Korean pharmaceutical market: An overview
Thursday, May 23, 2002 08:00 IST
Since the 1990s, the Korean pharmaceutical market size has grown to become the tenth largest in the world, attracting many multinational pharmaceutical companies from all over the world.
In 1995, the total value of drug production in Korea crossed US$ 7.5 billion. The share of production of pharmaceuticals to the total manufacturing industry in Korea is about 7.3 per cent and this industry is still regarded as having high potential for growth as well as being considered an attractive value added sector in Korea. It may be noted that the share of finished drugs out of the total pharmaceutical production is 93 per cent.
One of the major growth sectors in this industry is raw material production, which has been growing at rates up to 20 per cent a year. As of 1997, there were 92.3 per cent manufacturing firms making drugs, quasi-drugs, cosmetics, sanitary aids and sub-divided drugs. There are, at present, more than 40 joint ventures in this sector in Korea with a combined domestic market share of about 10 per cent.
Performance of leading domestic and foreign invested companies in Korea
Within the finished drugs segment, the annual growth rate of OTCs as has been declining while that of ethicals has been increasing though approximately both are 50 per cent of the total market. The total output of OTCs in 1997 was Won 4.64 trillion. The major categories of OTCs are antibiotics against gram-positive and negative infections, antipyretics, analgesics and anti-inflammatory agents. The output of pharmaceutical raw materials in 1997 was Won 508.4 billion (US$ 4.2 billion approx.). More than half of this was accounted for antibiotics, the leading items of which were Cephalosporin antibiotics and Amoxicillin.
Exports and Imports
The trade in the pharmaceutical industry centres mainly around pharmaceutical raw materials (bulk), despite the low proportion of this segment within the domestic production. Though it constitutes only 6.7 per cent of the domestic production, its percentage of exports from Korea is about 75 per cent. While pharmaceutical exports have been increasing imports during the same period also showed a tremendous increase, thus making the trade balance negative. The pharmaceutical trade balance between import and export in 1996 showed a ratio of 2.41 to 1.
In the sector of raw materials, the greater efforts to export pharmaceutical bulks has resulted in greater increase in the import of necessary intermediates. The domestic pharmaceutical industry is concentrating its efforts on new drug R&D and some of the companies have made heavy investments for the development of major exportable items. Some manufacturers of antibiotic basic and intermediate materials have achieved visible results in the overseas market in spite of heavy price dumping competition from countries like India and China. Vaccines are another area of interest of Korean companies tackling overseas markets.
The total import of pharmaceutical products into Korea in 1997 was valued at US$ 1089 million of which finished products totaled US$ 226 million. Out of this, 75 per cent or US$ 177 million is in the category of ETC while the remaining are OTC products.
India''s exports and EFI from Korea
India''s total exports of pharmaceutical finished products to Korea in 1997 was worth US$ 0.721 million with no export shown in the statistics for 1998. However, India''s exports of pharmaceutical raw materials (mainly bulk drugs) has been growing sharply. In 1997, Indian exports to Korea under chapter 29 covering all organic chemicals was US $ 101 million showing a growth of 17 per cent over the previous year. Of this, antibiotics constituted about 16 per cent. In 1998 under the same chapter exports fell to about US$ 70 million a fall of nearly 30 per cent, mainly on account of the economic crisis in Korea when imports overall into the country also declined by 35 per cent. When the economy stabilizes and normal demand conditions prevail the exports from India are expected to revive.
In India there are two Korean joint ventures making Rifampicin, an anti-TB drug. Chong Kun Dang has a tie up with Hindustan Ciba Geigy in Pune but caters only to the domestic market in India. Yuhan Corporation also has a joint venture in Gujarat and it is form this JV that Rifampicin is being imported into Korea, which is essential the only finished pharmaceutical being imported here from India.
Procedure for registration of drugs in Korea
As per the Pharmaceutical Affairs Law in Korea any persons who wish to manufacture/import drugs for business have to obtain;
(i) a drug manufacturing/ import license for each of their manufacturing/import business facilities from the Ministry of Health and Welfare and;
(ii) a manufacture/product import registration for each item from the MOHW or the Korea Food & Drug Administration (KFDA) as the case may be.
While the license as above is granted after Korean health inspectors have inspected the manufacturing facilities and certified as satisfactory such things as manufacturing capability, quality control, quality of human resources etc, with regard to the registration formulation required, there are two systems in vogue. One is product declaration for those products, which have been previously identified as registered products in the local market.
The MOHW has specified these to include those products listed in the Korea Pharmacopoeia and other specified Pharmacopoeias (where these have been registered in Korea) and such drugs as are notified by the KFDA. (The Indian Pharmacopoeia is not included). However, the above system excludes some types of drugs including anti-biotic. For permissible drugs, the declaration for registration is to be made to the local office of the KFDA, which is to review the declaration within 10 days. This system was introduced in 1992.
However, for products not subject to the declaration system, a product approval is to be obtained from the MOHW.
Distribution structure in Korea
The distribution structure in Korea typically revolves round an intermediary layer called the trading agent since most end users in the country do not speak English and prefer to deal with foreign suppliers through the local trading agents. In the area of chemicals and pharmaceuticals there are generally two types of trading agents:
(i) Offer sales agents whose business encompass issuing offer sheets and conducting sales promotion activities on behalf of foreign suppliers on a commission basis.
(ii) Stock sales agents who are actually distributors or dealers who imports and sell in accordance with agency contracts or authorization of foreign suppliers.
Taxes and Duties
The basic customs duty on all manufactured goods including chemical and pharmaceuticals is 8 per cent in Korea.
- Courtesy: Embassy of India, Seoul.