bank and the EU
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Source: Espicom

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Regulations on Import of Medical Device
• Regulatory framework on Medical Device:
 With a population of more than 90 millions and high demand for
treatment using high-end medical devices combined with the
limited support
⇒ Vietnam should prioritize to provide a clear and consistent legal
framework for import of medical device
 BUT current regulations provide:
 Only basic guidance to importer and distributor of medical
devices and mostly guide the paperwork and registration
procedures with the managing state authorities
 Distinction between imported medical devices and locally
manufactured medical devices by applying for a different
regulatory regimes between them
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Regulations on Import of Medical Device
• Regulatory authority of Medical Device Import:
 MINISTRY OF HEALTH (MOH)
 MEDICAL DEVICES AND FACILITIES SERVICE
DEPARTMENT
• Major legislative frameworks on Medical Device Import:
 Circular No. 07/2002 of the MOH guiding the registration for the
circulation of medical device and facilities
 Circular No. 24/2011 of the MOH guiding the import of medical
devices
 Decision No. 36/2006 of the MOH promulgating the Regulations
on the clinical trials of medical devices
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Regulations on Import of Medical Device
• Definition of Medical Device:
Art 02 of Circular No. 24/2011 of the MOH:
Medical device is types of equipment, devices, materials, chemicals, including
necessary software which are used alone or in combination, for human for
purpose of:
a) Preventing, monitoring, diagnosing, treating, alleviating disease or
compensating for an injury.
b) Investigating, replacing, modifying and supporting for surgery during the
medical examination and treatment;
c) Supporting and sustaining life;
d) Controlling contraception;
dd) Disinfecting medical devices (excluding chemicals, insect and bacterium
killing products for family uses and health);
e) Specialized transport for health activities;
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Regulations on Import of Medical Device
• NOTE: Current definition of a medical device largely
overlaps with the one of a medical product
• Definition of medical product:
Article 2.1 Circular No. 22/2009 of the MOH: medical product
means a substance or a mixture of substances for human use for disease
prevention, treatment or diagnosis or adjustment of bodily physiological
functions, including finished drugs, drug materials, vaccines and
biologicals, except for functional foods
• No further guidance on the distinction between medical device
and medical product
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Regulations on Import of Medical Device
• What the manufacturer should do: It has to rely on the opinion of
the bodies in charge of registration of such product
 BUT no guarantee for a consistent opinion because medical device
and medical product are registered with 02 different bodies under the
MOH (i.e the Medical Device and Facilites Service Department and
the Drug Administration of Vietnam, respectively)
• Unlike in the EU, Vietnam has no doctrine of primary use or
intended use by the manufacturer.
• In practice, in case of doubt, the importer should submit a
application dossier as a medical device and wait for the
decision of the authority
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Regulations on Import of Medical Device
• Requirement for the Importer of Medical Device:
 MUST obtain an Enterprise Registration Certificate or
Investment Certificate for trading or importing medical
devices in Vietnam
 MUST obtain an Import Permit (per each product) to import
medical device into Vietnam
 MUST satisfying the conditions of technical requirements, site
facilities and personnel for medical device trading or importing
 Appointment of a qualified chief technology officer (E.g. Having a
college degree in biomedical electronic or biomedical physic)
 Warehouse space to store safely the equipment: Guaranteeing
appropriate protection, means of fire prevention and fighting
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Regulations on Import of Medical Device
• Classification of Medical Device subject to Import Permit:
 By the list of imported medical device subject to Import Permit already
approved for circulation: The approved list includes 50 types of medical
devices in 03 groups: diagnostic device, treatment device and other devices
 Not under the approved list but imported into Vietnam for the first time:
Subject to the Import Permit if such device use new methods of diagnosis or
treatment
The registration of such device must include clinical evaluation results
