South Korea boasts a large pharmaceutical market, with its 2008 value estimated at over US$10.5bn at consumer prices. However, while the country’s prospects are considerable, price cuts, patent expirations and generic substitution will conspire to decelerate the rate of its pharmaceutical market growth over the coming years. Consequently, South Korea’s third position in BMI’s Business Environment Rankings for Q109 will be strongly challenged by emerging markets in Asia Pacific region. Still, South Korea’s pharmaceutical market is expected to be worth over US$15.4bn at the end of 2013, with population ageing providing opportunities especially for manufacturers of novel treatments for chronic diseases.

Oncology medicines are a major therapeutic area, given that cancer has long been the leading cause of death in South Korea.

The local pharmaceutical industry is relatively well developed, despite being mostly focused on generic products. South Korea has around 250 manufacturers, with leading companies including Dong-A Pharmaceutical, Daewoong, Yuhan Corporation, ChaeWoong and Hanmi. In recent years, local producers have turned their attention to in-house research and development (R&D) of novel drugs, in a bid to boost their position both at home and regionally. Additionally, most local companies are quick to capitalise on the patent expiries of leading medicines produced by multinationals such as US Pfizer and French Sanofi-Aventis, which have recorded negative sales growth in H108. In the meantime, local companies are largely posting double-digit growth.

The promise of the South Korean generic market is substantial. A number of off-patent products are expected to be launched in the coming months. In Q208 alone, patents for Pfizer’s Lipitor (atorvastatin), Merck & Co’s Cozaar (losartan), Ortho-McNeil’s Ultracet (tramadol), Takeda’s Actos (pioglitazone), and GlaxoSmithKline (GSK)’s Lamictal (lamotrigine) and Paxil (paroxetine) were set to expire. Dong- A, Hanmi and Yuhan were planning to launch their generic versions of Cozaar, while Daewoong and MSD Korea intend to launch their generic Januvia (sitagliptin). The generics market is also attracting global players. To this end, Iceland’s generic drugmaker Actavis entered the market in November 2008, bringing the number of generic drugmakers operating in the country to five. The company has contracted J&M Pharm, a South Korean licensing and consulting firm, to distribute its products.

In terms of a wider operating environment, despite posting a robust Q208 figure, we continue to see increasing risks to the South Korean growth as weakening domestic demand has made the economy ever more reliant on external demand. We have, accordingly, revised down our 2008 GDP growth estimate for South Korea from 4.7% to 4.2%, but caution that risks remain skewed to the downside. We have also revised down our 2009 GDP forecast from 4.9% to 4.3%. Deteriorating labour market and weakening consumer sentiment continue to weigh down private consumption, which will also be reflected in the lower forecast growth of the country’s over-the-counter (OTC) medicines segment, in comparison to total market and prescription drugs.