The Korean government is trying to boost the pharmaceutical market with a special fund for R&D, tax deductions for R&D costs, promoting mergers and acquisitions, training workers in the industry and by creating a national pharma company to compete on the international stage.
The recent government measures to streamline regulations and tax provisions have made it a more business-friendly country, including for pharmaceuticals, with multinationals now representing 40 per cent of the market.
The pharmaceutical industry, which plays a pivotal role in economic growth and quality healthcare, is gearing up to meet the government objectives, according to the Korean Research-based Pharma Industry Association (KRPIA).
Exports of Korean pharmaceuticals are also growing along with Japan, China, the US and Vietnam, the four largest markets for South Korean pharma products. The total exports of Korea-made drugs stood at 2.4 billion won in 2014, up by 13.5 percent compared to 2.1 billion won recorded the previous year, according to the Ministry of Food and Drug Safety.
Initiatives by trade bodies
In order to foster the pharmaceutical industry, KRPIA has been striving to build policy environment needed to expedite R&D of innovative new drugs and develop amicable relationship among stakeholders in the industry." We will continue to induce global pharmaceutical company's participation with local R&D and strengthen its competitiveness in global market. Also, as a partner with both global and local companies, we will cooperate closely to promote transparency in pharmaceutical industry through the ethical management and improve drug price system", said the Association.
“However, the improvement of drug pricing system to recognize proper value of new drugs, which are outcomes of R&D, still remain to be unresolved. An environment with virtuous cycle structure should be built so that more companies can concentrate efforts on developing new drugs. Also, the government needs to supplement and improve systems to increase patients' accessibility to essential drugs. As new pharmaceutical policies are introduced every year, if proper consideration are given to financial stability of the national health insurance ( NHI), predictable policies, and proper assessment of the new drug's innovativeness, it would motivate the industry strengthen its R&D efforts,” according to KRPIA.
Korea Pharmacy Trade Association (KPTA) is assisting in the promotion of international trade business that export-related works for Korean pharmaceutical companies and imported product administration. KPTA has also successfully built close relationship with other related organizations, both domestic and overseas, to promote international trade business and information exchange efforts.
The Korea Pharmaceutical Manufacturers' Association (KPMA) represents around 190 R&D companies. The implementation of the Drug Substance Patent Law in 1987 was a milestone for the industry association. In the recent years, 65 of its members collectively invested $2 billion to upgrade manufacturing plants in compliance with current Good Manufacturing Practice (cGMP) standards. The Fair Competition Committee was established and a Hotline Reporting Centre for code compliance complaints was activated to increase KPMA's credibility among the international pharma market.
Growing salience of South Korea
In Asia, after China and India, the role of South Korea is gaining salience. The South Korean pharmaceutical market was worth £12.3 billion in 2011 and is the fastest-growing in the developed world, according to BMI Healthcare. Sales growth has been in double-digits in the past five years and IMS forecasts a 6.5 per cent compound annual growth rate (CAGR) through 2015.
The hospital sector is a strong sales generator, with almost 50 per cent of sales for outpatient departments and 32 per cent for in-patients. The consumption of medicines is widespread and patients are keen on high technology procedures and the latest innovative treatments.
Joining hands with global partners, South Korean pharmaceutical companies are increasing their presence in the global health care industry by stepping off their home turf and venturing to bigger markets.
In the first half of 2015, Green Cross and Hanmi Pharmaceutical’s export volumes have surpassed 100 billion won for the first time ever, according to the firms’ regulatory filings.
Growing partnerships
Korean pharmaceutical companies, which are gaining recognition overseas for their new drug development capabilities, are partnering with a growing number of internationally renowned pharmaceutical giants to export their newly developed drugs with more success.
Recently Hanmi Pharmaceutical sealed an exclusive license and collaboration agreement, valued at around $730 million, with Germany’s Boehringer Ingelheim, to sell the development and global commercialization rights to its third-generation lung cancer treatment drug HM61713.
The company had inked a similar licensing deal, valued at about $690 million, with US-based Eli Lilly and Company in March to export its autoimmune disease treatment HM71224, a drug entering phase II of clinical trials.
