French drugmaker Sanofi SA said Friday that it's building a new medicine factory in Vietnam to supply drugs to that country and others in the region.
The move is part of a fast-growing trend among major international pharmaceutical companies to put factories and research centers in emerging markets that the industry increasingly is targeting for growth.
Paris-based Sanofi said it plans to spend about $75 million to build the factory in Ho Chi Minh City.
The factory will make medicines and consumer health products for sale in Vietnam and for export to other southeast Asian countries. It's expected to be fully operational by the end of 2015.
Medicine sales growth is declining in Western countries — long the industry's key markets — as government and private insurance plans there push for discounted prices as part of an effort to rein in health care spending. That's because those countries are squeezed by weak economies, budget deficits and older, sicker populations needing more medical care.
Years ago, drugmakers mainly operated sales offices and distribution centers in emerging markets, countries including China, India, Russia, Turkey, Mexico and Brazil.
Now, governments and a rising middle class in such countries are increasing spending on health care, and most big drugmakers have set goals of producing 25 percent or more of their total sales from emerging markets.
Those companies have found that setting up factories and research centers that hire local workers and collaborate with local research institutions helps sway their governments to buy more medicines from Western drugmakers, rather than just favoring local drugmakers, whose products often are of inferior quality.
And because of lower labor, land and other costs in emerging markets, the big drugmakers can sell their products at much lower prices than what they charge in the West.
Sanofi, the maker of diabetes drug Lantus and injected anticlotting drug Lovenox, noted that the new Vietnam factory will join its network of 40 manufacturing plants in emerging markets.
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