Vietnam’s healthcare sector offers significant growth potential, driven by a low healthcare spending base, rising middle-class population, and a large, aging population. Hospitals and pharmaceuticals are key contributors to healthcare spending, underpinning the sector’s growth trajectory.

In the Hospital segment, infrastructure remains underdeveloped, with est. 13 hospital beds per 10,000 people adequately equipped for comprehensive treatments. Private hospitals comprise just 11.3% of total hospital beds, far below regional peers. Rural-urban disparities persist, as 61.8% of the population lives in rural areas according to the General Statistics Office of Vietnam (GSO), while major cities like Ha Noi, Hai Phong, Ho Chi Minh city, Da Nang, and Can Tho account for only 22.4% of total population, but serve 34.0% of total inpatients, and host 38.2% of private hospitals nationwide. Limited healthcare access in smaller cities and rural areas forces patient migration to major-city hospitals, overcrowding urban hospitals with utilization rates averaging 133.8% in the above five  cities. Financial constraints in public hospitals further limit resources and service quality. To address these issues, the government is implementing reforms and incentivize private investments to accelerate hospital development.

Note: In this report, “urban”  refers to the five major cities, while “rural” includes all other areas, including smaller cities, towns, and remote regions.

In the Pharmaceuticals segment, with the ambition to offer local people quality drugs at more affordable prices, narrow the quality gap with foreign brands, and reduce import dependency, the government has implemented policy reforms to encourage local drug producers to upgrade product standards, enhance R&D, and improve competitiveness, while also positioning Vietnam as a regional hub for cost-effective drug manufacturing and export to international markets.

For 2024-2028, Fitch Solutions projects a 15.7% CAGR for the hospital market (USD29.7bn) and a 9.0% CAGR for the pharmaceutical market (USD8.7bn). The vibrant M&A deals by global players highlights the potential of Vietnam’s healthcare sector. With undemanding P/E valuation compared to regional peers and robust market growth, the sector is an attractive destination for investments.

Overview of the Healthcare sector

Low base: Vietnam’s healthcare expenditure remains modest at USD 189 per capita in 2022 (WHO)—far below regional peers such as Thailand (USD 386), Malaysia (USD 458), and China (USD 672). Hospital services account for 65.3% of the total expenditure, while pharmaceuticals represent 27.2%, and the rest come from medical equipment.

Growth potential: The healthcare market is expected to grow from approximately USD 24.6 billion in 2024 to USD 41.0 billion by 2028, at a CAGR of 13.6% (Fitch Solutions). Key drivers include:

• Expanding Middle Class: It is projected to exceed 30 million by 2030, coupled with increased health awareness, driving demand for advanced healthcare services.
• Prevalence of Chronic Diseases: Non-communicable diseases (NCDs) like cancer, diabetes, and cardiovascular conditions are rising. In 2020, nearly 200,000 cancer cases were reported, while in 2021, 5 million adults had diabetes, 24% of kidney complications largely driven by dietary shifts and reduced physical activity due to growing urbanization.
• Aging Population: Vietnam’s population is in the aging stage and expected to reach the aged stage by 2040 with around 15.9% of the total population will be aged 65 or older by then.
• Policy Reforms: Government initiatives to improve healthcare infrastructure and enhance accessibility and affordability (details in Hospital and Pharmaceutical segments).

Hospital sector

Current Landscape: Underdeveloped facilities, rural-urban disparities, and weak public healthcare services from financial constraints

Underdeveloped facilities: There are 1,548 hospitals nationwide (2023), with 78.4% public and 21.6% private. The country averages 32 hospital beds per 10,000 people; however, we estimate that only 13 are well-equipped for comprehensive treatment due to resource constraints. Furthermore, private hospitals remain underrepresented, accounting for just 11.3% of total beds, far below that in Thailand (20.7%), Malaysia (28.2%), and Indonesia (42.7%).

Severe rural-urban disparities persist: Despite 61.8% of Vietnam’s population residing in rural areas according to GSO, five major cities—Hanoi, Hai Phong, Ho Chi Minh City, Da Nang, and Can Tho (22.4% of the population)—serve 34.0% of inpatients, and host 38.2% of private hospitals nationwide. This imbalance drives patient migration to urban hospitals, leading to severe overcrowding, with utilization rates averaging 133.8% in these above cities. Expanding capacity and improving healthcare quality are critical to addressing this challenge.

Financial constraints weaken public healthcare services: Traditionally, public hospitals in Vietnam receive heavy government subsidies. However, financial constraints limit salaries and compensation for medical practitioners, making them significantly lower than in the private sector. Coupled with overworked staff due to patient overload and outdated medical equipment delaying diagnoses and treatment, these challenges reduce service quality and patient satisfaction.