Boryung Pharmaceutical also took a major leap toward making inroads into Asia’s burgeoning pharmaceuticals market last month by concluding a large-scale licensing deal in July with Hong Kong-based Zuellig Pharma to launch Kanarb, a high blood pressure treatment drug, across Asia and seven other countries over the coming years.
Kanarb is a blockbuster drug launched with 12 years of research and development and roughly 50 billion won ($41.7 million) in investment which will be marketed and sold by Zuellig in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam starting next year.
Industry observers say that such global-local partnerships have existed in the past, but the difference today is that such ties are expanding in scale and numbers, as global firms look to bolster research and development and business partnerships with Korean firms, which are seeking new growth engines and opportunities overseas.
Indo-Korean trade
According to some of the experts, as India is actively taking steps to boost its bulk drug manufacturing (Active Pharmaceutical Ingredients) sector, South Korea can play a key role as a catalyst investor.
With their expertise in the manufacture of bulk drugs, the Korean companies become partner with the Indian companies to invest and share knowledge and can extend a helping hand to the Indian pharma industry to realize its ‘Make-in-India’ dream.
For India being a leading generic manufacturer, it has been relying on China for low-cost APIs. And this trend, which has continued for a long time, is definitely a matter of concern for the country’s domestic bulk drug manufacturing segment.
According to GG Gurudatta, CEO, Estima Pharma, Indian pharm companies can look towards Korea only for APIs. There is no scope to export formulations because the country is way ahead in this manufacturing process. Though API exports is already taking place, finished dosage forms would be difficult, said Gurudatta.
Chiming in Sriram V Iyer, CEO, Valuegen Pharma Pvt. Ltd said Korea is a market for APIs and not for formulations. There are hardly very few companies in India which evince interest in Korea. If at all they do they go through agents.
For Raichur-based Shilpa Medicare, which is dedicated to developing, manufacturing and delivering high-quality Active Pharmaceutical Ingredients, has been approved by the Korea FDA. Our Unit 1 and 2 in Raichur comply with the well-recognized regulatory requirements of KFDA.
“We export both oncology and non-oncology APIs to Korea and this is good market, Vishnukant C. Bhutada – managing director, told Pharmabiz in a telecon.
Another company from Karnataka is The Himalaya Drug Company which markets its products in South Korea. The business development for the APAC region is driven by its Singapore hub, said a company official.
The leading companies in Korea are Donga A Pharma and Daewoong Pharma.
“There are about 400 pharma companies in Korea. Because of Korea’s Health Insurance policy which was introduced three years ago, many pharmaceutical companies are not doing good in their local market itself. In such cases, importing would be difficult. However, if any company is having niche product, then companies in Korea will look to import. However, at present, many Korean companies are looking for exports from Korea to African continent, Europe and US as well, added Gurudatta.
Korean pharma companies are facing a tough competition in the domestic market. This is because of the national insurance policy which was introduced a couple of years back. Due to this, survival in the domestic market has become difficult. Hence concentrating on export market has become an existential necessity for Korean pharma companies. None of the Korean pharma companies have joint venture partnership with companies in the European Union. They do not have required connectivity in the European market. Apart from this, pharma companies do not have full-fledged quality systems which will meet European or USFDA requirements. Language is also seen as big barrier to trade. Considering these, Korean FDA has announced to join PICS scheme with effect from July 1, 2014. All the pharma companies need to adopt to PICS quality systems which are equivalent to European standards. But, in order to do this, the present human capital does not have enough knowledge and capability to incorporate the PICS systems. Hence, KFDA gave one year time from till July 1, 2014 to its pharma companies to adhere to this regulation. Now it would be much easier to export to Korea, noted Gurudatta.
In 2013, The Korean Food and Drug Administration (KFDA) changed its titled to Ministry of Food and Drug Safety (MFDS).
Clinical studies
In the meanwhile Korea is fast emerging as a hub of global clinical studies in Asia. It has the adequate infrastructure, supported by the qualified manpower in in areas such as basic science, life science, and clinical research. The country has realized that clinical research cannot be ignored because it is the foundation for the development of new drugs.
Several international pharmaceutical companies are eyeing this market. They have understood the need for conducting clinical trials country to gain a foothold in this country. Therefore considerable early stage and late stage clinical trials are on. Moreover these companies are developing separate clinical trials targeting Asian people in Korea, according to the information from the public domain.