US Government to Step Up Efforts to Protect Multinational Pharmaceutical Companies in South Korea

The National Trade Estimate (NTE) Report released in April 2003 by the Office of the US Trade Representative (USTR) recently criticized South Korea’s trade barriers and lack of communication between the Korean government and multinational pharmaceutical companies. Based on the strong language chosen in the report, it is expected that the US will begin to step up trade pressure on South Korea in order to resolve complaints made by foreign pharmaceutical firms.

Many multinational pharmaceutical companies currently operating in South Korea are protesting the local government’s inconsistent enforcement of existing laws. They are also objecting to the fact that the Korean government fails to consult the foreign pharmaceutical firms when creating new regulations on drugs. Recent regulatory changes such as the price ceilings placed on many new foreign drugs have caused considerable dispute [Please see PBI Asian Medical eNewsletter, Volume 2, Number 10 at under the Newsletter section]. The Korean government has defended that the price ceilings were necessary to cut the government’s healthcare budget deficit. Foreign pharmaceutical manufacturers in Korea, however, feel that they have been unnecessarily targeted and that the government can find other means to reduce their budget deficit.

The Korea government has also refused to utilize the A7 pricing system for new drugs. This system uses the average ex-factory price from 7 of the world’s most-developed (OECD) nations in determining the price for new drugs. Frank Bobe, Country Manager for Novartis, claims that Korea’s price controls are “protectionism rather than cost-control.”

Jan Petersen, president of Pharmacia Korea explained, “We don’t ask that the government gives us the right to make registrations. What we ask is that when it intends to change the rules and regulations, there should be dialogue between all parties concerned before it makes changes.”