Decree No. 120/2004/ND-CP On Management of Prices for Medicines for Prevention and Treatment of Diseases in Humans

DECREE

On managing drug prices for disease prevention and treatment in humans

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THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Based on the Law on Health Care for the People dated July 11, 1989;

Based on the Price Ordinance dated April 26, 2002;

Based on the Ordinance on Administrative Violation Handling dated January 7, 2002;

At the proposal of the Minister of Finance,

DECREE:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation.

This Decree stipulates on managing drug prices; displaying drug prices; stabilizing prices of certain types of drugs; inspecting, checking, and handling violations of regulations on managing drug prices for disease prevention and treatment in humans.

Article 2. Scope of Application.

1. This Decree applies to organizations and individuals, both domestic and foreign, permitted to produce, import, and trade drugs for disease prevention and treatment in humans, and healthcare facilities in Vietnam (hereinafter referred to as facilities).

2. In cases where international treaties signed or acceded to by the Socialist Republic of Vietnam have provisions different from those of this Decree, the provisions of such international treaties shall be applied.

Article 3. Drugs for disease prevention and treatment in humans as defined in this Decree are finished products that have been approved for circulation and use in Vietnam by the Ministry of Health.

Article 4. Drug price management is carried out according to the following principles:

1. The State respects the right of facilities producing, importing, and trading drugs to set their own prices and compete on price in accordance with the law, except for drugs whose prices are set by the State.

2. The State uses necessary measures to stabilize prices, set prices for some essential drugs to protect the rights and legitimate interests of consumers, of facilities producing, importing, and trading drugs, and the interests of the State.

3. Implement national policies on drugs, enhance the capacity to produce and supply drugs to meet domestic needs and for export; create conditions for the development of the Vietnamese pharmaceutical industry, contributing to implementing policies on caring for and protecting people's health.

Article 5. Definitions.

The following terms shall be understood as follows:

1. Drugs for disease prevention and treatment in humans are products derived from animals, plants, minerals, chemicals, or biotechnology that are formulated for human use to prevent diseases, treat diseases, restore, adjust bodily functions, alleviate symptoms, diagnose diseases, restore or improve health, numb a part or the whole body, affect the reproductive process, or change body shape.

Finished drugs are forms of drugs that have undergone all production stages according to required procedures and are permitted for use and circulation in Vietnam.

2. Price declaration is the act of recording and reporting to competent authorities the correct import prices, wholesale prices, and retail prices of each type of drug in accordance with the provisions of this Decree and other relevant laws.

3. Retail markup is reasonable costs and profits for the retail stage.

4. Wholesale markup is reasonable costs and profits for the entire wholesale stage.

5. Retail price range is the permissible limit for the retail price of certain essential drugs for disease prevention and treatment in humans.

6. Displaying drug prices is the act of publicly displaying drug selling prices by printing or affixing or writing the selling price on the packaging containing the drug or outer packaging of the drug; publicly announcing on boards or papers at drug selling locations.

7. Abnormal drug price fluctuations are sudden increases or decreases in drug prices due to natural disasters, epidemics, or other unusual circumstances significantly affecting economic and social development.

Chapter II

MANAGEMENT OF DRUG PRICES

Article 6. Groups of drugs subject to State price management

The State manages drug prices in three groups as follows:

1. Group of drugs ordered by the State and priced by the State;

2. Group of drugs purchased by healthcare facilities for free provision to eligible recipients, social welfare recipients, partial payment patients, and health insurance patients;

3. Group of drugs priced by facilities themselves.

Article 7. Management of prices for certain medicines ordered and priced by the State.

1. The Minister of Finance shall stipulate:

a. Specific prices for types of medicines ordered by the State and paid for from the State budget without tendering or auctioning;

b. Retail price ranges for essential medicines to prevent and treat diseases for people, suitable for each period according to the list prescribed by the Minister of Health.

2. The Chairman of the People's Committee of provinces and centrally governed cities shall stipulate specific prices for some medicines provided free of charge to beneficiaries of subsidized policies as prescribed by the Government.

3. Adjustment of prices set by the State.

When factors forming prices fluctuate significantly affecting the production and business activities of entities, competent authorities with pricing authority must promptly adjust the specified prices. In cases where prices are not adjusted, financial and monetary measures and other necessary measures within their authority shall be applied; if exceeding their authority, they shall report to the Prime Minister for decision.

Article 8. Price management of medicines purchased by healthcare facilities for use by free-of-charge recipients, social policy beneficiaries, partial hospital fee payers, and health insurance.

1. Medicines purchased by healthcare facilities for provision to free-of-charge recipients, social policy beneficiaries, partial hospital fee payers, and health insurance must be procured through tendering as prescribed by law. The winning bid price must be lower than the prevailing retail price of such medicines on the market at the same time and uniformly applied across all public healthcare facilities in the province.

2. The Ministry of Health shall take the lead and coordinate with the Ministry of Planning and Investment and the Ministry of Finance to provide detailed guidance on tendering for the types of medicines prescribed in Clause 1 of this Article.

Article 9. Price management of medicines self-priced by entities.

1. Entities may self-price types of medicines permitted to circulate in the Vietnamese market, except those ordered and priced by the State and medicines purchased by healthcare facilities as prescribed in Articles 7 and 8 of this Decree.

2. Medicine producers shall base their self-pricing of medicine sales on production costs and budget payments, ensuring prices are competitive with the market but not higher than the selling prices of similar medicines in countries with comparable healthcare and trade conditions to Vietnam. Medicine producers must declare the wholesale price of such medicines when registering them for circulation with the competent state management agency.

