Korea Aspires to Transform Itself into One of the Top Seven Pharmaceutical Powerhouses

Korea has designated the pharmaceutical industry as a future growth engine with high potential. In order to facilitate expansion of the industry, the Korean government has been placing emphasis on enhancing growth potential through far-reaching policy measures, ranging from technology innovation to promoting market transparency, boosting the global competitiveness of companies, and establishing infrastructure for sustainable development. After accumulating know-how and capacity, the government, industry, medical society, and academic community are committing efforts to strengthen Korea's presence in the global pharmaceutical markets. Since Korean population has been aging rapidly, the Korean government has a keen interest in the pharmaceutical industry, which serves as a foundation for the public's quality of life. The government introduced “Accreditation of Innovative Pharmaceutical Company” in 2012, and will reinforce its efforts to support the industry every year with a view to reinvent the nation as one of the top seven pharmaceutical titans.

Promotion and Support of Innovative Pharmaceutical Companies

What Are Innovative Pharmaceutical Companies?

The Special Act on Pharmaceutical Industry Promotion and Support (enacted in March 2011) serves as the legal foundation to designate innovative pharmaceutical companies with a high level of verified R&D capacity for new drug development leading to global competitiveness. Those companies are expected to play a leading role in developing the domestic pharmaceutical industry into a future growth engine.
In particular, designating "Innovative Pharmaceutical Companies" is part of the government’s ambitious policy to cultivate the pharmaceutical industry. Under this policy, a company can be recognized as having superior capability in development of new drugs as well as overseas expansion based on the ‘Special Act on Fostering and Supporting the Pharmaceutical Industry’. To keep up with the rapid changes in the environment surrounding the pharmaceutical industry, such as the price cuts and effect of the Korea-US FTA, the Ministry of Health and Welfare aims to support "Innovative Pharmaceutical Companies" in their efforts to expand research, development, and overseas advancement capabilities. This is the main basis of the Ministry's ‘2012 Pharmaceutical Industry Competitiveness Enhancement Plan’, which was developed in collaboration with the related ministries in January 2012, to foster Specialized Pharma geared toward specific medical conditions, Global Generic Pharma that handles mass production of generics, and Global Major Pharma that is at the level of advanced multinational corporations. This is a major plan that government has envisioned.
Above all, the title "Innovative Pharmaceutical Company" was formed as an honor for distinguishing companies that play a leading role in developing the domestic pharmaceutical industry as a future growth engine. Moreover, these "Innovative Pharmaceutical Companies" will set new standards, based on the government's plan to cultivate the pharmaceutical industry in the future. The government had been using the metaphorical stick by measures such as the introduction of the rebate dual punishment system and implementation of the batch drug price cut. The designation of "Innovative Pharmaceutical Companies" is intended as the counterpart, the metaphorical carrot.

What are the Criteria for Selecting an Innovative Pharmaceutical Company?

In order for a business to be selected as an innovative pharmaceutical company, it is necessary to have research and development investment or facilities at a certain scale. In other words, the R&D expenditure relative to average gross drug sales in the last 3 years have to meet the following requirements : 1) Companies with an annual sales of more than KRW 100 billion would have an R&D cost of at least 5%; 2) Companies with less that KRW 100 billion would have the R&D investment of more that 7% or an absolute amount of more than KRW 5 billion; and 3) for US or EU GMP facilities, the R&D costs relative to sales would be at least 3%.

Accreditation Process

The Accreditation Screening Committee conducts written and verbal evaluations on candidate pharmaceutical firms that meet the requirements (Article 2 of the Enforcement Decree of the Special Act: Investment volume over a certain level). In the evaluations, the committee assesses candidate companies based on specific requirements, such as R&D performance in the past, the company’s capacity, vision and investment plan, ethical business practice, etc. The results of the evaluations delivered by the screening committee are finalized after the review carried out by the Committee for Pharmaceutical Industry Promotion and Support, which is chaired by the Minister of Health and Welfare.

Composition of Designated Innovative Pharmaceutical Companies

• General pharma firms [31]: 31 leading firms that have marked high scores in terms of R&D investment as well as number of highly qualified researchers, manufacturing facilities, patents and licensing out, and advancement into overseas markets, in addition to ten SMEs that have accumulated expertise in specialized areas such as development of incrementally modified drugs
• Bio venture companies [9]: Firms with relatively low sales but highly competitive technology and creative business models
• Multinational pharma firms [4]: One local company of an MNC, considered outstanding in terms of R&D investment (in early clinical trials), local production performance, advancement into overseas markets, etc.

List of Companies Certified as Innovative Pharmaceutical Companies [44]