BMI View: The South Korean government will continue to enforce price pressures on pharmaceuticals as a means to contain the escalating healthcare costs brought on by the country's ageing population. This is particularly as other avenues - including shifting the healthcare cost burden onto consumers - will remain more subdued as private expenditure already accounts for a large portion of total healthcare spending. Moreover, South Korea has developed multiple price control mechanisms that it can leverage upon to reduce pharmaceutical prices.
Headline Expenditure Projections
Pharmaceuticals: KRW16,590bn (USD15.8bn) in 2014 to KRW17,116.6bn (USD16.3bn) in 2015; +3.2% in local currency terms and -1.2% in US dollar terms. Forecast broadly in line with Q215.
Healthcare: KRW108,117.1bn (USD102.7bn) in 2014 to KRW114,291.6bn (USD103.9bn) in 2015; +5.7% in local currency terms and +1.2% in US dollar terms. Forecast slightly downgraded from previous quarter.
In Q3 2015, South Korea ranks second out of the 19 countries surveyed in the Asia Pacific region. South Korea's score for its Rewards variable is high, indicating the country's favourable longer-term standing in terms of its pharmaceutical market development. However, we note that Risks - particularly in relation to pharmaceutical pricing and reimbursement - will remain present, especially as the population ages and requires more public sector resources.
Key Trends & Developments
In March 2015, Boehringer Ingelheim Korea, the South Korean unit of German drugmaker Boehringer Ingelheim, aims to double its market share in the country by 2020 under its '2 by 2020' programme. The move comes despite the company reportedly facing sluggish growth owing to severe competition, regulatory issues and administrative red tape.
In the same month, Samsung Bioepis submitted a marketing authorisation application to the EMA for its Remicade (infliximab) biosimilar candidate, SB2. Remicade is marketed by Janssen Biotech ( Johnson & Johnson) and is indicated for the treatment of adult and paediatric Crohn's disease, adult and paediatric ulcerative colitis, rheumatoid arthritis (RA), ankylosing spondylitis and psoriatic arthritis.
In February 2015, South Korea's Ministry of Health and Welfare announced security measures on February 12 to better protect foreign patients seeking cosmetic surgery in the country as well as restrict illegal brokers. The measures were drafted following a discussion with relevant ministries at the 'Committee on Medical Export Promotion and Medical Tourist Attraction'. Under the new measures, anyone intending to solicit foreign patients has to be registered with the ministry in accordance with Article 27.2 of the Medical Act. '
BMI Economic View: As a result of continued headwinds stemming both from domestic weaknesses and poor external demand dynamics, we have lowered our 2015 real GDP growth forecast to 2.8% from 3.1% previously. In light of these weaknesses, the Bank of Korea (BoK) will maintain its current monetary policy stance, keeping its base rate on hold at 1.75% for the rest of 2015 in a bid to support growth.
BMI Political View: The passing of the new anti-graft bill will have a positive impact on South Korea's business environment and go some way in shoring up public support for President Park Geun-hye. However, the broad scope of the bill has also increased its vulnerability to constitutional challenges amid fears over the violation of basic personal rights.