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South Korea Pharmaceuticals and Healthcare Report Q2 2008
Business Monitor International, March 2008, Pages: 87
The South Korea Pharmaceuticals and Healthcare Report provides independent forecasts and competitive intelligence on South Koreas pharmaceuticals and healthcare industry.
In BMI’s new Business Environment Rankings for Q208, South Korea ranks third out of 14 markets assessed, below Japan and Australia, which rose to pole position from third in the previous period. Despite slipping one place, South Korea remains one of the most attractive regional markets. Key drivers of growth are high per capita consumption, high prices of pharmaceuticals, an aging population, lack of public awareness of generic substitution rules and improved conditions. However, the recently announced price cuts, averaging 13% and affecting 1,400 patented pharmaceuticals, will have a dual negative effect on the market - on the overall value as well as on the value of imports, which may fall as companies decide to reduce the fallout.
Nevertheless, multinational companies are far from abandoning the market, as illustrated by the January 2008 announcement by Sanofi-Aventis, which reported its intention to significantly increase investment in clinical testing conducted locally. Indeed, many other companies have chosen this avenue of involvement over direct manufacturing presence, sidelining South Korea for less expensive Asian destinations.
Overall, the industry landscape has been dynamic, with a number of deals taking place towards the end of 2007. The biotechnology sector remains a key focus, with the government committing US$60bn per annum across various segments. South Korea aims to be among the top 10 biotechnology powerhouses in the coming years, having been ranked 14th in the 2000-2004 period. Multinational companies are recognising the potential for growth in the sector, with Novartis Venture Fund (NVF) recently entering the Korean equity market as a stepping stone to wider regional involvement.
Among other recent developments is the introduction of the mandatory barcode on pharmaceutical packaging, with a view to reducing fraud and increasing the availability of information on sales volumes and expired drugs. While the drug-making community contested the planned rollout of the technology, allegedly claiming that the existing infrastructure is not able to support the changes, the government’s commitment to cost-containment has largely side-lined such accusations. Nevertheless, BMI believes that more advanced technology, such as advanced tablet marking or radio frequency identification (RFID), should have been used in place of barcodes, which will be quickly outdated.
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