KoBio Pharmaceutical Industry

HOME > About Korean Market > Korean Medical Industry Overview > Pharmaceutical Industry

Click for more on the latest Korean Medical Industry 2009.12

Source :

Korea Health Industry Developmenet Institute

- If we look at the pharmaceutical industry, the number of businesses and items has continuously increased since 1998, and was estimated to be 25,589 in 2006.
  
  The amount of production started an upturn trend from 2001 and reached 11.472 trillion won by the end of 2006. The average production amount per item is decreasing every year from 0.47 billion won in 1998 to 0.45 billion won in 2006. If we focus on completed drugs, there are no great changes in general pharmaceutical products whereas a significant increase occurs in specialized drugs. The increase in specialized drugs affects the production trend of overall pharmaceutical products. The recent huge increase in specialized drugs changed the share of specialized drugs compared to general drugs from 37.2%/62.8% in 2001 to 25.5%/74.5% in 2006.
  
  As for number of pharmaceutical product items, while general drugs dropped in production by 7.5% year-on-year to 7,285 in 2006, specialized drugs soared 6.8% year-on-year to 8,738 in the same year. The production performance of pharmaceutical products by remedial result groups, the number of total items approved has a decrease of 39 items, which then was 16,022 items while the total production amount increased by 8.1% to 10449.4 billion won. Drugs for the circulatory system produced 1,991.8 billion won to maintain its top position as with a year earlier, followed by drugs for digestive organs with 1,324 billion won and the third place went to antibiotic substances with 1,256.4 billion won. In terms of the export of material drugs, completed drugs, Chinese medicinal herbs, it increased by 12.7% from $912,09 million to $1,028.25 million in 2006.
  
  From these, completed drugs accounted for $489.81 million, material drugs were $529.21 million, closing the gap between completed and material drugs in terms of the amount of exports. Chinese medicinal herbs have had repeated ups and downs since 2000, they increased by 3.0% year-on-year to $9.24 million of exports. For imports, the total amount of imported drugs rose 7.3% compared with that of 2006 to $ 3,749.74 million, which consisted of: $1,691.49 million for material drug, and $1,979.14 million for completed drugs. 2007 export and import increase rate shows the followings: exports up 3.4%, imports up 7.2%, which indicates the deepening tendency of an unfavorable trade balance from $2,440.49 million in 2006 to $2,651.62 million in 2007.
  
  The total export amounts for the top 20 export partners in 2007 were $0.77 billion, accounting for 75.5% of the total exports. The countries to which Korea exported the largest sum of pharmaceutical products (material + completed) include Japan, the US, Vietnam, Germany, and the UK for $ 0.14 billion, $0.09 billion, and $0.07 billion, $0.07 billion, and $0.06 billion, respectively. Lastly, the size of the global pharmaceutical market in 2007 had a year-on-year increase of 6.4% to $712 billion. By region, the North American market ranked the highest at 45.9%, followed by Europe (31.1%), Asia/Africa/Australia (9.4%), Japan (8.8%), and Latin America (4.8%).
  
  As for the global pharmaceutical market by remedial result groups, the global pharmaceutical market size for top 10 disease groups was a total of $241.6 billion, taking 36.4% of the total market share. As for best selling products in the global market, Lipitor by Pfizer ranked no.1 with the sales of $13.5 billion (growth rate compared with the previous year, -2.8%) followed by Plavix, Nexium, Seretide/Advair, and Enbrel with $7.3 billion, $7.2 billion, $7.1 billion, $5.3 billion, respectively.

Export

If we look at the 2007 export status for material drugs, completed drugs, Chinese medicinal herbs, exports increased by 12.7% from $912.09m in 2006 to $1,028.25m. Among them, the export of completed drugs rose 19.8% year-on-year to $489.81m whereas material drugs soared 7.1% year-on-year to $529.21m, closing the gap between completed and material drugs in terms of exports. In case of Chinese medicinal herbs, they have had repeated ups and downs since 2000, and they increased by 3.0% year-on-year to $ 9.24 million export.

