South Korea is a rapidly growing pharmaceutical market. Previously considered a developing economy, this country was reclassified as a developed economy in 2010, though it is still considered an emerging market. In recent years, South Korea's high growth rate has continued amid worldwide economic downturns and is expected to continue in years to come. It is estimated to be the fastest growing developed market in the world. Other characteristics, such as recent free-trade agreements strengthening intellectual property rights and an aging population, make the market attractive for multinational companies. There are, however, considerable challenges. While South Korea's overall economy has outpaced other countries in the years since the worldwide economic downturn, rapidly rising healthcare costs caused the government to cut drug prices in 2011. Because the government is the single payer, this rise in costs has had a profound impact. South Korea's new president, Park Geun-Hye, has made building a safe and happy population a centerpiece of her platform. As a result, the Ministry of Food and Drug Safety (MFDS) has highlighted their own goal of becoming an international model for drug safety.
The bio-pharmaceutical business outlook in South Korea remains positive. (JASON TEALE PHOTOGRAPHY WWW.JASONTEALE.COM/GETTY IMAGES)
South Korea health and pharmaceutical market overview
The International Monetary Fund (IMF) considers South Korea to be a "graduated" developing economy, with the 15th highest gross domestic product (GDP) per capita worldwide and the 12th highest purchasing power parity (PPP). It is now the fourth largest healthcare market in the Asia-Pacific region, following Japan, China, and Australia (1). According to the Korean Pharmaceutical Traders Association, Japan and China are also the largest buyers of exported drugs from South Korea (2).
Over the past four decades, South Korea's population has consistently migrated from the countryside to cities, especially the capitol, Seoul. With 9.8 million inhabitants at the last census in 2005 and more than 24.5 million people in the surrounding areas, Seoul is the most densely populated city in the OECD. The population is one of the most ethnically homogeneous, but low birth rates and a rapidly aging population have resulted in increasing immigration since 2000, largely from other Asian countries, with government projections that the immigrant population could be as high as 6% in 2030 (3). The government has also created incentives for fertility and adoption in recent years to balance the rapidly aging population.
Population demographics have two particular implications for pharmaceutical companies looking to expand in the region: first the labor participation rates of the Korean population will decrease, and second, the aging population will face greater health needs.
Healthcare is paid for by National Health Insurance (NHI) with financing help from employee/employer contributions and is compulsory. Eligibility extends to all residents of South Korea, regardless of their nationality. This program does require copayments for pharmaceutical products, set at 35–40%. Because the copay is a percentage, some individuals also purchase private plans to offset additional costs in the case of expensive diseases such as cancer.