Table of Contents

CHAPTER 1 EXECUTIVE SUMMARY 4
Scope of the report 4
Key findings 4
CHAPTER 2 OVERVIEW OF SOUTH KOREA 12
A historical perspective 12
South Korea's division from the North 12
Economic growth under military rule, driven by chaebol 12
Corruption a chronic problem 13
Full democracy in 1987 14
A demographic perspective 15
Declining infant mortality 16
Population growth slowing 16
South Korea's young population 18
Proportion of elderly to increase sharply 21
Public spending in South Korea is low but set to rise 22
Low unemployment 25
An economic perspective 26
High per capita GDP 26
Weak domestic demand, despite rising incomes 27
International trade driving South Korea's growth 28
China is South Korea's most important trading partner 29
Export has driven GDP growth 30
Income rise has promoted growth in imports 32
Free trade agreements with US has implications for pharmaceuticals 33
Foreign direct investment set to rise 34
CHAPTER 3 HEALTHCARE IN SOUTH KOREA 37
Establishment of national health system 38
Incremental extension of coverage 38
Organization of South Korea's National Health Insurance 39
Coverage is extensive but lacks depth 40
Private-sector domination 40
Rising healthcare costs 42
Fee for service boosts healthcare costs 43
Rapid adoption of new medical technologies in South Korea 43
Separation of prescribing and dispensing led to fee increases 44
Physicians call the shots in South Korea 45
Healthcare spending 46
Total spending low but on the increase 46
Public expenditure on healthcare is low 47
Large out-of-pocket spending contributes to low public healthcare expenditure 48
Pharmaceutical spending 51
Separation of Prescribing and Dispensing Act shifted revenues to the retail sector 53
Pricing and reimbursement in the South Korean Healthcare system 55
Actual Transaction Pricing 55
Introduction of a positive list 56
The intellectual property environment and drug approval in South Korea 58
CHAPTER 4 EPIDEMIOLOGICAL TRENDS AND DRUG USE 61
Mortality risk factors 61
Rise of non-communicable chronic disease 62
Decline in communicable diseases 63
Pharmaceutical sales in South Korea 64
Retail sector by therapy area 65
Cardiovascular revenues dominate retail sales 66
Gastroenterology franchise contributing to revenue growth 66
Infectious disease one of the largest revenue drivers 67
Oncology sales grew fastest 67
CNS and respiratory drugs show strong growth 68
Retail sector by top 10 drugs 68
Plavix the highest-selling retail drug 69
Cardiovascular drugs dominate the retail top 10 70
Hospital sector by therapy area 72
Infectious disease drugs dominate hospital sales 72
CNS and oncology drugs show strong growth 73
Hospital sector by top 10 drugs 74
Oncology drugs dominate hospital market 75
CHAPTER 5 KEY PLAYERS IN THE SOUTH KOREAN PHARMACEUTICAL SECTOR 76
The top 10 companies in South Korea include domestic and foreign players 76
Domestic companies dominate the volume market 78
Slow growing multinationals dominate value market 78
Prospects looking up for multinationals 79
Pfizer, GlaxoSmithKline and Sanofi-Aventis dominate the South Korean value market 81
Domestic market highly generic 85
Generics market characterized by little price erosion 85
South Korea striving to become a biotech leader 88
State-driven growth in biotech industry 89
Cell-based therapies - company case studies 91
Stem-cell fiasco - the danger of trying too hard 92
CHAPTER 6 BIBLIOGRAPHY 93
Publications and online articles 93
CHAPTER 7 APPENDIX 99
Abbreviations 99
Exchange rates 100
List of Tables
Table 1: GDP for South Korea, Japan, China and India, 2007 27
Table 2: Dominance of private sector healthcare in South Korea versus Japan, 2001 41
Table 3: Increase in new technology use in South Korea, Japan and Taiwan relative to the UK, 1992-2002 44
Table 4: Out-of-pocket expenditure on health as percentage of private expenditure, in the US, 5EU, Japan and South Korea, 2000 and 2005 49
