By Noh Hyun-gi
Can regulators and drug makers reconcile their conflicting interests?
The answer to this question will pretty much determine whether the world in general including Korea will be able to provide affordable health care for the aging population without restricting the endeavors to innovate by pharmaceutical firms.
The American Chamber of Commerce in Korea (AMCHAM) Wednesday held “Healthcare Innovation Seminar 2012,” inviting professionals from both the public and private sector to discuss the future of life saving enterprises.
The event highlighted the relationship between government and industry_ the former wants to control health care costs, the latter seeks profit _ showing that they can work together for the common purpose of helping people live long and healthy lives.
Experts from both sectors stressed the need for an innovation-friendly environment that will prepare properly for a Korean society mainly composed of elderly seniors and the subsequent rise in health care costs.
“I believe now is the most tenuous yet the most promising time for our manufacturers,” said Lee Dong-ho, CEO of the Korea Drug Development Fund during the opening session.
The discussions were timely and pointed, given the recent tension between the two entities. In April, the Korean government imposed an average 14 percent price cut on 6,506 medicines which led some domestic producers to file lawsuits against the Ministry of Health and Welfare. The federal agency has also tightened punishments for underhand illicit transactions.
The Korean market is estimated at 19.1 trillion won in 2010, which grew by 5.1 percent from 2009, according to Sohn Yeo-won from the Korea Food and Drug Administration. The largest drug categories are antibiotics and antipyretics. Korea mostly imports recombinant protein products.
The domestic market accounts for 1.9 percent of the world consumption at $856 billion. Annually, imports reach $4.69 billion while exports are a mere $1.72 billion. Quinaxem, a combination vaccine for infants by BernaBiotech Korea is the most exported item.
Korea suffers from over-competition, a lack of innovation and collaboration between academia and the industry. There are 468 small pharmaceutical firms in Korea. The largest company, Dong-A Pharm, has annual sales of 1 trillion won, barely 1 percent of Pfizer’s. Its size prohibits any of them from developing a stable infrastructure or making significant investments in successful research and development (R&D).
The saturated market leads to under-the–table deals of paying incentives to doctors or agencies to prescribe specific products becoming the industry norm.
Domestic firms have low commitment to enter the global market as they lack information on licensing and approval processes in foreign nations. With China and India advancing in generic manufacturing, the focus area of Korean firms thus far (generics consist 68 percent of their sales), home companies are quickly losing ground.
Industry officials from Korea, Australia, Germany and Japan at the seminar stressed the importance of speedy reviews and approval processes for biopharmaceutical products.
The Korean health ministry recognizes the state of the domestic biomedical industry and has launched a subsidy program to encourage R&D as well as mergers among players. On June 18, it certified 48 companies as “innovator pharmaceuticals.” These producers will enjoy premiums for innovator drugs, first generics and biosimilars (or follow-on biologics) and tax benefits for R&D investment.
Left unaddressed, price cuts and a muddled approval system threatens not only the advancement of the domestic industry but the healthcare of the people as foreign manufacturers are likely to shun the market, depriving the country of high-end products.
Japan also suffers from avoidance by global manufacturers due to lowered prices and strict regulations. Less than half of the products available in America are sold in Japan. The key reasons for the discrepancy are inadequate market size and high regulatory costs, according to a 2010 survey by L.E.K Consulting.
More alarmingly, over 80 percent of the pharmaceutical commodities sold in the U.S. come to Japan with a one- to three-year lag, whereas 40 percent of such products become available in Korea and China simultaneously.
This led the Japan government to adopt a policy revision in 2010 to expedite the review and offer additional premiums to encourage a timely supply of medicine and treatment options. Bruce Ellsworth, director of government affairs and policy at Johnson and Johnson in Tokyo, said the Ministry of Health, Labor & Welfare is on track with its policy changes.
In more established markets such as the U.S. and Europe, regulatory agencies focus on reflecting frontline technology in policies and promoting orphan drug (medication targeted for rare conditions) development.