Asian countries represent the fastest developing area for medical technology in the world, with an expected 15¬20% annual growth rate in that area in the near future. As per capita incomes have begun to rise above $5000 per year in many Asian countries (excluding Japan, which has a greater per capita income than the United States), there has been a striking increase in health-care and medical technology spending.
The Republic of Korea presents one of the best opportunities for businesses seeking to benefit from the phenomenal growth of the Asian market. From 1965 to 1990, the Korean economic growth rate was the second highest in the world. With per capita incomes exceeding $6000, the purchasing power of over 40 million Koreans has been and continues to be very strong.
The Korean market will expand for U.S. medical exporters in the future. Statistics from the Korean Hospital Association show 650 hospitals with 125,100 beds and 51,425 physicians in 1994. In 1993, $730 million was spent on medical devices in South Korea. Surgical and medical instruments accounted for $205 million, surgical appliances and supplies for $214 million, and x-ray apparatus and tubes for $112 million.
U.S. manufacturers have attained a strong market position in the Republic of Korea, supplying 40% of total imports in 1993. Among the U.S. companies that have enjoyed success in the Korean market are Abbott Laboratories (Chicago); Beckman Instruments, Inc. (Fullerton, CA); DuPont Co. (Wilmington, DE); Nova Medical, Inc. (St. Paul, MN); Immucor, Inc. (Norcross, GA); and Ciba Corning Diagnostic Corp. (Medfield, MA). Several European and Japanese manufacturers, such as Coulter of the United Kingdom and Fujirebio and Iatron of Japan, are also competitive in the Korean health-care product market.
One of the most successful market sectors for U.S. manufacturers has been laser equipment. Since medical laser technology was first introduced to South Korea in the 1980s, this sector has experienced unprecedented growth, particularly in the specialties of ophthalmology, dermatology, and orthopedics. Imported equipment accounts for 98% of the Korean laser market. The United States has held a strong position in this market, with a market share of approximately 70%. However, German and Japanese manufacturers are expected to increase their shares.
MEDICAL FACILITY EXPANSION
Recently, the Korean government extended comprehensive medical insurance to the nation’s entire population, a plan that includes upgrading hospitals and building new ones. In addition, the government plans to construct new residential areas–and a number of new medical facilities–in Seoul and other satellite cities. Under this plan, market sectors that historically have had low growth rates in South Korea, such as patient monitoring systems, may offer increased export growth opportunities.
Although the plan to increase the number of medical facilities is encouraging, medical device manufacturers should be aware of the Korean government’s policy of restricting the purchase of high-cost medical devices to be installed in Korean facilities. Hospitals that wish to install equipment such as computed tomography scanners and magnetic resonance imaging devices are required to obtain approval from the High Cost Medical Equipment Council of the Ministry of Health and Social Affairs. This policy, adopted in 1991, led to a decrease in imports of these devices. However, the Health Industry Manufacturers Association (HIMA) reports that, since 1994, the ministry has eased its standards for these approvals.
In the past, the Korean medical device market suffered from excessive testing requirements and regulations that lacked a sound scientific basis. Today, several new regulatory developments promise an improved export environment for U.S. manufacturers.
In December 1995, the Korean government released a draft of revised regulations that are a major improvement over those issued on July 1, 1993. The new regulations introduce a risk-based classification system for devices, improve testing and quality control systems, and establish a postmarket surveillance system.
Further regulatory modifications are in the works, to be finalized this May and translated by July. The Korean Academy of Industrial Technology (KAITECH) is preparing a draft of a globalized regulatory system. As a part of this new system, the government is considering the use of the family of quality systems standards, commonly known as ISO 9000, developed by the International Organization for Standardiza-tion, as well as International Electrotechnical Commission standards. Additional reduction or elimination of testing requirements and the removal of Korean Medical Instruments Industrial Cooperative (KMIIC) involvement are under consideration as well. The government may also establish an agency similar to FDA. HIMA has submitted comments to the Korean government regarding the proposed new regulations.
The number of product categories subject to testing has been reduced from 36 in 1987 to 11 in 1995, and KMIIC no longer requires the quantity and unit price for import notification. However, some medical devices, such as anesthetic equipment, electrosurgery equipment, incubation equipment, and high-pressure sterilization equipment, are still subject to piece-by-piece mandatory testing.
