Drugs and Pharmaceuticals
Republic of Korea
Overview
2004 2005 2006 (estimated)
Total Market Size 8,671 11,010 10,554
*Total Local Production 8,064 10,144 9,724
**Total Exports 374 439 421
**Total Imports 981 1,305 1,252
**Imports from the U.S. 112 159 158
Unit: USD million
(Sources: Compiled by U.S. Commercial Service, Korea), * Korea Pharmaceutical Manufacturers Association (KPMA); ** Korea Pharmaceutical Traders Association (KPTA)
USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)
Note:
1) Local production includes production by multinational firms.
2) Total market size was estimated using the following formula: Total Local Production + Total Imports – Total Exports = Total Market Size. However, according to IMS Korea statistics, Total Market Size reached USD 6.0 billion in 2004; USD 7.7 billion in 2005; and an estimated USD 8.5 billion in 2006. IMS data is primarily sourced from end-users.
The Korean market, the 12th largest pharmaceutical market in the world, was valued at USD 7.7 billion in 2005. According to industry sources, Korean market demand for pharmaceuticals is estimated to have grown by 11 percent in 2006 to reach USD 8.5 billion and is forecast to grow at an average annual rate of 10 percent over the next few years since the need for medical treatment for senior citizens is rapidly increasing.
The Korean pharmaceutical market has continued to experience unprecedented restructuring since 1999, when the Korean government implemented significant reforms to improve transparency in the health care system. These reforms have helped increase transparency in the reimbursement system and have, to some degree, leveled the playing field for multinationals. There have also been positive changes in the regulatory climate that have allowed smoother and earlier market access for new, innovative drugs. Multinationals have expanded their share of the total therapeutic (ethical and over-the-counter) pharmaceutical market in recent years.
Over the next few years, one important factor that may slow the growth rate in overall market demand and hamper patient access to innovative pharmaceuticals will be the measures taken by the Korean government to finance the national healthcare insurance system. The Korean government implemented the National Health Insurance (NHI) Drug Expenditure Rationalization Plan (DERP) on December 29, 2006. The key contents of the DERP included a change in the NHI drug management system from a Negative List System, in which all medicines were, in principle, covered by insurance, to a Positive List System in which explicit item-by-item approval is needed for reimbursement. In future, cost effectiveness will also be a key consideration in the decision whether to reimburse for insurance purposes. Additionally, the NHI Corporation, the single payer, has introduced a price negotiation procedure which determines whether a new drug should be listed and at what price.
Notwithstanding the Korean government’s cost containment measures, the U.S. government will continue to work closely with and advocate on behalf of U.S. exporters’ market access concerns. This includes continuing to encourage the Korean Government to make the market more transparent, to reimburse innovative drugs at appropriate levels, and to ensure Korean patients’ access to innovative pharmaceuticals. Industry sources speculate that the Korean government’s need to reduce costs will be balanced by satisfying consumer demands for advanced health care over the next few years. We advise U.S. exporters of research-based, innovative drugs to evaluate the impact of the new reimbursement system on their potential sales before entering this lucrative and growing, but challenging, market.
With the Korean government’s encouragement, the Korean biotech pharmaceutical industry is striving to invest more in R&D (currently only 4-5 percent based on sales revenue) and diversify from the production of generics and antibiotics. This trend presents excellent opportunities for U.S. biotech firms to participate in Korea’s strategic biotech sector. Although Korea’s pharmaceutical industry is competitive in terms of chemical synthesizing technologies, it is much less competitive in drug screening, safety evaluation and clinical trials. Korean companies are pursuing strategic alliances with multinational firms to finance R&D for new products or for cross-licensing of existing technologies. Industry experts predict that the U.S. market share will increase as more U.S. biotechnology-based products become commercially available over the next few years.
Best Products/Services
-Therapeutic pharmaceuticals
Opportunities
The Osong Bio-technopolis, under the Korean Ministry of Health and Welfare, is seeking foreign investment for biotechnology industry development in the high-tech science park at Osong. The 4,633,000 square meter science park will have two major focuses: pharmaceuticals and cosmetics (59.7 percent) and medical devices (25.8 percent). Since the Korean biotech industry is still relatively undeveloped, the timing may be good for U.S. companies interested in getting in on the ground floor.
Resources
Trade Shows
N/A
Key Contacts
Ministry of Health and Welfare
Korea Food & Drug Administration
Health Insurance Review Agency
Local Contact
(Ms.) Yoon-Shil Chay
Senior Commercial Specialist
Commercial Service Korea
U.S. Embassy
32 Sejong-ro Jongro-gu
Seoul 110-710 Korea
Tel: 82-2-397-4439
Fax: 82-2-739-1628
Email: yoon.shil.chay@mail.doc.gov
Website: www.buyusa.gov/korea