Drug makers face worst performances
By Kim Tae-gyu
The country’s leading pharmaceutical companies including top-tier ones have struggled to find their feet during the first quarter, even before a government-mandated price cut came into effect.
Market leaders like Dong-A Pharmaceutical, Daewoong Pharmaceutical, Yuhan Corporation and Hanmi Pharmaceutical saw profits almost halve or even suffered deficits according to recent data from Shinhan Investment Corp.
Market observers say that hospitals and pharmacies returned medicine during the first three months of the year to hurt the bottom lines of drug makers ahead of the price drop, which started last month.
Operating profits of industry bellwether Dong-A amounted to 16.2 billion won during the January-March period, down 46.5 percent from a year before, while those of No. 3 player Daewoong dipped 32.6 percent.
Fourth-largest Yuhan saw its operating income contract 48.4 percent to 15.5 billion won while fifth-biggest Hanmi chalked up 6.5 billion won in losses.
Just industry runner-up Green Cross increased operating profit by 23.1 percent to 20.9 billion won as the Seoul-based company’s business was immune to the government measure.
``Sales of the big five edged merely 2.8 percent on average during the initial quarter from a year ago while their profits plummeted 36.3 percent,’’ said a Seoul analyst, who asked not to be named.
``Excluding Green Cross, the remaining four’s turnover inched up a mere 1 percent on average while their profitability worsened by 49.8 percent. Drug firms now teeter on the brink of big trouble as the effects of the price downgrade will be full-fledged from the second quarter.’’
Starting last month, the country’s drug prices fell by double-digit rates as the Ministry of Health and Welfare (MOHW) slashed the price of 6,506 medicines, half the total covered by medical insurance.
The policy, geared toward eliminating the illegal kickbacks from drug firms to doctors and pharmacists, has been greatly criticized and challenged by pharmaceutical outfits but the Seoul administration has forged ahead with its plan.
In this climate, the market consensus is that some would experience declining sales from the second quarter like Daewoong and Hanmi. Some are feared to see a double-digit decline.
Foreign companies are also known to face jitters due to the price change although they have not disclosed the latest figures.
``The atmosphere could not be worse. Many are trying to slash their payrolls because most companies think that the worst is ahead,’’ said an employee at a global pharmaceutical company.
``In our case, we are not likely to diminish our workforce. But the firm has said it will not hire new staff even when demand rises. Overall, the industry is stuck in a difficult situation.’’