assessed by the MOH unless being recommended by an international
organization
• Device not subject to Import Permit can be imported if satisfying the
requirement of application dossier for import
• NOTE: Prohibited to import second-hand consumer medical apparatus
under the list of apparatus prohibited to import by the MOH
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Regulations on Import of Medical Device
• Requirements for Import Permit:
 Each Import Permit for each device
 Notable documents in the application dossier :
 Legitimate and valid ISO 13485 or ISO 9001 certification
 Legitimate and valid Certificate of Free Sale (CFS) for imported medical
device in the producing countries, or Certificate to Foreign Government
of FDA, or CE Mark Certificate
 Legitimate and valid authorization letter of producing firms or legal
distributors for the agencies which are allowed to import and distribute
the medical devices in Vietnam
 Import Permit is valid for 01 year and non renewable
 The MOH will review required annual reports sent by the importer
and use it as the basis for recommending renewal of each Import
Permit
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RULES FOR PROCUREMENT
BY TENDER
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Rules for Procurement by Tender
• Overview of Procurement by Tender in Vietnam:
 Being a high growth economy and an emerging market, Vietnam
has been investing heavily in infrastructure and used much budget
for public procurement
 Many opportunities for local and foreign firms to do business with
government authorities and state owned enterprises
 BUT public procurement is one of the sectors most susceptible to
corruption in Vietnam
 Officials in charge of equipment purchase contracts can solicit for
kickbacks or personal commissions
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Rules for Procurement by Tender
• Overview of Procurement by Tender in Vietnam:
 The number of competitive tenders in the total value of awarded
government procurement contracts declined significantly
 Vietnam’s procedure for choosing international bidders create
uncertainty with lethal loopholes
 Who benefits from corruption and non-transparency in government
procurement in Vietnam: Chinese contractors!
 90% of power, mining, manufacturing, ferrous and chemical projects
of state-owned companies in Vietnam are awarded to Chinese
contractors
 Example of China State Construction Engineering Corp: CSCEC
keeps winning important contracts although it has a poor track record
and has even been blacklisted by the World Bank due to bribery
charges
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Rules for Procurement by Tender
• Major regulatory framework for public procurement by tender in
healthcare sector:
 Law No. 61/2005/QH11 on Tender as amended by Law No. 38/2009/QH12
 Decree No. 85/2009 of the Government guiding the implementation of Tender Law
as amended by Decree No. 68/2012
 Joint Circular No. 01/2012/TTLT-BYT-BTC of the MOH and the Ministry of
Finance guiding tender of drugs procurement in the medical facilities
 Circular No. 11/2012/TT-BYT of the MOH providing guidance on preparation of
tender invitation documents for drug purchase in medical facilities
• The law on public investment and procurement is on the process
of drafting and pending for issuance
• Vietnam has not yet signed WTO’s Agreement on Government
Procurement
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Rules for Procurement by Tender
• Principles of Vietnam’s tender legal framework:
 Assurance of competitiveness in tender process
 Prohibited acts in tender: Prohibited to give, offer, receive or
request anything of value resulting in impartial behavior, or
to exert personal influence to distort the bidder selection
process. Collusion to alter bids or to arrange winning a bid
award is also prohibited
 Provision on currency to be used in tender (stipulated in the
tender invitation documents on the principle of one currency
for one specific volume)
 All domestic costs must be quoted in Vietnamese Dong
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Rules for Procurement by Tender
• Type of Contract under Tender law:
 Lump-sum contract
 Unit price contract
 Time-based contract
 Percentage contract
• Negotiation and signing of a tender contract: Must base on
 Results of the tender
 Model contract provided in the tender invitation document
 Requirements of the tender invitation document
 The tender and any documents clarifying the tender provided by the
selected contractor,
 The contents that need to be negotiated and finalized by the parties
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Rules for Procurement by Tender
• Steps of contractor selection:
 (i) Assessing the competence and experience of contractors
 (ii) Evaluating technical expertise
 (iii) Appraising prices.