Export Status for Materal Drugs, Completed Drugs, Chines medicaimal herbs (2002~2007)

(Unit: $thousand)

Export Status for Materal Drugs, Completed Drugs, Chines medicaimal herbs (2002~2007)
Export performance	2002	2003	2004	2005	2006	2007	Increase rate
Material drugs	457,938	441,591	416,894	448,428	494,342	529,209	7.1%
Completed drugs	221,053	250,268	292,474	345,958	408,783	489,805	19.8%
Chinese medicinal herbs	5,565	5,313	5,478	6,820	8,964	9,236	3.0%
Total	684,556	697,172	714,846	801,206	912,089	1,028,250	12.7%

Source : Presentation date of the Korea Pharmaceutical Traders Association

Export Status for Materal Drugs, Completed Drugs, Chines medicaimal herbs (2002~2007)

Import

Total imports of the 2007 material drugs, completed drugs, Chinese medicinal herbs rose 7.3% compared to 2006 to $ 3,749.74 million. While the import of material drugs rose 0.4% year-on-year to $1,691.49m, that of completed drugs still maintain an upturn trend of a 13.7% increase, albeit slightly less than that of the previous year to register $1,979.14m. Although the import of material drugs had been larger that that of completed drugs for the past year, in 2006, the import of completed drugs exceeded that of material drugs. The huge increase of imports of completed drugs can be attributed to the withdrawal of MNCs’ plants from Korea.

Import Status for Materal Drugs, Completed Drugs, Chines medicaimal herbs (2002~2007)

(Unit: $thousand)

Import Status for Materal Drugs, Completed Drugs, Chines medicaimal herbs (2002~2007)
Export performance	2002	2003	2004	2005	2006	2007	Increase rate
Material drugs	1,453,666	1,324,762	1,205,321	1,368,987	1,685,173	1,691,494	0.4%
Completed drugs	587,192	687,719	933,921	1,214,871	1,740,426	1,979,140	13.7%
Chinese medicinal herbs	69,455	57,610	55,704	61,712	70,634	79,634	12.0%
Total	2,110,313	2,070,091	2,194,946	2,645,570	3,496,233	3,746,737	7.3%

Source : Presentation date of the Korea Pharmaceutical Traders Association

Import Status for Materal Drugs, Completed Drugs, Chines medicaimal herbs (2002~2007)

Export & Import Increase Rate

Annual Pharmaceutical Products Exports & Imports Performance (2002~2007)

(Unit: $thousand)

Annual Pharmaceutical Products Exports & Imports Performance (2002~2007)
Classification		2002	2003	2004	2005	2006	2007
Export	Material drugs	457,938	441,591	416,894	448,428	494,342	529,209
Export	Completed drugs	221,053	250,268	292,474	345,958	408,783	489,805
import	Material drugs	1,453,666	1,324,762	1,205,321	1,368,987	1,685,173	1,691,494
import	Completed drugs	587,192	687,719	933,921	1,214,871	1,740,426	1,979,140
Export total		678,991	691,859	709,368	794,386	985,107	1,019,014
import total		2,040,858	2,012,481	2,139,242	2,583,858	3,425,599	3,670,634
Trade deficit		-1,361,867	-1,320,622	-1,429,874	-1,789,472	-2,440,492	-2,651,620

Source : Korea Pharmaceutical Traders Association, Survey & Facts, each year

Annual Trend for Total Exports & Imports fo Pharmaceutical Products (2002~2007)

- According to the 2007 study and analysis of health industry research and development, there are 231 businesses engaged in the manufacture of medicinal chemicals and antibiotics, biological preparations, medicinal drugs, prepared herb medicaments, medical equipments and other drug related products with a total number of employees of 40,486, total sales of 8763.6 billion won, each increased by 5.96%, 1.82%, and 3.23%, respectively. In terms of the size of businesses, SMEs accounted for 45.0%, venture enterprises for 44.2%, and conglomerates for 10.8% and operated in small-sized businesses smaller than SMEs in 2006.
  
