CIRCULAR

PROVIDING GUIDANCE ON THE EXPERIMENT IN DRUG PRICE MANAGEMENT BY MAXIMUM WHOLESALE SURPLUS IN A CYCLE, APPLICABLE TO THE DRUGS COVERED BY THE STATE BUDGET AND HEALTH INSURANCE

Pursuant to the Law on Pharmacy No. 34/2005/QH11 dated June 14^th 2005 of the National Assembly;

Pursuant to the Government's Decree No. 63/2012/ND-CP dated August 31^st 2012, defining the functions, tasks, powers and organizational structure of the Ministry of Health;

Pursuant the Government's Decree No. 79/2006/ND-CP dated August 09^th 2006, detailing the implementation of the Law on Pharmacy;

Following the direction from the Deputy Prime Minister Nguyen Thien Nhan in the Official Dispatch No. 1758/VPCP-KGVX dated March 19^th 2012 of the Government Office, approving the experiment in drug price management by maximum wholesale surpluses in a cycle at the request of the Ministry of Health;

At the request of the Director of the Drug Administration of Vietnam,

The Minister of Health issues a Circular providing guidance on  the experiment in drug price management by maximum wholesale surpluses in a cycle, applicable to the drugs covered by the State budget and health insurance.

Chapter I

GENERAL REGULATIONS

Article 1. Scope of regulation

This Circular provides guidance on the experiment in drug price management by maximum wholesale surpluses in a cycle, applicable to the drugs covered by the State budget and health insurance in to the List of experimented articles specified in Article 4 of this Circular.

Article 2. Subjects of application

This Circular is applicable to Vietnamese organizations and individuals licensed to produce, import, and sell wholesale drugs; state-owned medical facilities and Services of Health that hold centralized biddings in this experiment; other organizations and individuals relevant to the bidding for procurement of drugs held by the state-owned medical facilities in this experiment.

Article 3. Interpretation of terms

1. Import price is the price inclusive of the drug value according to the sale price fixed by the exporting country, the insurance cost, and freight charge from the exporting country to a Vietnam’s port (hereinafter referred to as CIF price), and exclusive of import tax (if any).

2. Prices of domestic drugs are the full prices determined in accordance with the Regulation on valuation of property, goods and services, enclosed with the Circular No. 154/2010/TT-BTC dated October 01^st 2010 of the Ministry of Finance, and equal to the direct cost of materials and fuel plus (+) direct labor cost plus (+) general production expense plus (+) financial expense (interest on loans, if any) plus (+) administrative expense plus (+) selling expense minus (-) costs distributed to secondary products (if any).

3. Original drug values are used to indicate maximum wholesale surpluses in a cycle: for imported drugs, it is the CIF price in VND; for domestic drugs, it is the applicable cost declared by the domestic producers or outsourcing organizations, plus (+) 20% of the cost.

4. Maximum wholesale surplus in a cycle (hereinafter referred to as maximum wholesale surplus) is the maximum permissible difference between the wholesale price of a drug being supplied to state-owned medical facilities and their original values.

5. The exchange rates for calculating CIF prices in VND are the selling exchange rates of Vietcombank when centralized biddings are held at Services of Health and medical facilities in this experiment.

Chapter II

SPECIFIC REGULATIONS

Article 4. Rules for selection and list of articles in this experiment

1. The articles that contain the active ingredients in this experiment must:

a) Have high utility in medical facilities;

b) Win biddings for drug supply in many hospitals

c) Have considerable difference in price among the articles that have the same active ingredients, concentration, composition, or dosage form;

d) Many articles that contain these active ingredients have considerable difference in price between the sale price and the original price (cost and CIP price).

2. The list of active ingredients in this experiment is provided in Appendix 1 to this Circular.

Article 5. Rules for selection and list of medical facilities in this experiment

1. Based on the bid organization of units, the Ministry of Health shall select some medical facilities and Services of Health that hold centralized biddings to conduct this experiment on the following principles:

a) They represent bidding holders: hospitals and centrally run hospitals that hold biddings themselves; provincial general hospitals that hold bidding themselves; Services of Health that hold centralized biddings.

b) They are scattered over the North, the Middle, and the South.

2. The list of units in this experiment is provided in Appendix 2 to this Circular. Depending on the biddings being held, the list of units in this experiment may be adjusted.

Article 6. Method for determining maximum wholesale surpluses in this experiment and formulas

1. Method for determining maximum wholesale surpluses in this experiment:

a) Calculate the surpluses of drugs based on the applicable wholesale prices provided by domestic drug producers, outsourcing organizations, importers, and import authorizers;

b) Classify the ranges of drug values and corresponding surpluses, ensuring that the higher the value, the lower the surplus;

c) Calculate the common surpluses of over 50% of the articles in each range of drug values.

d) Devise a formula for calculating surpluses in each value range based on the maximum surplus of the lowest value in the value range, and the extra surplus added to each Dong of value.

2. The maximum wholesale surpluses shall be calculated using the formulas provided in Appendix 3 to this Circular.

Article 7. Drug price management by maximum wholesale surpluses, applicable to drugs in this experiment

1. The purchase of drugs that contain active ingredients in the list of active ingredients in this experiment prescribed in Clause 2 Article 4 of this Circular must comply with the Joint Circular No. 01/2012/TTLT-BYT-BTC dated January 19^th 2012 of the Minister of Health and the Minister of Finance, providing guidance on bid procurement of drugs in medical facilities, and the Circular No. 11/2012/TT-BYT dated June 28^th 2012 of the Minister of Health, providing guidance on making invitations for bid procurement in medical facilities.