• Tender applications that meet the criteria for (i) and a minimum score for
(ii) (70-80%, depending on the complexity of the contract) can enter the
third phase, the basis for ranking and choosing contractors
=> Contract prices matter substantially, especially compared with
technical expertise
• Tender Price Floor: Not yet regulated under applicable laws
=> The Chinese contractors tend to charge unbelievably low prices that make
little economic sense and cast aspersions on such aspects as technical
competence, financial might, working conditions and so on. The repercussions
can be grave, as evinced by aforementioned projects
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Rules for Procurement by Tender
• Drug Procurement by Tender in Vietnam: Same practice of other
Pubic Procurement by Tender: corruption and non-transparency. The
price of drug procurement by tender always raises the most concern
 Principles of Drug Procurement by Tender:
 The drugs tender package will be divided according to using needs
 Drug tender packages by generic name
 Drugs tender package by of proprietary- name
 Oriental drugs tender packages or drugs from medical herbs
 Price of tender packages: The total value of drugs in the package.
Prices of drugs used in the tender plan shall not be higher than the
maximum price of each drug that had been published in the nearest
time of the MOH
 Contractor selection forms: Open tender in nationwide
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Rules for Procurement by Tender
• Principles of Drug Procurement by Tender:
 Method of tender: 01 package of documents
 Time for organizing selection of contractors: Comply with the tender law
 Form of contract: Comply with the tender law
 Review and approval for winning bid:
 For drugs tender packages by generic name: Each group of drugs is considered for bid
winning only 01 type of drug meeting the technical requirements and quality specified in
the tender documents and with bid price evaluated as lowest in the group of drugs
 For drugs tender packages under the proprietary name and oriental-drug tender packages
or drugs from the pharmaceutical herbs: Each drug shall be considered bid winning only
01 type of drug with bid price evaluated as lowest in the items meeting the technical
requirements and quality specified in the tender documents
 Giving priority winning selection of drugs produced domestically with similar quality and
price not higher than drugs imported at the time of tender
 Tender winning price of each drug item: Not higher than approved price
of such drug item in the tender plan
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Rules for Procurement by Tender
• Trans - Pacific Partnership – Door of Public Procurement in
Vietnam will open within next year
 Trans-Pacific Partnership (TPP) is one of the most ambitious free trade
agreements between 12 countries Australia, Brunei Darussalam, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand, Peru, United States,
Singapore and Vietnam where is the home of 40% of the world’s population,
produces nearly 60% of global GDP
 TTP require to open government procurement contracts to businesses
operating in any of those member countries
 The procurement rules through TPP prohibit the member country from
applying any restrictions imposed on the financial assistance that one level
of government provides to another level of government
 Vietnam hopes to conclude TPP in first half of 2014
 TPP will change level playing field dramatically
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OPPORTUNITY IN PPP
HOSPITAL PROJECT
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Opportunity in PPP Hospital Project
• Overview of Healthcare Service Market in Vietnam:
 A great potential with an average annual growth rate of 10.3% and
total healthcare spending will be estimated at about US$11.3 billions
by 2015 from US$7 billions in 2010
 Vietnam has 20.5 hospital beds for every 10,000 citizens - low
compared to the 33 beds considered to be the minimum level set by
the World Health Organization
 Private hospitals represent 12% of the total number of healthcare
facilities nationwide and will grow dramatically
 The overcrowded hospital sector is in great need of investment
 Vietnamese government provides a range of clear incentives into
healthcare sector: A corporate income tax of 10%, tax exemption over
the first 04 years and 50%subsequent tax break in the following years
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Opportunity in PPP Hospital Project
• Overview of Healthcare Service Market in Vietnam:
 A premium investment area when the demand for high-grade
healthcare services will inevitably increase
 Foreign investor eyeing on Vietnam’s healthcare market
 Recent notable foreign investment deals:
 The Chandler Corporation, a Singapore based company acquired 80% stake with
a price US$99 million in Hoan My Medical Corporation, the largest private
hospital group
 The Triple Eye Infrastructure Corporation, a Vancouver-based healthcare
developer invest US$160 million in building a 200-bed international hospital
 United Lab, a Filipino pharmaceutical firm, with existing manufacturing
facilities in Vietnam to joint venture with High Precision Diagnostic, a fellow
Filipino company for opening specialist diagnostic and testing clinic
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Opportunity in PPP Hospital Project
• Investing in Healthcare sector in Vietnam: Any opportunity
for PPP projects?
