South Korea Pharmaceuticals and Healthcare Report Q4 2012

Date: October 3, 2012
Pages: 111
Price:
US$ 1,295.00
Publisher: Business Monitor International
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: SE8B16D0F67EN
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BMI View: Despite the country’s political and economic stability, we continue to view South Korea as a challenging pharmaceuticals market, largely on account of ongoing pricing dispute between the government and pharmaceuticals manufacturers. We expect pharmaceuticals market to grow on average at an annual rate of between 3% and 4% through to 2016, which is considerably lower than the growth rates posted in previous years. Nevertheless, manufacturers will continue to benefit from relatively high per capita spending on medicines and the steady volume demand driven by trends such as an ageing population..

Headline Expenditure Projections
  • Pharmaceuticals: KRW16,392bn (US$14.80bn) in 2011 to KRW16,914bn (US$14.39bn) in 2012; +3.2% in local currency terms and -2.70% in US dollar terms. Local currency forecast broadly unchanged from Q312.
  • Healthcare: KRW83,450bn (US$75.33bn) in 2011 to KRW88,199bn (US$75.06bn) in 2012; +5.7% in local currency terms and -0.4% in US dollar terms. Local currency forecast unchanged from Q312.
  • Medical devices: KRW4,432bn (US$4.00bn) in 2011 to KRW4,901bn (US$4.17bn) in 2012; +10.6% in local currency terms and +4.3% in US dollar terms. Local currency forecast broadly unchanged from Q312.
Risk/Reward Ratings: South Korea’s Pharmaceuticals RRR score for Q412 is 2.3% higher than in the previous quarter, which now places the country second out of the 18 countries assessed in Asia Pacific, second only to Japan. The ranking is underpinned by ageing population, a large pharmaceuticals market and a largely predictable operating environment. However, downward pressure on prices and other costcontainment measures will increasingly represent a challenge to pharmaceuticals companies, although the free trade agreement (FTA) with the US is seen as a welcome development by multinational companies.

Key Trends & Developments
  • South Korean pharmaceuticals companies are continuing to invest in manufacturing facilities in order to be competitive, according to June 2012 Daily Pharm reports. Over 30 pharmaceuticals companies have built new plants or remodelled existing ones to meet GMP standards in the past three years. Meanwhile, 17 pharmaceuticals companies have finished the construction of new facilities, while 12 companies are still working on them. More than 10 drugmakers have built or modified their plants in Hyangnam.
  • In a twist in the ongoing dispute between pharmaceuticals firms and the South Korean government, four out of five pharmaceuticals firms (Ilsung, Dalim Biotech, KMS and Elyson), in April 2012 withdrew their lawsuits against the government's price containment policies. Only Curesys is continuing with its legal action against the state. Given the lack of support from other pharmaceuticals firms, we do not believe the firm has sufficient bargaining power against the government. BMI believes the withdrawal of the lawsuits does not indicate a settlement between the government and the pharmaceuticals companies, instead it allows the government to continue with the implementation of its price reduction policies. We expect pharmaceuticals companies will continue to protest against price cuts until they can reach a resolution with the government.
  • In April 2012, president of Samsung Biologics, Kim Tae-Han, stated that - given the company's manufacturing expertise – it intends to make biosimilars at 50% of the current Western prices, on the basis of the firm's 'parallel processing' manufacturing system that can reduce costs while boosting yields. However, even assuming accelerated technology advancement, Samsung's quest for low-cost biosimilars can only be achieved in the long term, primarily due to the complex nature of biosimilars. In addition, we note that the firm's aim to launch its first biosimilars in 2015 is ambitious given that it takes three to four years to approve biosimilars.
BMI Economic View: Pledged increases in welfare expenditures that politicians have used as votebuying tactics, will be funded by debt, given that budgetary adjustments and tax increases are likely to be out of the question. The government has yet to get its fiscal house in order and public debt remains a perennial concern for policymakers. We highlight that a continued rise in welfare expenditures, if left unchecked, will continue to add to debt levels, which are already on the rise, thereby placing increasing pressure on South Korea' fiscal position.

