MEDICAL DEVICE REIMBURSEMENT IN KOREA: AN OVERVIEW
Last summer, the Korean government put into service a new law, the “National Health Insurance Act,” which, among other things, significantly changed Korean government policy regarding reimbursement of medical devices. Government approval of the listed coverage and price is required before a medical device can be marketed for sale in Korea. The new rule was enacted in large part as a cost-containment mechanism, and is also part of a series of policies aimed at combating corruption in the Korean health care industry.

As a follow up to the National Health Insurance Act, in November 2000 the Korean government instituted a new so-called “ceiling price system,” under which the government negotiates with firms to set price limits for reimbursable medical devices. Depending on the product, limits are set on an individual basis or on an average price basis of a group of similar products. This pricing mechanism has caused some controversy, as grouping products tends to equate lower technology products with new innovations, holding down reimbursement rates for new technology. In fact, U.S. Department of Commerce officials met with Korean government representatives in April 2001 to discuss this issue. U.S. officials argued that lower reimbursement rates have made it more difficult for new medical devices to enter the Korean market, ultimately denying Korean citizens access to cutting edge developments in medical technology. Korean officials acknowledged the difficulties and indicated that the Health Insurance Review Agency (HIRA) has recently created a task force to address reimbursement pricing issues. However, the government needs to keep costs down, as Korean patient co-payments average only 3-4% of costs, well below worldwide averages.

To be listed for reimbursement, medical device suppliers must submit an application to the Korea Food & Drug Administration (KFDA) within 30 days of receiving approval for the product. Foreign manufacturers may not submit this themselves. Instead, the application must be submitted on their half by their local distributor. To apply for reimbursement coverage, a firm must provide HIRA with a proposed price (including cost breakdown), expected sales volume, a copy of the product’s approval documents, information on cost-effectiveness (as compared to similar or competing treatments), information on clinical use(s), product information, and other reference materials.

FINDING AND QUALIFYING DISTRIBUTORS IN CHINA: THE BASICS
Finding and qualifying distributors in China can be a tricky process. Historically, all medical device and pharmaceutical distribution in China was done via State owned distributor companies who covered most of China but were very bureaucratic and not very market oriented. Abut six to seven years ago, private medical importing companies began to form. The advantage of these groups are that they tend to be more marketing oriented and able to move faster than State owned groups. However, most are relatively small (under 75 people), not well financed, and oftentimes do not have the resources to buy a container of your product. Despite these negatives, private medical importing companies are often the best way to go, as long as you check the group out very carefully (both reputation and financial situation) and make sure they have a business license to operate legally. Be weary of groups with big talkers, who claim to have 100 staff (when the staff is 90% other third party distributor groups and not on this company’s payroll) and payment terms that oftentimes will never be met. Distribution can also be split between different firms because (1) the landscape is so large, and/or (2) the manufacturer has multiple lines of business. For example, you might choose to have separate distributors for North China and South China, or separate nationwide distributors for each of your product lines.

FURTHER DEREGULATION IN JAPAN: DEVICES, PHARMACEUTICALS BENEFIT
Despite U.S. companies’ relative success in the Japanese medical device and pharmaceuticals markets, over-regulation has continued to hamper U.S. cutting edge products’ access to Japan’s market. This hurts both U.S. manufacturers and Japanese citizens, who are denied access to innovative, cost-effective, life-saving U.S. medical technologies.

The U.S. and Japan have been working together on deregulation issues since 1989. In recent years, through the Enhanced Initiative on Deregulation and Policy (“Enhanced Initiative”), the U.S. and Japan have negotiated more expedient medical device approval processes and greater acceptance of foreign clinical data for both medical devices and pharmaceuticals, among other things. As a result of work under the Enhanced Initiative, in October 2000, the Ministry of Health, Labor, and Welfare (MHLW) revised the reimbursement pricing procedures to increase transparency and create more appropriate valuations of medical devices that recognize increased innovation. MHLW has also indicated that it will review the “timing” of granting reimbursement to encourage faster introduction and greater availability of innovative new products. Additional drug pricing reform is expected to be completed by April 1, 2002.

On June 30, 2001, the U.S. and Japan announced the establishment of the Japan-U.S. Economic Partnership for Growth, the fourth bilateral forum to focus on important bilateral issues such as regulatory reform. As part of this forum, a working group on medical devices and pharmaceuticals will focus on remaining issues related to medical devices, pharmaceuticals, and nutritional supplements. This new organization, which replaces the “Enhanced Initiative” framework, should help continue the regulatory reform work that has occurred so far, increasing market access for U.S. companies and allowing more choice for Japanese health care providers and consumers.

THE PHILIPPINES PHARMACEUTICAL MARKET: OPPORTUNITIES FOR FOREIGN COMPANIES
The pharmaceutical market in the Philippines is expected to grow 5% this year, to $294 million. Poverty and pollution both help to contribute to especially high incidences of diseases such as respiratory infections, cardiovascular disease, and diseases of the central nervous system. Thus, pharmaceuticals that treat these illnesses are in particularly high demand. Pharmaceutical products are sold primarily through drug stores, with hospitals, supermarkets, and corner stores also serving as retail outlets.

Most large U.S. pharmaceutical companies, including Pfizer, Eli Lilly, and Abbott Laboratories are represented in the Philippines. Market entry for U.S. producers is relatively easy, as the Philippines’ Bureau of Food and Drug uses U.S. pharmacopoeia. Switzerland has the largest share of the Philippines’ market with 11 percent, followed by the U.S. and Germany with 10 percent of the market each.