• Regulation on PPP projects: Decision No. 71/2010/QD-TTg on
Pilot Investment under the form of PPP took effective in January 2011
• Criteria for implementing project under the PPP form:
 Important and large-scale, and urgently required for development of the economy
 Able to generate a reasonable return on capital to the investor
 Able to take advantage of the technology, managerial and operational experience, and
effectively utilise the financial capacity of the private sector
 State capital cap a maximum of 30% of the total investment level
 State contribution under the form of one or more of (i) direct state capital; (ii)
investment incentives; (iii) relevant financial policies
 Investment has a senior debt to equity ratio of 70:30
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Opportunity in PPP Hospital Project
• Status of PPP projects: 24 potential and ambitious PPP projects in
various transportation infrastructure, power and social sectors are
preliminarily listed
• Notable proposed PPP projects in Hospital Sector:
 Phu Xuyen General Hospital: Located in Phu Xuyen district- Hanoi
with capacity of 1,000 beds with an investment of US$161 million under
a Build-Transfer contract
 Gia Lam General Hospital: Located in Gia Lam district- Hanoi with
capacity of 1,000 beds with an investment of US$161 million under a
Build-Transfer contract
 However, the first and most feasible PPP formed project in Vietnam,
Dau Giay - Phan Thiet highway project is still in preparation stage and
hoped to commence the construction next year
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Opportunity in PPP Hospital Project
• The status of 02 PPP Hospital projects is still ambiguous
• PPP projects in Hospital Sector: Will still be attractive?
 YES, still having many opportunities. BUT waiting for new reform of PPP
regulatory framework and more opened and active commitment from the
Government
• Why the PPP projects can not be implemented?
 Current PPP framework considered as pilot: Current framework sets out larger
policies and legal concept but does not contain detailed provisions for implementation
 The Government's lack of experience and shortage of funds also prevented investors,
especially foreigners, from taking part in PPP projects
 The state contribution limitation to a 30 per cent of the total investment capital of a
PPP project is an obstacle for the implementation of PPP projects
 Uncertain whether the cost of land rental, land clearance and compensation to be
counted with the 30 per cent or state-owned enterprises’ capital contributed to the
PPP project would be considered as a part of the state contribution
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PRACTICAL ISSUES IN
CONTRACT NEGOTIATION
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Practical Issues in Contract Negotiation
• Foreign exchange control:
 Vietnam Dong is not freely convertible, subject to control by the State Bank of
Vietnam (SBV)
 Must specify the cost of all transactions, “payments, price listings, advertisings,
evaluating and quotations” in VND
• Governing laws:
 The law of Vietnam requires to be governed in case having foreign element (e.g.
dispute relating to rights to real estates in Vietnam, dispute of transportation contract
with the transporter having head office or branch in Vietnam)
• Dispute settlement:
 In principle, foreign arbitration is permitted for contracts between foreign and
domestic entities
 However, recognition and enforcement of arbitration awards in Vietnam is very
arduous
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Practical Issues in Contract Negotiation
• Competition Law Issues:
 Competition Law prohibited a number of restrictive agreements and
practices, irrespective of the market share of the involved parties:
 Preventing, restraining or disallowing the entrance of business development of
competitors
 Exclusion agreement
 Bid rigging
 Agreement prohibited when the combined market share of
participating enterprises makes up 30% or more of the market:
 Price Fixing
 Market allocation
 Restricting or controlling quantities or volumes
 Imposing unfavorable conditions on the others
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