  Annual R&D expenditure for the pharmaceutical industry rose 36.6% year-on-year to 470.4 billion won while R&D intensity, which is R&D expenditure against sales, climbed 32.3% year-on-year to 5.37%. The number of researchers in the field in 2006 was 3,851, a 5.2% increase compared to the previous year’s 3,661. The average number of researchers by business was 16.7, a slight decline from 16.8 in the previous year, while the R&D expenditure per 1 researcher increased to 122.2 million won, indicating intense R&D industry. The distribution of researchers by their degree was topped by master’s degree holders accounting for 58.7%, followed by bachelor’s degree holders (26.5%,) and doctoral degree holders (12.9%) and others (1.9%), which means a high rate of high-quality human resources totaling 71.6%.
  
  As for government funding to pharmaceutical industry’s R&D, the total funding size was 145 billion won for 662 projects with average funding amounts of 0.22 billion won, 31.3% and 14.7% increase from the previous year. Funding by research stages was relatively concentrated on basic stage as the projects in that stage received 42.9% of the total funding, followed by applications (27.9%), and development stage (27.5%). However, in terms of financial aids, each stage received 25.8%, 32.0%, and 40.2% of findings, so that application and development stages received higher financial aids. As for the aid size, those between 0.1 billion won and 0.5 billion won accounted for 41.2% and the funding for more than 0.5 billion won has been increasing every year. In terms of government contribution supported R&D projects, there are 622 projects with 145 billion won. The number of supported projects by government agencies was topped by the Ministry of Science and Technology with 210 projects (31.7%), followed by the Ministry of Education & Human Resources Development with 137 projects (20.7%), the Korean Food and Drug Administration with 117 projects (17.7%) the Ministry of Health and Welfare with 93 projects (14.0%) and the Ministry of Commerce, Industry and Energy with 72 projects (10.9%). In terms of support size by different agencies, the Ministry of Science and Technology ranked no.1 with 54,9 billion won (37.8%), followed by the Ministry of Health and Welfare with 37.4 billion won (25.8%), and the Ministry of Commerce, Industry and Energy with 21.4 billion won (14.7%).
  
  Total R&D budgets for disclosed companies in the field of the pharmaceutical industry was 434.2 billion won in 2006 while R&D intensity, the index for investment level dropped by 9.29% to 4.10% compared with the previous year. As for technology trade status of the pharmaceutical industry, annual technology adoption trends can be summarized as such: starting from $27.01m in 2003: the figure rose by14.5% to $30.94m in 2004: in 2005 the figure decreased by 4.9% to $29.42m: in 2006, it rose again by 34.06% to $39.43m. As for technology adoption by year and technology types, the share of technology information (including know-how) increased by 88.26% whereas that of technology service dropped by 27.09%.
  
  Lastly, annual technology export trends of the pharmaceutical industry includes: $7.56m in 2003 (33% decrease from the previous year), $169.5 m in 2004 (22 times increase), $27.19m in 2005 (yet higher figure than the previous year), $37.79m for 2006 (a slight increase from a year earlier). In terms of technology export by technology investments, a notable trend is a significant increase of the share of SMEs’ technology exports (179.6%). However, still most technology export was made by conglomerates. As for technology exports by annual and technology type, patents took the most shares with 63.6%, followed by technology services (13.6%), and technology information (4.5%).

To illustrate annual technology adoption trend of pharmaceutical industry, it was $27.01m in 2003, $30.94m in 2004 (a 14.5% increase compared with a year earlier), $29.42m in 2005 (a 4.9% drop), and $39.43m (a 34.06% increase) in 2006. In case of the distribution of technology adoption by technology importers, a 73.8%of technology adoption was made by SMEs in 2004, while it made a significant drop by 45.4% in 2005. Instead the share of conglomerates doubled up to 54.6% compared with the previous year. In 2006, the trend continued as the share of SMEs further decreased to 34.0% while that of conglomerates rose by 66.0%.

