Korea's Dream Market

May 01, 2008

South Korea's Numbers
With the big growth in drug sales coming almost entirely from the developing world, the acronym BRIC is on every drugmaker's lips. But adding a K, for South Korea, might make the shorthand more accurate. Although much smaller in size and population than Brazil, Russia, India, and China, this Asian tiger has one of the fastest growing and most affluent middle classes in the world, and its living standards are second only to Japan's in all of Asia. (See box). If its economy keeps growing at the current pace, South Korea is set to have the third highest GDP per capita ($52,000) in the world by 2017.

In addition, major improvements in public services and diets have led to a longer life expectancy—and as every pharma exec knows, an aging population means growing drug consumption. In fact, according to The Economist, if these trends continue, "South Korea would have the world's highest proportion of people over the age of 65 by 2050."

As with any emerging market, there are significant challenges, such as a complex healthcare landscape including limited price controls on drugs and a biased regulatory process. Yet reforms are ongoing. Pharma companies seeking to optimize opportunities in South Korea must learn the language of this unique market—from the factors driving healthcare consumption to the developments changing the sector's outlook.

The Healthcare Consumer: Worried, Well, and Wealthy

In 2007, the South Korean drug market was worth nearly (US)$16 billion, with Big Pharma products claiming a 40 percent share—plus a 13.5 percent annual increase that's expected to dip only slightly in this year's globally gray outlook. South Korea has about 700 domestic drugmakers, the largest of which are Dong-A, Hanmi, Yuhan, Green Cross, Chungwei, Cheil, and Chonggeundang. Though systematic R&D is only two decades old, it's revving up with 11 new drug launches in the past few years. The government has also invested an unprecedented $1 billion in the industry in the wake of signing a Free Trade Agreement with the US last year. Still, the vast majority of products remain generics, which claim about one third of the total market.

Synovate's research shows that South Koreans have a generally positive perception of their healthcare industry, with a strong and growing emphasis on patient empowerment and consumer influence. Having traditionally been the passive recipients of decision-makers' policies, patients are now beginning to shape policy. According to Biospectrum Asia, 1,300 patients' groups have sprung up in South Korea. Clearly, in the absence of direct-to-consumer advertising, these patient networks have major implications for pharma marketing efforts.

Even more important is the interesting observation by local doctors and industry members that South Koreans are exceptionally open to taking both over-the-counter (OTC) and prescription drugs. The nation has a high number of "worried well" (not to say hypochondriacs!) and attitudes toward healthcare tend to be markedly more preemptive than in most other markets. Hence, preventative medicines of all kinds are very popular, as are vitamins and dietary supplements. In fact, a trend has been reported in patients visiting their doctor to request treatment for conditions they do not actually have.

For example, a large proportion of the South Korean population believe themselves to be obese, even though only 30 percent actually fit that description. Coupled with patient pressure, the penetration of anti-obesity drugs in South Korea is among the highest in the world.

This is good news for diet drug sales. But the risk of incurring side effects by taking unnecessary medicines can lead to other health problems. This in turn increases the burden on the government's already-stretched purse strings.

A related consumer trend is growing expenditure on body beautiful. Traditionally, South Korea has been a very conservative society, but increasingly its people (particularly women) are focusing on—as the advertising industry emphasizes—looking good and feeling confident. As a result, there's a big market for cosmetic surgery such as implants, nose jobs, liposuction, and stomach banding—all of which are increasingly affordable.

Any commodity that is in style is generally taken up in South Korea. Consumers are savvy, have a lot of disposable income, believe in health and fitness, and are crazy about the "next big thing." With the exception of Japan, it's probably easier to launch a drug successfully in South Korea than in any other Asian market.

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