The last decade has seen considerable investment in South Korea, and the country now represents the world's 11th largest economy
and has the 11th largest GDP.1 With a population of approximately 50 million and a GDP of $14000 (€8880) per head, it is an important consumer base that
international companies cannot afford to ignore.
Unfortunately, external enthusiasm for the South Korean market was severely dented by the 1997 financial crisis, which led
to many foreign investors selling their assets. Since then, the country has introduced major policy changes that have made
it stronger and more focused than other Asian competitors; for example, South Korea's foreign-exchange reserves have been
described as the second highest after Japan among the 30 international member countries that make up the Organization for
Economic Co-operation and Development. This makes the likelihood of another financial crisis reminiscent of 1997 unlikely.
As the country's economy has rebounded, so too has foreign interest. This was highlighted by the decision to hold the 2006
International Conference on Pharmaceutical Medicine (ICPM) in Seoul, South Korea's capital?— the first ICPM meeting to have
been held in the Asian region.2
Driving foreign interest
The South Korean government has invested in infrastructure and improved funding for the healthcare system to alleviate uncertainties
caused by the 1997 financial crisis, and to attract the attention of the global pharmaceutical sector. The National Health
Insurance (NHI) Act, introduced in 1999, integrated multiple insurance societies into a single insurer system to enhance the
equity of financing for healthcare. Backed by temporary measures through the 2002 Special Act for Financial Stabilization
of National Health Insurance, the government attempted to provide comprehensive healthcare services to the public. The NHI
system, overseen by the Ministry of Health and Welfare,3 is mandatory for Koreans living in the country, except for some medical aid beneficiaries. In October 2003, it was estimated
that the NHI Programme covered 97% of the population. The Medical Aid Programme, a Korean social assistance programme, covered
the remaining 3%.
The author says...
The new system has created considerable opportunities for foreign companies as there is strong demand from the population
for new medicines. At present, pharmaceuticals account for approximately 30% of healthcare expenditure in South Korea.1 Estimates of the value of the country's pharmaceutical market vary, but Business Monitor International has predicted that
it will reach $21.6 billion (€13.7 billion) by 2011.4
A major attraction for pharmaceutical companies is the separation of medical prescribing and dispensing, which was a key reform
of the South Korean healthcare system in July 2000. This process marked a shift from dispensing doctors to a retail pharmacy
market and was strongly resisted by physicians, who had traditionally derived a large proportion of their income from pharmaceuticals.
These measures appear to have benefited multinational pharmaceutical companies, which are dominating the market,1 and South Korean consumers are now more aware of branded medications. As foreign companies tend to introduce the latest breakthrough
medicines, they have had the most success. In contrast, many local companies have become so reliant on income streams from
the government for generic drugs that they have little desire to innovate.