Overall Status of Technology Adoption in the Pharmaceutical Industry

(Unit: US$ , case, %)

Overall Status of Technology Adoption in the Pharmaceutical Industry
Classification	2003	2004		2005		2006
Classification	Amount/Cases	Amount/Cases	Increase rates	Amount/Cases	Increase rates	Amount/Cases	Increase rates
Amounts spent for technology adoption	27,017,211	30,939,763	14.52	29,418,191	-4.92	39,439.209	34.06
No. of businesses	49	51	4.08	45	-11.76	49	8.89
No of contracts	101	68	-32.57	99	45.59	115	16.16
No. of contracted businesses	35	25	-28.57	26	4.00	18	-30.77
No. of contracts over $1 M	4	3	-25.00	2	-33.33	6	200.00

Source : Korea Pharmaceutical Traders Association, Survey & Facts, each year

In terms of the technology adoption by year and regions, while the proportion of technology adoption from Oceania and Africa declined to 60.46% and 100%, respectively, the ones from Europe and North America soared to 64.19%, 12.69%, respectively. In 2006, most technology adoption was made by Japan, followed by Germany and the US.

Technology Adoption Status in the Pharmaceutical Industry by Regions

(Unit: US$ , case, %)

Technology Adoption Status in the Pharmaceutical Industry by Regions
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
North America	11,955,833	7,865,391	-34.21	7,347,863	-6.58	8,280,566	12.69
Europe	8,547,546	8,370,290	-2.07	11,450,362	36.80	18,800,716	64.19
Asia	6,310,097	14,187,299	124.83	10,090,942	-28.87	11,001,011	9.02
South America	184,009	120,912	-34.29	228,889	89.30	252,978	10.52
Africa	0	143,141	-	37,285	-73.95	0	-100.00
Oceania	19,726	252,730	1,181.20	262,850	4.00	103,938	-60.46
the Middle East	0	0	0.00	0	0.00	1,000,000	-
Total	27,017,211	30,939,763	14.52	29,418,191	-4.92	39,439,209	34.06

Technology Adoption Status in the Pharmaceutical Industry by Countries

(Unit: US$ , case, %)

Technology Adoption Status in the Pharmaceutical Industry by Countries
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
US	11,060,533	7,710,031	-30.29	6,113,675	-20.70	7,618,984	24.62
Japan	4,466,315	11,424,400	155.79	9,315,335	-18.46	10,411,324	11.77
Switzerland	1,536,254	3,660,937	138.30	796,084	-78.25	7,410,007	830.81
France	62,003	118,593	91.27	344,794	190.74	146,821	-57.42
Netherlands	1,199,611	794,118	-33.80	707,250	-10.94	0	-100.00
Germany	1,967,282	912,580	-53.61	8,210,365	799.69	9,107,875	10.93
Israel	0	0	0.00	0	0.00	1,000,000	-
Others	6,725,213	6,319,104	-6.04	3,930,688	-37.80	3,744,198	-4.74
Total	27,017,211	30,939,763	14.52	29,418,191	-4.92	39,439,209	34.06

If we look at the technology adoptions by year and technology types, it is found that the share of technology information (including know-how) increased by 88.26% whereas that of technology service dropped by 27.09%. In case of the distribution of technology adoption by royalty methods, fixed royalty type was the largest, taking 14.4%, with running royalty type (11.9%), pre-payment/ deposit (6.3%) and other various payment methods (67.4%). As for the amount of technology adoption by restrictions, it was shown that the share of restriction over competitior’s goods and competing technology increased significantly.

