A recent survey conducted by the Political and Economic Research Consultancy (PERC), a Hong Kong based research group, gave South Korea 5.88 points on a scale of 0 to 10 for intellectual property (IP) protection (0 being the highest level of IP protection and 10 being the lowest). The country was placed fifth among twelve Asian countries with Singapore ranked highest followed by Japan and Hong Kong. The results of the survey were not surprising to many multinational companies operating in South Korea, particularly research-based pharmaceutical companies.
In a recent report released by the Pharmaceutical Research and Manufacturers of America (PhRMA), entitled “PhRMA 2003 ‘Special 301’ Submission,” South Korea was placed on the organization’s “Priority Watch List Countries.” According to PhRMA, South Korea’s policies towards IP protections as well as recent regulations proposed in 2002 have merited this heightened status.
According to the report, the Korean Food and Drug Administration (KFDA), the government authority responsible for ensuring safety and efficacy of medical products, and the Korean Industrial Patent Office (KIPO), currently do not have any direct connections. Thus, competitors are sometimes given marketing approval by the KFDA for products that are covered by patents at KIPO. Companies holding the patents are then forced to defend their patents through the court system after the competitors’ products are on the market, resulting in huge losses in time and money. PhRMA also argues that South Korea inhibits innovation and usage of more sophisticated patented drugs by restricting reimbursement for such products. The South Korean government’s recent 2002 proposal to implement a reference pricing system to set ceilings for reimbursement rates will further hinder the ability of multinational research-based pharmaceutical companies to operate successfully in South Korea.
PhRMA estimates that due to the restrictions and lack of intellectual property protection in South Korea’s current system, members of the organization report an estimated loss of between US$500 million to US$1 billion annually.