BMI's Executive Summary

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South Korea has one of the most attractive pharmaceutical markets in the Asia Pacific region, as evidenced by BMI's all new Business Environment Rankings. The country achieved this high placement due to its large pharmaceutical market (US$16.7bn), impressive growth (10% y-o-y) and high per capita consumption (US$347). In the near term, we expect the country to maintain this position as these fundamental are unlikely to change very much. However, we are poised to lower growth rates in response to a series of negative drivers, such as price cuts and the promotion of generic substitution by pharmacists.

Medicines are expensive in South Korea. An October 2007 review by the Health Insurance Review & Assessment Service found that 13 out of 25 medical products are more expensive than those in seven other countries, including Japan, France, Germany, Italy and the US. In response, price cuts for approximately 5,000 products were announced, resulting in a KRW100bn (US$110mn) loss for the pharmaceutical industry.

During Q307, BMI marginally increased its projection for healthcare spending in South Korea after the publication entitled 'OECD Health Data 2007' revealed that expenditure as a percent of GDP reached 6% in 2005, compared to our previous estimate of 5.8%. This statistic coupled with the country's expected strong economic growth, particularly as a result of the recently signed free trade agreement (FTA) with the US, leads us to forecast that healthcare spending will reach US$74.7bn by 2011, a 6.4% increase on BMI's previous projection of US$70.2bn.

Mirroring the trend seen in the US, multinational pharmaceutical companies in South Korea are increasingly hiring females to promote their products, according to an August 2007 survey by the Women Marketer Meeting (WMM). While women are also penetrating other corporate departments - such as finance, research and management - the ratio of males to females engaged in promotional activities has become grossly disproportionate.

South Korea has a remarkably low level of adult obesity, but a higher rate of overweight citizens. According to a 2002 study that was published in Public Health Nutrition, only 2.4% of the population was considered clinically obese in 1998. Currently, the OECD estimates that this prevalence is now approximately 3.2%. By way of comparison, the obesity rate for the US, Germany and Switzerland are 30.6%, 12.9% and 7.7%, respectively. Only neighbouring Japan has a comparable disease burden.

Large multinational drugmakers operating in South Korea were heartened by a September 2007 poll which revealed that the vast majority of the public are unaware of generic substitution. This means that branded products with expired patents sold by these firms still remain popular, ensuring ongoing inflated sales. We are of the view that this distrust of generics is very much entrenched and is indeed an established cultural phenomenon. For example, the survey also found that more than half of respondents (53.5% of 1,022 people polled) said that they would go to another hospital other than the National Medical Centre (NMC) because of the institution's generic-name prescription programme, presumably believing that standard of care is lower because of its reluctance to dispense branded products.

Contents

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Chapter 1 - Executive Summary

Table: South Korea Pharmaceuticals Industry SWOT

South Korea Political SWOT

South Korea Economic SWOT

South Korea Business Environment SWOT

Chapter 2 - South Korea: Business Environment Ranking

Table: Asia Business Environment Rankings

Business Environment Ranking

Economics - Long-Term Risk

Politics - Long-Term Risk

Regulatory Barriers

Domestic Sector Threat

Market Growth Potential

Market Size Ranking

Chapter 3 - South Korea: Market Summary

Table: Top 10 Products (Q405)

Table: Top 10 New Products Less Than 2 Years Old (Q405)

Chapter 4 - Regulatory Regime

Intellectual Property Developments

Market Access Barriers

Pricing & Reimbursement Issues

Recent Developments

Foreign Trade Developments

Chapter 5 - Industry Trends & Developments

Epidemiological Trends

Table: HIV/AIDS In South Korea

Healthcare Expenditure

Pharmaceutical Industry

Domestic Sector

Multinational Sector Developments

Research Sector

Chapter 6 - Industry Forecast Scenario

Overall Market Forecast

Table: South Korea Drug-Market Expenditure Forecasts

Key Growth Factors - Industry

Table: Health Expenditure Indicators

Key Growth Factors - Macroeconomic

Table: GDP, Output & Population

Prescription Market Forecast

Table: South Korean Prescription Market Forecasts 2005-2009

OTC Market Forecast

Export/Import Forecasts

Table: Pharmaceutical trade indicators

Other Healthcare Data Forecasts

Table: South Korea Healthcare Data Forecasts 2005-2009

Key Risks To BMI's Forecast Scenario

Chapter 7 - Competitive Landscape

Overview

Table: Top 10 Corporatons (Q405)

Table: Leading Foreign Multinationals In South Korea

Chapter 8 - Company Profiles: Leading Multinationals

GlaxoSmithKline

Pfizer

Sanofi-Aventis

Merck & Co

Novartis

Chapter 9 - Profiles: Leading Domestic Manufacturers

Dong-A

DaeWoong Pharmaceutical

ChoongWae

Hanmi Pharmaceutical Co

Yuhan Corporation

Yungjin Pharmaceuticals

Kuhnil Pharmaceutical

Chapter 10 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Technical Process

Pharmaceutical Industry

Sources

Chapter 11 - Appendix: Regional Demographic Data

Table- Manufacturing Wages (ave per annum), US$

Table - Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Country Snapshot: South Korea Demographic Data

Section 1: Population

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Competitive Landscape for Asia Pharmaceuticals and Healthcare: Sample of Companies Ranked

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Cross-border analysis of regulatory systems comparing the patenting environment, summarising regional pricing and reimbursement factors and monitoring the growth of the Pharmaceuticals sector across the region. Company SWOTs cover leading multinational and national drug companies operating in each market.

Network of Asian Pharmaceuticals & Healthcare Sources

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BMI's Asian Pharmaceuticals Healthcare Reports are based on an extensive network of multilateral organisations, government departments, pharmaceuticals & healthcare industry associations, chambers of commerce and company reports. Information sources include: