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South Korea Pharmaceuticals and Healthcare Report Q1 2008
Business Monitor International, Dec 2007, Pages: 84
The South Korea Pharmaceuticals and Healthcare Report provides independent forecasts and competitive intelligence on South Koreas pharmaceuticals and healthcare industry.
South Korea has one of the most attractive pharmaceutical markets in the Asia Pacific region, as evidenced by the all new Business Environment Rankings. The country achieved this high placement due to its large pharmaceutical market (US$16.7bn), impressive growth (10% y-o-y) and high per capita consumption (US$347). In the near term, we expect the country to maintain this position as these fundamental are unlikely to change very much. However, we are poised to lower growth rates in response to a series of negative drivers, such as price cuts and the promotion of generic substitution by pharmacists.
Medicines are expensive in South Korea. An October 2007 review by the Health Insurance Review & Assessment Service found that 13 out of 25 medical products are more expensive than those in seven other countries, including Japan, France, Germany, Italy and the US. In response, price cuts for approximately 5,000 products were announced, resulting in a KRW100bn (US$110mn) loss for the pharmaceutical industry.
During Q307, the author marginally increased its projection for healthcare spending in South Korea after the publication entitled OECD Health Data 2007 revealed that expenditure as a percent of GDP reached 6% in 2005, compared to our previous estimate of 5.8%. This statistic coupled with the countrys expected strong economic growth, particularly as a result of the recently signed free trade agreement (FTA) with the US, leads us to forecast that healthcare spending will reach US$74.7bn by 2011, a 6.4% increase on our previous projection of US$70.2bn.
Mirroring the trend seen in the US, multinational pharmaceutical companies in South Korea are increasingly hiring females to promote their products, according to an August 2007 survey by the Women Marketer Meeting (WMM). While women are also penetrating other corporate departments - such as finance, research and management - the ratio of males to females engaged in promotional activities has become grossly disproportionate.
South Korea has a remarkably low level of adult obesity, but a higher rate of overweight citizens. According to a 2002 study that was published in Public Health Nutrition, only 2.4% of the population was considered clinically obese in 1998. Currently, the OECD estimates that this prevalence is now approximately 3.2%. By way of comparison, the obesity rate for the US, Germany and Switzerland are 30.6%, 12.9% and 7.7%, respectively. Only neighbouring Japan has a comparable disease burden.
Large multinational drugmakers operating in South Korea were heartened by a September 2007 poll which revealed that the vast majority of the public are unaware of generic substitution. This means that branded products with expired patents sold by these firms still remain popular, ensuring ongoing inflated sales. We are of the view that this distrust of generics is very much entrenched and is indeed an established cultural phenomenon. For example, the survey also found that more than half of respondents (53.5% of 1,022 people polled) said that they would go to another hospital other than the National Medical Centre (NMC) because of the institutions generic-name prescription programme, presumably believing that standard of care is lower because of its reluctance to dispense branded products.
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