11 January, 2018
The Ministry of Health in Laos has issued a Decision on the Establishment of Businesses for the Import and Export of Medicine and Medical Products No. 1820/MoH dated August 25, 2017 (the Decision), to provide information on setting up and conducting businesses related to the import and export, distribution, wholesale, and manufacture of medicines and medical products/devices.
The Decision aims to address issues that the Law on Medicine and Medical Products No.07/NA dated December 21, 2011, failed to address, and it also stipulates the requirements necessary to establish a medicine or medical products company, and subsequent requirements needed for the company when it starts to conduct its activities.
Scope of Activities Addressed by the Decision
In Laos, laws alone often do not provide complete information on the criteria necessary to set up or conduct a business.
This is also the case for the Law on Medicine and Medical Products, which provides broad principles on the management of medicine and medical products/devices in terms of registration, standard requirements, advertisements of these products, and general prohibitions for operators during their business operations.
Therefore, the Decision perpetuates the long-standing Lao practice of using regulations to complete the law and provide details on the steps and requirements necessary to register and conduct contemplated activities in Laos.
The Decision provides requirements for the establishment and operations of businesses contemplating import and export of medicine and medical products/devices, and distribution and domestic wholesale activities for these products. Provisions in the Decision also cover factories involved in the manufacturing of medicines and medical products/devices, as well as requirements for places to be used to store goods and the minimum maintenance and warehousing standards and requirements for such goods.
Requirements to Establish a Legal Entity
The Decision clarifies that both local and foreign business investors can obtain a license to conduct businesses related to the import and export, distribution, wholesale, and manufacture of medicines and medical products/devices. This clarification, however, still sets out a number of general restrictions on foreign investors.
The Decision sets out that an applicant for business registration should have at least one pharmacist who has received appropriate education in Laos or abroad, and who has been approved by the Ministry of Health to conduct such activity. Pharmacists who are employed by companies that import and export medicine and medical products should have at least five years of experience, while branches or wholesale companies require either a pharmacist, or a pharmacist assistant, who has at least four years of experience.
A company registration applicant should not currently be under investigation or charges, or subjected to sanctions related to the sale of drugs or narcotics. Furthermore, applicants must have good physical and mental health. The Law on Medicine and Medical Products further requires: (1) good ethics for medicine and business; (2) personnel with knowledge and capabilities; (3) measures relating to safety and environmental practices; and (4) appropriate premises, necessary facilities, and standardized warehouses and transport vehicles.
It is important to note that both the Law on Medicine and Medical Products and the Decision do not directly address registered capital, and they leave specific issues or requirements to other laws and regulations to address. Minimum registered capital requirements are thus addressed in the Decision of the Ministry of Industry and Commerce on Wholesale and Retail Businesses No. 1005/MOIC dated May 22, 2015, which states that the Lao regulatory framework allows a foreign investor to wholly own an import-export, distribution, or wholesale-related activity, with the registered capital requirements for the activities dependent on the share ratio that a foreign investor holds in the company, as follows:
A company with foreign ownership of 50% or less has registered capital requirements of LAK 4 billion (approximately USD 480,000) to LAK 10 billion (approximately USD 1.2 million).
A company with foreign ownership of 70% or less has registered capital requirements of LAK 10 billion to LAK 20 billion (approximately USD 2.4 million).
A company with foreign ownership of 100% has registered capital requirements of LAK 20 billion or more.
The Decision also seeks to regulate the organizational structure of a company, as it imposes bodies or departments that are not mandatory for companies per se. Accordingly, a company must have an internal organization chart that includes at least a director and a board of directors (which therefore implies that a director, and second director or a deputy director, may be necessary), along with the following departments: (1) financial accounting; (2) warehouse accounting; (3) pharmacy; (4) technical committee; and (5) other departments, as required.
Registration Process
The Decision provides a list of documents that must be submitted for a new application to be considered by relevant authorities, and also for a renewal application for a granted license.
The registration of businesses related to the import and export, distribution, wholesale, and manufacture of medicines and medical products/devices is divided into two steps. First, approval must be obtained from the Ministry of Industry and Commerce or its related departments, which are in charge of general business registration. Once approval is obtained, the application is passed to the health sector in the vicinity where the business will be established, either at the city, provincial, or Capital Health Office level. The application is then passed to the Department of Food and Drugs for their opinion, before it is submitted to the Minister of Health, who will issue an operating license.