BMI Political View: We believe that the ruling Saenuri Party's Park Geun-hye will head into December 2012's presidential election with a solid lead over her closest competitors, independent candidate Ahn Cheol-soo and the Democratic United Party's (DUP) Moon Jae-in. However, the volatile nature of South Korea's political landscape could quickly see a turn of events and see Park lose her frontrunner position. Social welfare and economic slowdown are likely to feature as dominant themes during the election. Regardless of the outcome, we envisage neither a material change to the policymaking process, nor the business environment, although we could see a number of policy-inducing measures that would compel the chaebols to loosen their grip on the economy.
Executive Summary
SWOT Analysis
South Korea Pharmaceuticals Industry SWOT
South Korea Political SWOT
South Korea Economic SWOT
South Korea Business Environment SWOT
Pharmaceuticals Risk/Reward Ratings
  Table: Asia Pacific – Regional Pharmaceuticals Risk/Reward Ratings, Q412
Rewards
Risks
South Korea – Market Summary
Regulatory Regime
Regulatory Developments
Counterfeiting
Controversial Trade Practices
Intellectual Property Regime
IP Deficiencies
Patent Litigation
Pricing Regime
Price Cuts
Reimbursement Regime
Hospital Purchasing
Selected List Of Illegal Rebates Cases
Foreign Trade Developments
Industry Trends And Developments
Epidemiology
Non-Communicable Diseases
Communicable Diseases
Healthcare System
Healthcare Financing
National Health Insurance Corporation
Medical Tourism
Research And Development
Biotechnology Sector
  Table: South Korea’s Bio-Industry Backbone
Clinical Trials
Medical Devices
Industry Forecast Scenario
Overall Market Forecast
  Table: Pharmaceuticals Sales Indicators, 2008-2016
Healthcare Market Forecast
  Table: Healthcare Expenditure Indicators, 2008-2016
  Table: Healthcare Governmental Indicators, 2008-2016
South Korea Pharmaceuticals & Healthcare Report Q4 2012
© Business Monitor International Ltd Page
  Table: Healthcare Private Indicators, 2008-2016
Key Growth Factors – Macroeconomic
  Table: South Korea - Economic Activity
Prescription Drug Market Forecast
  Table: Prescription Drug Sales Indicators, 2008-2016
Patented Drug Market Forecast
  Table: Patented Drug Market Indicators 2008-2016
Generic Drug Market Forecast
  Table: Generic Drug Sales Indicators, 2008-2016
OTC Medicine Market Forecast
  Table: OTC Medicine Sales Indicators, 2008-2016
Pharmaceuticals Trade Forecast
  Table: Exports and Imports Indicators, 2008-2016
Medical Device Market Forecast
  Table: Medical Devices Sales Indicators, 2008-2016
Other Healthcare Data Forecasts
Key Risks To BMI’s Forecast Scenario
Competitive Landscape
Pharmaceuticals Industry
Domestic Pharmaceuticals Industry
  Table: Leading Pharmaceuticals Companies On Korea Exchange According To Market Capitalisation
Recent Developments
Company Profiles
Leading Local Manufacturers
Dong-A
Chong Kun Dang Pharmaceutical
Hanmi Pharmaceutical Co
Yuhan Corporation
Daewoong Pharmaceutical
Bukwang Pharmaceutical Company
Kuhnil Pharmaceutical
Choongwae
Leading Multinational Companies
GlaxoSmithKline
Pfizer
Sanofi-Aventis
Merck & Co
Novartis
Eli Lilly
Demographic Outlook
South Korea – Population By Age Group
South Korea – Population By Age Group
South Korea – Key Population Ratios
South Korea – Rural and Urban Population
Glossary
BMI Methodology
How We Generate Our Pharmaceuticals Industry Forecasts
Risk/Reward Ratings Methodology
South Korea Pharmaceuticals & Healthcare Report Q4 2012
© Business Monitor International Ltd Page
Ratings Overview
  Table: Pharmaceuticals Business Environment Indicators
Weighting
  Table: Weighting Of Components

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