The US-South Korean Free Trade Agreement (KORUS FTA) is expected to improve the competitiveness of US medical equipment and pharmaceuticals. Once approved by the US Congress, the KORUS FTA will enable more than 90% of US medical equipment exported to South Korea to obtain duty-free status. The duty-free status would be given within 3 years of the FTA implementation. Out of this 90%, more than 43% of the US medical equipment exports would receive duty-free treatment immediately upon the FTA implementation. This compares to the existing 5.4% medical equipment tariff in South Korea, which can go up to 50% for some US exporters of medical products.
Under the FTA, South Korea will also agree to allow for higher reimbursements for US pharmaceuticals and medical devices under its single-payer health insurance program. Previously, US manufacturers had voiced concerns over the discrimination against innovative pharmaceuticals in the form of low reimbursement amounts. These low amounts did not consider the costs of innovative drug development of foreign pharmaceutical companies. Under the FTA, South Korea will also publish proposed new laws, regulations and procedures regarding the pricing, reimbursement and regulation of pharmaceuticals and medical devices in South Korea. To increase transparency, these will be published in a publicly available document, where further comment from the public will be allowed.
South Korea’s medical equipment market is currently estimated at about $2.7 billion. Although much smaller than that of China, at $7.5 billion, South Korea’s medical device market is projected to grow about 10% each year. This will be aided by healthy economic growth and a gradually aging population in need of medical care. Between 2008 and 2010, US authorities estimate that $1 billion of medical equipment was exported from the US to South Korea.