According to the Decision, once the application has reached the health sector stage, consideration of the dossier should take no more than 90 days. In case of a license renewal, the Food and Drug Department will be responsible for approving the renewal. Once issued, an operating license is valid for a period of two years, and subsequent renewals must be undertaken three months before its expiry date.
Post-Establishment Requirements
The Decision also provides other requirements that need to be fulfilled after a legal entity is established, which range from the storage of documents on the company’s premises, to setting up systems to ensure the safety of medicine and medical products/devices which will be handled by the business operators. Accordingly, such operators should retain the following documents on their company premises:
- Standards for Operation Procedure in relation to tasks which are to be performed by the company, branch, and agent;
- All relevant laws, regulations, and notifications in respect of drugs and medical products;
- Guidelines on the utilization of drugs;
- Monitoring booklets that substantiate the inspections of drugs and medical products performed by government inspectors;
- Records of the medicine and medical products/devices that have undergone the registration process/notification and that have already been approved by the relevant authorities;
- A list of the names of suppliers, along with their address, responsible contact person, and contracts detailing the business relationship with the operator;
- Monitoring list for medicine and products in the company/branch, such as: (1) products purchased; (2) products distributed; (3) actual outstanding stock with expiration date; (4) their lot numbers; and (5) the source of supply;
- Adverse drug reaction report forms;
- Copies of bills/invoices related to purchased imported and exported goods of the company/branch. Such bills/invoices must provide information required under laws/regulations on medicine and medical products/devices. These documents must be maintained for at least five years;
- Copies of the complete documents pertaining to the import, export, and transportation of medicine and medical products. These documents must be maintained at the companies and its branches for at least five years;
- A report, which must be produced every six months, detailing the activities of the company, and a list that tracks the importation and distribution of products; and
- A list of drugs that require special management, such as narcotic and psychotropic drugs, and other lists, as required.
In addition to documentation requirements, certain obligations may also be imposed on specific operators, depending on their activities and responsibilities.
Companies that import or export medicine and medical products/devices must have a system to track the quality of their product, monitor the effects of medicine, or provide alerts on the safety of a particular type of medicine (i.e., pharmacovigilance) that falls under the responsibility of the distributor. Moreover, companies have the responsibility to retain or recall products that are the subject of safety and quality concerns that have occurred after their distribution.
Additional requirements may be imposed in accordance with specific activities to be performed by a company. For instance, companies that also modify the bundle or container of medicine or medical products /devices must have a storage place and equipment that are specifically designed, and certified by relevant authorities, for the performance of such actions.
Warehousing and Maintenance
The Decision sets out minimum standards for warehouses where import-export companies store their medicine or medical products/devices.
An import-export warehouse must have the necessary equipment and adequate methods to maintain the storage facility, which must be included in their Good Wholesaling Practice. Likewise, good storage practices may also be required from the facility operator. If narcotic and psychotropic drugs are to be stored, these must be stored in an area that differs from the storage places used for other medicine or medical products/devices. A cold storage facility should have a temperature that ranges from two to eight degrees Celsius, and must have a thermometer or other device to ensure that medicine stays at the appropriate temperature.
If vaccines or biological products are to be stored, the management and distribution standards of these products, the warehouse used to store them, and the vehicles used to transport them must meet requisite regional and international standards.
In the event that regulations require product packaging to be changed, the company must have proper equipment and packaging procedures, which are approved by relevant authorities to ensure they are of good quality.
Distributors and wholesalers will also have specific requirements in regard to warehouses where medicine and medical products are stored, which will differ slightly from storage facilities used by import-export companies in regard to the size of the storage unit, the criteria for determining good storage practice, and the transportation requirements for such products.
Conclusion
The Decision was not only enacted to fill the void and address issues that the Law on Medicine and Medical Products did not address, but it also reiterates the commitment of Lao authorities to implement and impose standards that meet regional and international requirements, which are also reflected in broader legislative changes related to consumer protection being implemented in Laos, including a May 2017 decision on the management of packaged products.
The strong intention of Laos to meet regional standards for the transit of goods, including medicine and medical products, coupled with its geographically strategic location between many ASEAN countries and China, could help the country emerge as a key transportation hub in the region in the near future.
For further information, please contact:
Dino Santaniello, Tilleke & Gibbins
dino.s@tilleke.com