Table 5: Leading causes of mortality and morbidity in South Korea, 2005 61
Table 6: Key drivers of growth for the top five domestic companies in 2007 79
Table 7: Exchange rates, 2006 100
List of Figures
Figure 1: Infant mortality rates in South Korea compared to the US, Japan, the 5EU and BRIC countries, 1960-2006 16
Figure 2: Population growth in South Korea, 1950-2050 17
Figure 3: Decline in South Korea's population growth rate compared to the US, Japan, the 5EU and BRIC countries, 1951-2050 18
Figure 4: Proportion of elderly population in South Korea compared to the US, Japan, the 5EU and BRIC countries, 2006 19
Figure 5: High fertility and low life expectancy contributed to South Korea's young population, 1960-2006 20
Figure 6: Projected increase in elderly population in South Korea compared to the US, Japan, the 5EU and BRIC countries through 2050 21
Figure 7: Public spending in South Korea lags behind more developed countries, 1993-2003 23
Figure 8: Breakdown of public spending for South Korea, Japan, the US and OECD countries, 2003 24
Figure 9: Unemployment rates in South Korea compared to the US, Japan, the 5EU and BRIC countries, 1995-2006 25
Figure 10: South Korea as a fast emerging developing market, 2003-07 26
Figure 11: Steady rise in per capita income in South Korea, Japan, the US and the 5EU, 1990-2006 28
Figure 12: South Korea's major trading partners, 2007 29
Figure 13: Technological exports in South Korea compared to the US, Japan, the 5EU and BRIC countries, 1996-2006 31
Figure 14: R&D expenditure in South Korea, compared to the US, Japan, 5EU, and BRIC countries, 1996-2005 32
Figure 15: Import levels in South Korea, the US, Japan, 5EU, and BRIC countries, 1990-2006 33
Figure 16: Foreign direct investment in South Korea, compared to the US, Japan, 5EU, and BRIC countries, 1996-2006 35
Figure 17: Organization of the South Korean Healthcare system 37
Figure 18: Healthcare provision in South Korea 39
Figure 19: South Korean National Health Insurance finances, 1993-2003 42
Figure 20: Per capita expenditure on health in South Korea compared to the US, 5EU, Japan, 1990-2006 47
Figure 21: Public expenditure on health in the US, 5EU, Japan and South Korea and OECD average, 2000-05 48
Figure 22: Public healthcare expenditure in the US, 5EU, Japan and South Korea, 1990-2006 49
Figure 23: Breakdown of health expenditure in South Korea, 1985-2004 50
Figure 24: Pharmaceutical expenditure in South Korea, Japan, the US and 5EU, 1995-2006 52
Figure 25: South Korean retail sales overtake hospital/clinic sales, 1999-2001 53
Figure 26: Division between hospital and retail sales in South Korea, 2003-07 54
Figure 27: Rising incidence of non-communicable disease in South Korea, 1985-2006 62
Figure 28: Fall in infectious diseases in South Korea, 1980-2006 63
Figure 29: Retail pharmaceutical sales by therapy class in South Korea, 2003-07 65
Figure 30: Hospital-retail split for Glivec sales , 2003-07 68
Figure 31: Top 10 drugs by dispensed through retail channels in South Korea, 2007 69
Figure 32: Norvasc erosion by alternative salt amlodipine, Q2 2004-Q4 2007 71
Figure 33: Hospital pharmaceutical sales by therapy class in South Korea, 2003-07 72
Figure 34: Top 10 drugs by dispensed through hospitals in South Korea, 2007 74
Figure 35: Top 10 pharma companies in South Korea by volume and value, 2003-07 77
Figure 36: Drivers and resistors for multinational companies in South Korea 80
Figure 37: Multinational companies in South Korea by volume and value sales, 2003-07 81
Figure 38: Effect of generic competiion on Zantac revenues in South Korea, 2003-07 83
Figure 39: Volume market dynamics for impotence drugs in South Korea, 2003-07 84
Figure 40: Domestic companies in South Korea by volume and value, 2003-07 87
Figure 41: Biotech activity in South Korea, 2008 89
Figure 42: Surge in biotech-related publications and patents in South Korea, 1991-2002 90