3. Medicine importers shall base their self-pricing of medicine sales on import costs and budget payments, ensuring prices are competitive with the market and must fully declare import prices, supplier selling prices in several regional countries, and projected retail prices in Vietnam when submitting applications for registration of foreign-produced medicines (including importers without registration numbers in Vietnam) with the competent state management agency.

4. Wholesale medicine sellers shall base their pricing of wholesale medicine sales on the purchase value recorded on invoices issued by the Ministry of Finance and the wholesale markup rate prescribed by the Ministry of Finance. Wholesale medicine sellers must comply fully with regulations on invoice and documentation usage for goods circulating in the market as prescribed by the competent state agency.

5. Retail medicine sellers shall base their pricing of retail medicine sales on the purchase value recorded on invoices issued by the Ministry of Finance and the retail markup rate prescribed by the Ministry of Finance, ensuring prices are competitive with the market. Retail medicine sellers must comply fully with regulations on invoice and documentation usage for goods circulating in the market as prescribed by the competent state agency and may only sell prescription medicines as directed by doctors, except for over-the-counter medicines as prescribed by the Ministry of Health.

Article 10. Price Stabilization for Medicines.

When the prices of certain essential medicines on the market fluctuate abnormally nationwide or in specific regions, affecting the interests of patients, competent state agencies shall implement price stabilization measures as prescribed in Decree No. 170/2003/NĐ-CP dated December 25, 2003, detailing the implementation of certain provisions of the Ordinance on Prices.

Chapter III

PUBLIC DISPLAY OF MEDICINE PRICES

Article 11. Public Display of Wholesale Prices.

1. Medicine production facilities, importers, and wholesale sellers must display the wholesale prices of each type of medicine at the wholesale selling location and may not sell at a higher price than that displayed.

2. Medicine prices shall be displayed by writing them on a board or paper placed in a convenient location at the medicine selling point.

Article 12. Public Display of Retail Prices.

1. Retail medicine sellers must display the retail prices of each type of medicine and may not sell at a higher price than that displayed.

2. Medicine prices shall be displayed by printing, writing, or affixing the retail price on the packaging containing the medicine or on the outer packaging of the medicine.

Chapter IV

INSPECTION, AUDIT AND VIOLATION HANDLING

Article 13. Inspection and Supervision of Medicine Price Management Regulations Implementation

1. The Ministry of Finance, the Ministry of Health, and relevant ministries within their respective duties and powers shall organize inspections, supervision, or coordinate inspections and supervision and handle violations of national regulations on medicine price management at production facilities, importers, wholesalers, retailers, and treatment facilities throughout the country according to the law.

2. People's Committees at all levels within their respective duties and powers shall organize inspections, supervision, or coordinate inspections and supervision and handle violations of national regulations on medicine price management at production facilities, importers, wholesalers, retailers, and treatment facilities in their localities according to the law.

Article 14. Administrative Sanctions for Violations in Medicine Price Management.

1. A fine of VND 500,000 to VND 2,000,000 for the act of violating the price declaration regulations with less than 10% of the types of medicines of the facility.

A fine of VND 2,000,000 to VND 5,000,000 for the act of violating the price declaration regulations with 10% or more of the types of medicines of the facility.

Remedial Measures: Compel compliance with the price declaration regulations of the competent authority for the violation stipulated in this clause.

2. A fine of VND 5,000,000 to VND 10,000,000 for the act of incorrectly defining the price range or surplus amount as prescribed by the competent authority.

Additional Sanction Form: Suspension of the right to use business licenses or professional certificates for a limited period for facilities and individuals who violate the regulations stipulated in this clause once within a year. Suspension of the right to use business licenses or professional certificates indefinitely for facilities and individuals who violate the regulations stipulated in this clause two or more times within a year.

3. A fine of VND 10,000,000 to VND 20,000,000 for the act of engaging in monopolistic price fixing.

Additional Sanction Form: Suspension of the right to use business licenses or professional certificates (for a limited or indefinite period) for facilities that violate the regulations stipulated in this clause two or more times within a year.

4. Other administrative violations in the field of medicine price management shall be subject to administrative sanctions as prescribed in the Government's Decree on Administrative Sanctions for Violations in Pricing.

5. Specific sanctioning authority, procedures, and processes shall be carried out according to the Administrative Violation Handling Ordinance 2002 and related legal documents.

Chapter V

IMPLEMENTING PROVISIONS

Article 15. Effective date of implementation:

This Decree shall take effect fifteen days after its publication in the Official Gazette.

Article 16. Organization for implementation:

1. The Ministry of Finance shall take the lead and coordinate with the Ministry of Health and relevant ministries and sectors to guide the implementation of this Decree.

2. The Ministry of Health:

a. Take the lead and coordinate with the Ministry of Planning and Investment and relevant ministries and sectors to develop a project on measures to limit and eliminate monopolies of foreign pharmaceutical companies for submission to the Prime Minister for approval.

b. Provide specific guidance on prescribing drugs by their generic names.

c. Take the lead in developing and implementing a project to reorganize the distribution network for medicines used in treating domestic patients.

d. Study and develop mechanisms and policies to create favorable conditions for the Vietnam Pharmaceutical Manufacturers and Traders Association and the Vietnam Pharmacists Association to base their strategic development plans for the pharmaceutical industry at each stage, guiding members to organize production and trade of medicines in a manner that ensures sufficient quantity and variety of medicines for the market, avoiding situations where there is either excessive surplus or shortage of medicines leading to instability in the medicine market.

Article 17. Responsibility for Implementation

The Ministers, Heads of Ministries equivalent to ministries, Heads of government agencies, and Chairmen of provincial people's committees directly under the central government shall be responsible for implementing this Decree./.