2. Prices of drugs that contain the active ingredients in this experiment must satisfy the following requirements:

a) The difference between the successful price of the drug that contain active ingredients in this experiment and the its original value must not exceed the maximum wholesale surpluses prescribed in Appendix 3 to this Circular.

b) In case the successful drug (having the lowest assessed price), as prescribed in the Joint Circular No. 01/2012/TTLT-BYT-BTC dated January 19^th 2012 of the Minister of Health and the Minister of Finance, providing guidance on bid procurement of drugs in medical facilities, has the difference in price between the successful price and the original value of that drug which exceed the maximum wholesale surpluses prescribed in Appendix 3 to this Circular, the head of the unit that conducts this experiment, as prescribed in Clause 2 Article 5 of this Circular, shall negotiate with the contractor that has the lowest assessed price in order to ensure that this difference does not exceed the maximum wholesale surpluses as prescribed. If an agreement on the price cannot be reached, but the drug is still necessary, the head of the unit shall send a report to the Ministry of Health (the Drug Administration of Vietnam, the Department of Financial Planning) for consideration and settlement, ensuring the adequate drug supply for medical examination and treatment.

Chapter III

RESPONSIBILITY FOR CONDUCTING EXPERIMENTS

Article 8. Responsibility of relevant units

1. The Drug Administration of Vietnam shall:

a) Cooperate with relevant units affiliated to the Ministry of Health, the Ministry of Finance, the Ministry of Industry and Trade, and Vietnam Social Insurance in conducting the experiment

- Collect and provide the units in this experiment with information about costs of domestic drugs declared by domestic producers or outsourcing organizations, and the CIF prices of imported drugs, provided by the General Department of Customs, that have active ingredients in this experiment and are traded on the market.

- Cooperate with the Department of Finance and Planning in supervising and resolving difficulties arising during the experiment, in order to send reports to the Ministry of Health for prompt direction and settlement.

- Hold commissions to guide units to conduct experiments where necessary.

b) Cooperate with relevant units in assessing, summarizing, reviewing, and sending reports to the Ministry of Health. The Ministry of Health shall report the result of the experiments to the Prime Minister, and suggest further plans.

2. The Department of Finance and Planning shall:

Act as the lead supervisor and receive reports on difficulties arising during the experiments, and report them to the Ministry of Health for prompt direction and settlement.

Article 9. Responsibility of Services of Health of central-affiliated cities and provinces

1. Provide guidance on the implementation of this Circular for local medical facilities in the list of units in this experiment prescribed in this Circular.

2. Conduct experiments when Services of Health hold centralized biddings according to the list of units in this experiment prescribed in this Circular.

3. Summarize and send the Ministry of Health (The Drug Administration of Vietnam, the Department of Finance and Planning) the reports on the result of this experiment within 30 days from the date on which the bid result is approved as prescribed in Appendix 4 to this Circular.

Article 10. Responsibility of medical facilities;

1. Directors of medical facilities in the list of experimented units are responsible for conducting experiments.

2. Reports on the result of this experiment shall be sent to the Ministry of Health (The Drug Administration of Vietnam, the Department of Finance and Planning) within 30 days from the date on which the bid result is approved in accordance with the forms in Appendix 4 to this Circular.

Article 11. Responsibility of drug producers and drug importers

1. Domestic drug producers and outsourcing organizations are responsible for the accuracy of the prices of drugs registered with State management agencies in accordance with the Regulation of price calculation promulgated together with the Circular No. 154/2010/TT-BTC dated October 01^st 2013 of the Minister of Finance.

2. Domestic drug producers, outsourcing organizations, importers, and import authorizers are responsible for providing information about effective CIF prices, costs, and anticipated wholesale prices of the articles in this experiment, which have been registered at the request of the Drug Administration of Vietnam and the units in this experiment during drug procurement, and responsible for the accuracy of the information and documents about drug prices provided for units in this experiment.

Article 12. Experiment period

Experiments shall be conducted at medical facilities and Services of Health prescribed in Clause 2 Article 5 of this Circular for 01 year from the effective date of this Circular.

Chapter IV

REGULATIONS ON THE IMPLEMENTATION

Article 13. Effects

This Circular takes effect on April 01^st 2013.

Units are recommended to report the difficulties arising during the implementation to the Ministry of Health (the Drug Administration of Vietnam, the Department of Finance and Planning) for consideration and settlement./.

APPENDIX 1

(Promulgated together with the Circular No. 06/2013/TT-BYT dated February 08^th 2013 of the Minister of Health)

LIST OF ARTICLES IN THIS EXPERIMENT

APPENDIX 2

(Promulgated together with the Circular No. 06/2013/TT-BYT dated February 08^th 2013 of the Minister of Health)

LIST OF UNITS THAT CONDUCT EXPERIMENT IN DRUG PRICE MANAGEMENT BY EMPLOYING MAXIMUM WHOLESALE SURPLUS METHOD

APPENDIX 3

(Promulgated together with the Circular No. 06/2013/TT-BYT dated February 08^th 2013 of the Minister of Health)

MAXIMUM WHOLESALE SURPLUSES

1. Values of drugs:

Drug values are CIF prices of smallest packages of imported drugs or costs of smallest packages of domestic drugs in VND, in particular:

2. Original value of drug for surplus calculation (symbol: C):

a) For imported drugs, C is the CIF price in VND.

b) For domestic drugs, C is the cost plus 20% of the cost. For instance: the cost of a drug is 1,000 VND. The surplus = 1,000 VND + 20% x 1,000 VND = 1,200 VND (C = 1,200 VND).

3. In the following cases, the surplus is 1.1 times  higher than the surplus calculated using the surplus calculation formula.

a) Drugs that expire within 02 years.

b) Drugs that must be preserved at special temperature below 15 ^oC.

c) Serums and intravenous medications of 100 ml or more.