High levels of access to healthcare insurance and reimbursement and increasing demand for healthcare services from a growing elderly population will drive the growth of the pharmaceutical market. However, an increasing focus on generics as a means of reducing healthcare expenditure will restrict the growth of the market in the forecast period.
In 2008, the South Korean pharmaceutical market was worth $15.4 billion and was estimated to grow to $18.6 billion in 2013. The pharmaceutical market is expected to grow at a Compound Annual Growth Rate (CAGR) of 3.9%, from approximately $19.3 billion in 2014 to $24.3 billion in 2020. The increasing elderly population and its associated disease burden combined with the launch of novel medicines have been fueling market growth. The South Korean pharmaceutical market is one of the largest in Asia. Therapeutic segments such as cardiovascular and oncology are expected to grow due to the increasingly large elderly population, which accounts for approximately 12% of the total population, as well as changes to food and lifestyle habits. The market growth is also expected to be influenced by various initiatives taken by the government (such as the Korean Small Business Innovation Research (or KOSBIR) program, organized by Korea Nanotechnology Initiative) to encourage R&D and sustain growth in the pharmaceutical industry (KETs Observatory, 2012).
Additionally, to boost private investment, the government has designated 44 pharmaceutical companies: “Korea’s innovative pharmaceutical companies” (in accordance with the Act for Supporting and Raising Pharmaceutical Industry (2011) to provide special benefits such as tax reduction and exemption, preferential government research funding and the postponement of drug price cuts.
The government is focusing on the use of generics as a cost-containment tool to slow the rise of its healthcare expenditure. The country’s generic market increased from $3.5 billion in 2008 to an estimated $4.9 billion in 2013. The market grew at a CAGR of 7% between 2008 and 2013 (FAPA, 2011). In January 2012, South Korea’s generic pricing methods were revised, and according to the current method, the price of the first generic to reach the market is 59.5% of the branded drug price, while the branded drug’s price is lowered to 70% of the listed price before patent expiry for the first year from when the first generic is launched. After 12 months, the prices of all generics entering the market are lowered to 53.55% of the relevant branded drugs’ prices. This price reduction and generic erosion is expected to have a limiting impact on the growth of the pharmaceutical market.
The South Korean medical device market was valued at $3.3 billion in 2008 and is projected to grow at a CAGR of 5.5% to an estimated $6.3 billion in 2020. In 2013, the major segments of the medical device market were ophthalmic devices (17.6%), in vitro diagnostics devices (13.9%), nephrology and urology devices (10.5%), orthopedic devices (10.3%) and dental devices (10%), respectively. The market is driven by the factors such as increasing awareness regarding the early detection and diagnosis of disease, advancements in medical technology, and an increase in the elderly population.