Further reduction of mandatory testing and a move toward adoption of ISO 9000 standards will streamline and speed up the import process for medical devices. U.S. medical device manufacturers need to stay on top of the swiftly changing regulatory scene to be successful in Korea.
MEDICAL DEVICE CLASSIFICATION
The Republic of Korea’s new regulatory system divides medical devices into three classes according to the risk associated with the equipment. Class I medical devices are those that do not come into direct contact with, or do not pose any hazards to, the human body. Typical products falling into this category include knives, scissors, drills, beds, and wheelchairs for medical use. A manufacturer or importer has a single requirement for Class I devices–notification to KMIIC of general information on the medical device, such as the name and address of the manufacturer, product name, and product type.
Class II medical devices are those whose safety and effectiveness can be guaranteed if they are designed and manufactured according to relevant standards relating to their raw materials, components, structure, and performance. Such devices include transcutaneous electrical nerve stimulators, ultrasound scanners, defibrillators, and electro-encephalographs. The government requires approval of these devices before they can be sold and distributed. The approval application must be in Korean and must contain the name and number and date of issuance of applicable technical specifications.
Class III medical devices are defined as those that have a serious effect on the human body, such as life-supporting devices or permanent implants. Products in this class include such devices as pacemakers, prosthetic heart valves, vascular graft prostheses, and artificial tissue. The application process for approval of these devices is similar to that for Class II devices; however, information pertaining to the device’s safety and effectiveness must also be submitted for Class III medical devices.
Imported medical devices must be tested by an agency in South Korea designated by the Ministry of Health and Welfare (MOHW). Testing results from a foreign agency may also be acceptable if they meet Korean standards. Testing is generally done on the first shipment of a particular device, except for those Class I devices exempt from quality control; subsequent shipments of these exempt devices are tested.
Different Korean testing agencies are designated according to the type of medical device involved. General medical devices such as catheters are tested by the Korea Testing and Research Institute for Chemical Industry and the Korean Merchandise Testing and Research Institute. For other types of devices, KAITECH is the testing agency. Implants and devices based on new technologies are tested by the Korean National Institute of Safety Research. Certification from any of these agencies is good for five years.
PERMISSIONS TO EXPORT
Products sold in South Korea prior to January 1, 1995, are grandfathered under the new regulations, and additional testing is not required. This is a significant change because prior grandfathering protection extended only to July 1, 1992. Exporters of these devices must submit the following documentation to an MOHW-authorized testing agency:
- A certificate of free sale or a certification of products of export.
- A certification that the product has been sold in Korea for three or more years.
- Evidence that at least 50 pieces have previously been imported to South Korea.
For implants, the exporter must present shipping records and certify that no problems have occurred.
In order to export new products into South Korea after January 1, 1995, applications should be submitted in Korean to an MOHW-authorized testing agency. A single application may be submitted for multiple products. The agency has 15 working days to complete reviews.
For medical implants and newly invented devices, an applicant will also have to include data concerning the safety and efficacy of the product. Applications for implants and new devices are sent to the National Institute of Safety Research for a review, which takes about 90 days. Local governments handle follow-up monitoring and report nontested devices to MOHW.
After a device is certified, the manufacturer must submit an import notification to KMIIC, including an import license and a certificate of free sale. Three days before going through customs, a report of the customs clearance plan must be sent to the testing agency. After customs clearance, stock is held in quarantine until it has passed testing.
Foreign medical device exporters receive substantial product exposure at the annual Korean Medical Equipment Show, organized by one of South Korea’s major daily newspapers, Hankook Ilbo. In addition, foreign manufacturers now hold their own presentations for physicians or hospital purchasing officers.
U.S. manufacturers cannot ignore political factors when appraising the Korean medical market. Korean politicians often support protectionist policies, particularly in election years. Thus, restrictions on imports into the Republic of Korea could continue through a maze of nontariff barriers.
The relationship between South Korea and the United States, however, has remained healthy, and South Korea is one of the United States’ most important commercial partners. Given Korea’s receptiveness to new medical technology and its plans to reduce regulation, U.S. manufacturers will have the opportunity to hold on to and even increase their share of this growing market.