Significantly low prices at public hospitals due to the government subsidy combined with low wages for medical practitioners leading to limited-service level.

Vietnam’s national insurance fund covers, on average, 80% of medical service costs at the state healthcare prices, with patients contributing the remaining 20%. However, these state prices are heavily subsidized by the Government, which include operational but not investment costs, resulting in significantly lower prices than at private facilities and creating a wide public-private price gap.

Additionally, with low wages for medical practitioners factored in operational costs, public facilities face challenges in attracting and retaining skilled professionals, further impacting service quality. Meanwhile, government funding constraints hinder the pace of healthcare improvements, underscoring the need for structural reforms and enhanced hospital management to elevate healthcare quality.

Policy Reforms aim to decentralize healthcare system management by removing the subsidies on the state healthcare prices and promoting private investments.

Phasing out subsidies on the state healthcare prices: Vietnam’s 2024 Healthcare Law aims to align state healthcare prices with market rates by 2026, integrating previously excluded costs such as investment expenses. This reform seeks to increase public hospital revenues for reinvestment in equipment, technology, and staff compensation, while narrowing the public-private price gap to encourage private hospital development and redirect the government subsidies to underserved areas. Additionally, the amended Health Insurance Law (effective July 2025) aims to expand national insurance coverage, reduce government budget pressure and improve accessibility.

Encouraging Private Investment: The government targets to double the proportion of private hospital beds from est. 11.3% in 2023 to 25% by 2050. Beyond narrowing the public-private price gap as aforementioned, various incentives are offered, including tax benefits, affordable land-use pricing, competitive borrowing rates, and support for public-private partnership (PPP) models.

Pharmaceutical sector

Current Landscape: Vietnam’s pharmaceutical market, valued at USD 6.2 billion in 2024, is among IQVIA’s 17 fastest-growing globally, with a projected 9.0% CAGR from 2024 to 2028.

By drugs: Generic drugs account for approximately 58.0% of total market sales, patented drugs contribute 18.0%, and the remaining share comes from other products, including supplements, and herbal medicines, according to Fitch Solutions.

By distribution channels: Pharmaceutical sales are divided into two main channels:

• Hospital Channels (43%): With the hospital system predominantly composed of public hospitals, a significant portion of pharmaceutical sales in this channel is funded by national insurance. In which, drug procurement operates through a tiered bidding system(Tier 1 – 5). Tiers 1–2 encompass patented drugs and generic drugs manufactured under high regulatory standards (e.g., EU-GMP, PIC/S-GMP), while Tiers 3–5 align with WHO-GMP standards. Local producers primarily compete in Tiers 3–5,where the market is highly fragmented, intensifying competition.
• Retail Channel (57%): Over 45,000 pharmacies comprise this channel, with 93% being small independent stores. Modern drugstore chains, including Long Châu (1,706 stores), Pharmacity (898 stores), An Khang (481 stores), and Trung Sơn (200 stores), represent the remaining 7%. These chains are rapidly expanding, leveraging their strong financial backing, advanced digitalization capabilities, and modern operational systems to gain market share.

By producers: Currently, local pharmaceuticals serve around 46% of the total demand, and 54% remain still reliant on imports. All local productions are for generic medicines, supplement, and herbal medicines. To reduce reliance on imported drugs and ease the financial burden on public insurance, the government aims to increase locally produced pharmaceuticals to 70% by 2030, ensuring greater affordability and sustainability in healthcare funding.

Unlocking Vietnam’s Pharmaceutical Potential

Enhance local competitiveness and reduce imports: Aiming to provide affordable, high-quality generic medicines to local patients, the government is advancing pharmaceutical policy reforms, including the revised Pharmaceutical and Bidding Laws (2025), to strengthen local drug production and reduce import dependence. These policies prioritize domestic drug manufacturers offering more competitive prices than imported alternatives for Tier 1–2 drug categories. This trend will encourage local firms to enhance their production quality standards to align with international benchmarks while maintaining price competitiveness.

M&A drive growth and potential exports: Establishing a pharmaceutical manufacturing facility in Vietnam typically takes 4–5 years, involving investment licensing, development, operational audits, and quality inspections. Given these regulatory hurdles, global firms increasingly acquire majority stakes in Vietnamese drug manufacturers to accelerate market entry and scale production. This strategy enables faster integration into local retail and hospital networks while expanding capacity for export markets. As production capabilities grow, Vietnam is positioned to become a cost-effective regional hub for pharmaceutical manufacturing and supply.

The attractiveness of these sectors has driven vibrant M&A activities, promising exit opportunities for early investors

Healthcare sector valuation remains undemanding

Vietnamese healthcare companies are traded at an undemanding average P/E ratio of 16.3x compared to regional peers of 35.2x. This relatively attractive valuation is further supported by the sector’s growth prospects.

Source: TIM