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Alliances aim to control drug distribution market

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Pharmaceutical companies are hiring retail chains to distribute their products, rather than develop distribution networks of their own.

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A drug store of An Khang  store chain

 

Sources said Domesco (DMC) plans to allocate distribution of supplement food to Digiworld, a digital device distributor. 

If the cooperation deal is realized, this will be the first time in the last 28 years since its establishment that the company has outsourced product distribution. The pharmaceutical firm has been distributing products through its network in 63 provinces/cities.

However, Domesco seems to have a bigger advantage in ETC, i.e. selling drugs as prescribed and bringing drugs to hospitals through bids. 

In 2016, the distribution channel saw a growth rate of 29 percent. The OTC (over the counter, through drugstores) reported a modest growth rate of 4.7 percent.

In the last three years, the ETC channel appears to have shrunk because of competition from foreign rivals. So Vietnamese pharmaceutical firms now have to expand the OTC channel.

A Vietnam Report survey said the two priority tasks for pharmaceutical firms are R&D and OTC channel development. 

OTC brings 82 percent of total revenue to Imexpharm, 90 percent to Hau Giang Pharmacy and 80 percent to Traphaco (TRA).

To increase its turnover by 10 percent, Domesco will have to boost sales through OTC, which is believed to be behind its decision to join hands with Digiworld.

A market analyst said only a few pharmaceutical firms, namely Hau Giang Pharmacy and Traphaco, can do professional marketing and organize a distribution network in a professional way. 

The former owns a network with 12 subsidiaries and 24 branches throughout the country. Meanwhile, the latter has had 24,000 drugstores where it not only sells its products, but also distributes products of Natural Factors and Novatis.

However, developing distribution networks is not what all pharmaceuticals usually do. They tend to use distribution services from partners. 

In Vietnam, there are about 300 foreign drug distributors. DKSH Holdings, Zuellig Pharma, Mega Products and Diethelm hold larger market share. Mesa, which distributes Blackmores’ products, is also a well known name.

Many Vietnamese companies have also joined the drug distribution market, namely Vimedimex, Dapharco, Khuong Duy, Hapharco, Eco and Sapharco. 

However, the companies are only in charge of selling products, and they don’t undertake marketing strategies, advertisements and post-sale works as foreign companies do.

Regarding Digiworld, the distributor has contracts with Vinamedic (Kingsmen), Thong Nhat Pharmacy and Phu Bao (medical masks). 

Sources say Digiworld is expecting a contract on distributing and marketing products for a large Singaporean supplement food manufacturer.

FPT Retail and The Gioi Di Dong, hi-tech product distribution chains, have also joined the drug distribution market.

 

Source: VietNamNet

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