Disputes Continue Between Foreign Pharmaceutical Manufacturers and the Korean Authorities

The battle between multinational pharmaceutical manufacturers and the South Korean government continues as the proposed “reference pricing system” moves forward. The reference pricing system, which plans to cut current reimbursement rates for medical treatment in Korea, will have a considerable effect on foreign manufactured drugs. The Korean Research-Based Pharmaceuticals Industry Association (KRPIA), an organization that represents multinational drug companies in South Korea, claims that the proposed reference pricing system is discriminatory to foreign manufacturers. With the government no longer paying 70% of medical costs for its people, patients will opt for generic products produced by local manufacturers.

Jan Peterse, president of Pharmacia (U.S. pharmaceutical company headquartered in New Jersey) and chairman of the KRPIA, commented, “I would advise against investment in this country. It is easy for the government to pick on foreign companies because there is still quite a lot of xenophobia here.” The South Korean government, however, fervently denies any discriminatory action again foreign drug manufacturers. They argue that the new pricing system will help to alleviate the financial crisis that is currently occurring in the healthcare system. However, foreign drug companies believe that the current budget crisis in the Korean national health insurance system can be solved through other means. General manager, Geoffrey Whitehead, of Novo Nordisk (Denmark) in Seoul, was quoted saying, “The government does not consider patients’ quality of life. It is interested only in the price of treatments, rather than their effectiveness.” Mr. Whitehead believes that many foreign produced drugs, although more expensive, are more effective than generic drugs produced in Korea. In the long term, these foreign manufactured drugs would help lower the healthcare cost burden to the government rather than exacerbate it.

The ill feelings that are currently brewing between the Korean government and foreign drug companies may affect South Korea’s goal of becoming a global hub for biotechnology. With the aggressive attitudes of Korean policymakers and the perceived discrimination, many companies will rethink their options when looking for investment opportunities in Asia. Already the EU is involved in more trade disputes with Korea than with any other country. If the situation worsens, a complete investigation may be conducted and a complaint filed to the World Trade Organization. In the meantime, Korea may be losing out to countries such as Singapore and China in the race to become a global biotechnology hub.