SOUTH KOREA’S DRUG PRICING CONTROVERSY
Controversy has arisen between US drug manufacturers and the Korean government regarding the reform of South Korea’s national health insurance system and its affects on drug pricing. Proposals have been made by Korea’s Health Ministry to implement a new reference pricing system as well as a price reevaluation system for the drug industry. These two systems are meant to decrease costs for the national health insurance system and alleviate its fiscal deficits.

The reference pricing system proposes to set price ceilings on drugs with similar efficacy. With this system, patients will receive insurance benefits for drugs that fall within the range of the reference price. For products that are priced higher, patients will have to pay the difference out of pocket. The price reevaluation system also aims to curb drug prices by establishing mandatory reviews of product prices to be done every three years. This is to ensure prices are properly devalued to reflect the expiration of patent rights.

Both these proposals have raised strong disapproval from US drug manufacturers doing business in South Korea. Should the two systems be implemented, the demand for higher priced drugs manufactured by US companies would undoubtedly be negatively affected. US brand name drug products may be replaced by generic, Korean manufactured, inexpensive versions of the same products. US drug makers, including Pfizer and Jansen, lobbied the US government to raise their concerns to the Korean authorities. However, the sacking of former Health Minister Lee Tae-bok has led many Koreans to believe that the US is pressuring the Korean government to the extent of interfering with internal policymaking. The Korean Research-based Pharmaceutical Industry Association (KRPIA), composed of 27 foreign pharmaceutical manufacturers based in Korea, fervently denies the allegations. However, on July 15th, Mark Johnson, president and CEO of Lilly Korea, resigned as chairman of the KRPIA, leading many to believe that he is avoiding the scheduled parliamentary hearing investigating the influence-peddling of the organization he led. Currently, the two proposed systems to overhaul drug pricing in Korea have been stalled but continue to be considered as probable solutions to lower costs for the health insurance system.

REVISION OF THE JAPANESE PHARMACEUTICAL AFFAIRS LAW
The Japanese House of Representatives passed and enacted the revised Pharmaceutical Affairs Law on July 25, 2002. The revision of the law will facilitate start-up pharmaceutical and medical device companies that do not have production facilities in Japan to enter into the market. In addition, the new law will divide the conventional scope of the manufacturer into a “manufacturing stage” and a “sales stage,” while the Gyo-Kyoka/Shonin (license/approval) will turn its focus more on “sales” and “post marketing safety measures.”

Previously, start-up companies were obligated to manufacture their own products without contracting out to a third party. However, the revised law allows these companies to outsource their production and focus instead on R&D and sales. In order to maintain standards, companies that outsource will be required to establish quality control divisions to supervise the quality and safety of their products. The direct access system for foreign manufacturers will be maintained. Foreign manufacturers, however, will also be responsible for quality assurance and post marketing safety measures.

The revision will bring Japan’s medical manufacturing market closer in line to those of the U.S and Europe. Currently, there are approximately 3,000 pharmaceutical start-up firms in the U.S. while there are only 100 in Japan. The law will provide greater flexibility to the Japanese start-up companies and grant them greater access into the pharmaceutical market in Japan.

Already, many Japanese companies are restructuring in order to take advantage of the law revision. Shionogi & Company, one of the largest drug manufacturers in Japan, is planning to spin off five factories into separate companies. By doing so, Shionogi plans to generate more income by outsourcing their production facilities to smaller start-up companies.

THE CHINA COMPULSORY CERTIFICATION: A NEW SAFETY CERTIFICATION
The China Compulsory Certification (CCC) mark has replaced the old China Commission for Conformity Certification of Electrical Equipment (CCEE) and China Commodity Inspection Bureau (CCIB) marks as of on May 1, 2002. The CCC will replace the previous certification systems as the new safety licensing system for certain types of products. The new system’s product list includes 19 product groups and 132 product categories that include medical devices, latex products, and electrical tools. There will be a transition period of one year for converting previously CCEE and CCIB certified products to CCC. Both CCEE and CCIB marks will be invalid after May 1, 2003.

Application for new CCC marks or to change from CCEE or CCIB marks can be done online at www.cqc.com.cn/index-e.htm. Applicants must first register online and obtain an applicant number, then the necessary documents such as type tests as well as payment for the application must be sent to the China Quality Certification Center (CQC). After the type tests have been approved, an initial factory inspection will be done. Next, a Product Certification Engineer and Assessment Member will then examine the results of the factory inspection, type tests, and other documents to determine whether all the requirements have been met. The final phase of the application would be the rejection or approval of the certification by the President of the CQC. Once approved, products may display the CCC mark to indicate its safety license certification.

SINGAPORE GOVERNMENT PROMOTES GROWTH OF LOCAL BIOMEDICAL COMPANIES
The Singapore government has set aside another S$25 million (US$14.3 million) to distribute to promising companies in the life-sciences industry. Singapore’s Economic Development Board has already spent in excess of S$150 million (US$86 million) in 50 portfolio companies. The money will come from the S$1 billion (US$572 million) Biomedical Sciences Investment Fund. The fund was established to assist local scientists to push their research into commercial enterprises. Under this so called BMS Inc. plan, local companies that show promise can stand to receive S$250,000 (US$143,000) in initial grants and up to S$2 million (US$1.14 million) in subsequent funding.

Two local companies that are first to receive the grants are Promatrix Biosciences, a start-up from Johns Hopkins Singapore (an international research arm of Johns Hopkins University located in Singapore), and Attogenix Biosystems, a spin off from a joint project between the Defense Science and Technology Agency (DSTA) of Singapore and Nanyang Technological University (NTU). Promatrix is developing a new kind of tissue scaffold. The scaffold provides a structure for which different types of cells can be grown. It is designed for application in the building of tissue walls and blood vessels. The second company, Attogenix is developing a diagnostic chip. The chip would be capable of analyzing small amounts of blood to test for the presence of diseases such as malaria, dengue fever, and tropical soil disease through genetic processes.

Chairman of the Agency of Science, Technology and Research, and Co-chairman of the Economic Development Board, Philip Yeo, said, “We have successfully attracted international pharmaceutical, biotechnology and medical-technology companies to Singapore…We must now encourage and nurture our own home grown biomedical-sciences companies.”