Technology Adoption Status in the Pharmaceutical Industry by Technology Type

(Unit: US$ , case, %)

Technology Adoption Status in the Pharmaceutical Industry by Technology Type
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
Technology information (including know-how)	2,996,456	3,047,677	1.71	4,475,234	46.84	8,425,283	88.26
Patent license	3,190,185	5,023,921	57.48	7,025,715	39.85	9,302,687	32.41
Technology service	10,913,599	12,067,659	10.57	5,749,161	-52.36	4,191,637	-27.09
Trade mark license	745,415	917,301	23.06	8,465,605	822.88	11,088,811	30.99
Others and other industrial property	9,171,556	9,883,205	7.76	3,702,476	-62.54	6,430,791	73.69
Total	27,017,211	30,939,763	14.52	29,418,191	-4.92	39,439,209	34.06

Technology Adoption Status in the Pharmaceutical Industry by Rotalty methods

(Unit: US$ , case, %)

Technology Adoption Status in the Pharmaceutical Industry by Rotalty methods
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
Fixed royalty	8,360,908	8,064,761	-3.54	3,671,069	-54.48	5,663,124	54.26
Pre-payment/deposit	653,914	1,187,900	81.65	2,756,350	132.04	2,495,778	-9.45
Running royalty	3,858,152	5,939,517	53.95	5,594,773	-5.80	4,678,401	-16.38
Others	14,144,207	15,747,585	11.34	17,395,999	10.47	26,601,906	52.92
Total	27,017,211	30,939,763	14.52	29,418,191	-4.92	39,439,209	34.06

Technology Adoption Status in the Pharmaceutical Industry by Restrictions

(Unit: US$ , case, %)

Technology Adoption Status in the Pharmaceutical Industry by Restrictions
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
Export restriction	258,249	1,027,491	297.87	505.700	-50.78	2,116,011	318.43
Exclusive license grant restriction	3,787,004	1,848,965	-51.18	470,803	-74.54	881,821	87.30
Sub license grant restriction	27,953	795,466	2,745.73	0	-100.00	77,719	-
Mutal exchange restriction of improved technology during a contract period	1,008,406	85,272	-91.54	1,582,847	1,756,23	1,351,182	-14.64
Restriction over competitior’s goods and competing technolog	284,622	496,308	74.37	167,004	-66.35	3,692,116	2,110.79
Others	21,650,977	26,686,261	23.26	26,691,837	0.02	31,320,360	17.34
Total	27,017,211	30,939,763	14.52	29,418,191	-4.92	39,439,209	34.06

In 2004, the annual technology export trend in the pharmaceutical industry recorded $169.5m, a 22-fold increase from the previous year. In 2005, it diminished to $27.19m, still a higher figure than the previous years. In 2006, it soared slightly to $37.79m compared with a year earlier. As for the export amount by technology investment, while SMEs’ technology exports significantly increased by 179.6% compared with the previous year, the area was still dominated by conglomerates.

Overall Status of Pharmaceutical Industry Technology Export

(Unit: US$ , case, %)

Overall Status of Pharmaceutical Industry Technology Export
Classification	2003	2004		2005		2006
Classification	Amount/Cases	Amount/Cases	Increase rates	Amount/Cases	Increase rates	Amount/Cases	Increase rates
Amount Earned by Technology Exports	7,560,900	169,503,239	2,141.84	27,186,828	-83.96	37,793,619	39.01
No. of businesses	8	9	12.50	7	-22.22	11	57.14
No of contracts	8	17	112.50	8	-52.94	7	-12.50
계약No. of businesses	5	7	40.00	4	-42.86	2	-50.00
No. of contracts over $1 M	0	2	-	4	100.00	4	0.00

Status of Pharmaceutical Industry Technology Export by Regions

(Unit: US$ , case, %)

Status of Pharmaceutical Industry Technology Export by Regions
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
Europe	5,600,000	149,925,655	2,577.24	7,162,996	-95.22	7,133,166	-0.42
Asia	700,900	9,276,584	1,223.52	8,102,436	-12.66	5,463,773	-32.57
America	1,100,000	9,645,000	776,82	11,921,396	23.60	25,196,679	111.36
South America	160,000	100,000	-37.50	0	-100.00	0	0.00
Africa	0	556,000	-	0	-100.00	0	0.00
Total	7,560,900	169,503,239	2,141,84	37,793,619	-83.96	37,793,619	39.01

Status of Pharmaceutical Industry Technology Export by Countries

(Unit: US$ , case, %)

