Structure Analysis and Improving Strategies on Pharmaceutical Industry

Abstract

In 2010, the pharmaceutical industry accounted for 1.43% of Korea’s GDP, with a considerable influence on the national economy. So, the government has enacted laws and reorganized institutions to foster the pharmaceutical industry as a global pharmaceutical conglomerate. Nevertheless, the Korean pharmaceutical companies still remain small. These companies are overly profit-oriented, focusing on sales rather than R&D. Their business structure has been often criticized as inimical to the competitiveness of the Korean pharmaceutical industry. In addition, as the national health spending has continuously increased due to population ageing, reducing pharmaceutical spending accounting for 30% of health insurance reimbursement will have a great effect on the future of the pharmaceutical industry. This study analyzes the changing environment of the pharmaceutical industry and the structural characteristics of the Korean pharmaceutical industry from various perspectives, and draws measures to improve its structures and to gain its competitive edge based on the analysis. The global pharmaceutical industry in the future will develop new drugs and biopharmaceuticals for a new pharmaceutical market and diseases that have not been treated by existing drugs, and patent expirations for blockbusters is also expected to result in the expansion of the market for generics. Furthermore, since productivity does not match up to the investment in R&D for developing new drugs, the global pharmaceutical industry will make efforts to raise the productivity by reducing production costs through licensing and M&A, restructuring drug portfolios, and creating a new market. Against this backdrop, in order for the Korean pharmaceutical industry to grow, the followings are needed to be considered: First, stepwise outsourcing and global open innovation should be encouraged in the development of new drugs. Second, continuous interest in the market of generics is needed and investment in bio-similar area should increase. Third, pharmaceutical professionals should be nurtured. Fourth, the practicality and marketability of pharmaceuticals should be secured through the translational researches of research-oriented hospitals. Fifth, the capacity to actively respond to external shocks like KORUS FTA should be strengthened. Sixth, measures should be established for effective M&A strategies of pharmaceutical companies and for sufficient capital investment.