Status of Pharmaceutical Industry Technology Export by Countries
Classification	2003	2004		2005		2006
Classification	Amounts	Amounts	Increase rates	Amounts	Increase rates	Amounts	Increase rates
Germany	0	143,947,655	-	0	-100.00	0	0.00
US	1,100,000	9,645,000	776.82	11,921,396	23.60	24,446,679	105.07
China	150,000	0	-100.00	1,131,126	-	1,957,464	73.05
Japan	250,000	8,926,584	3,457.83	6,818,876	-23.61	3,006,309	-55.91
Switzerland	5,600,000	5,600,000	0.00	6,840,000	22.14	6,000,000	-12.28
Others	460,000	1,384,000	200.87	475,430	-65.65	2,383,166	401.27
Total	7,560,900	169,503,239	2,141.84	27,186,828	-83.96	37,793,619	39.01

Looking at the technology exports distribution by annual and technology type, the share of patents was the highest with 63.6%, followed by technology service, 13.6%, and technology information 4.5%. Total 22 technology exports by royalty methods were made including fixed royalty type (68.2%), running royalty (9.1%) and pre-payment/deposit types (9.1%). As for technology exports distribution by restriction, most of them were restrictions over competitior’s goods and competing technology.

Status of Pharmaceutical Industry Technology Export by Type

(Unit: US$ , case, %)

Status of Pharmaceutical Industry Technology Export by Type
Classification	2004	2005			2006
Classification	Cases	Cases	Cases/Increase rates	Amounts	Cases	Cases/Increase rates	Amounts	Amounts/Increase rates
patents	12	14	16.67	19,772,133	14	0.00	27,678,150	39.99
utility model & design	0	1	-	383,396	0	-100.00	0	-100.00
trademark license	0	0	0.00	0	0	0.00	0	0.00
technology information (including know-how)	3	2	-33.33	88,992	1	-50.00	2,000,000	2,147.39
technology services	0	5	-	1,102,307	3	-40.00	713,773	-35.25
overseas industry R&D	6	0	-100.00	0	0	0.00	0	0.00
others & no response	1	3	200.00	5,840,000	4	33.33	7,401,695	26.74
Total	22	25	13.64	27,186,828	22	-12.00	37,793,619	39.01

Status of Pharmaceutical Industry Technology Export by Payment Methods

(Unit: US$ , case, %)

Status of Pharmaceutical Industry Technology Export by Payment Methods
Classification	2004	2005			2006
Classification	Cases	Cases	Cases Increase rates	Amounts	Cases	Cases Increase rates	Amounts	Amounts Increase rates
Fixed royalty	20	24	20.00	23,686,828	15	-37.50	10,773,259	-54.52
Pre-payment/deposit	1	1	0.00	3,500,000	2	100.00	1,750,000	-50.00
Running royalty	0	0	0.00	0	2	-	17,944,984	-
Others/no response	0	0	0.00	0	3	-	7,325,375	-
Total	21	25	19.05	27,186,828	22	-12.00	37,793,619	39.01

Status of Pharmaceutical Industry Technology Export by Restrictions

(Unit: US$ , case, %)

Status of Pharmaceutical Industry Technology Export by Restrictions
Classification	2004	2005			2006
Classification	Cases	Cases	Cases Increase rates	Amounts	Cases	Cases Increase rates	Amounts	Amounts Increase rates
Export restriction	0	0	0.00	0	1	-	2,000,000	-
Exclusive license grant restriction	14	11	-21.43	12,172,825	1	-90.91	250,000	-97.95
Sub license grant restriction	0	0	0.00	0	0	0.00	0	0.00
Mutal exchange restriction of improved technology during a contract period	0	3	0.00	97,464	2	-33.33	106,309	9.08
Restriction over competitior’s goods and competing technology	0	2	0.00	1,982,704	5	150.00	3,050,000	53.83
Others/ no response	5	9	80.00	12,933,835	13	44.44	32,387,309	150.41
Total	19	25	31.58	27,186,828	22	-12.00	37,793,619	39.01