Pharma & Biotech Market of South Korea in 2023

The NHI data shows that in 2020, pharmacies submitted claims worth W17.8trn. Out of this amount, W12.9trn was reimbursed by NHIS, and patients paid the rest. As of mid-2021, NHIS reported that there were 23,586 operating pharmacies in the country. Looking ahead, we anticipate a yearly growth rate of 2.5% in local currency terms for pharmaceutical sales, including both prescription and over-the-counter medicines, during the forecast period of 2023-2027.
Pharma Sales Growth (%)
Pharma Sales Per Capita (USD)
Pharma Sales % of GDP
Pharma Sales % of Healthcare

Hyper Growth Potential Hindered by Regulation Environment

South Korea’s pharmaceutical market is expected to grow steadily in the coming years, driven by strong demand fundamentals. As the third largest pharmaceutical market in the Asia-Pacific region, sales reached KRW28.6trn (USD21.9bn) in 2022 and are forecasted to increase to KRW35.3trn (USD32.1bn) by 2027 and KRW41.9trn (USD38.1bn) by 2032. However, pharmaceuticals account for only a small segment of total health expenditure, comprising 14.2% in 2022 and decreasing to 9.3% by 2032.

Improvements in the medicine approval process will benefit drugmakers. The South Korean government is committed to strengthening the pharmaceutical and healthcare system and bringing novel drugs to the market to meet the needs of the ageing population. Efforts to reduce regulatory uncertainty and improve investor sentiment will also yield benefits for the pharmaceutical sector.

Although the prevalence of chronic diseases associated with South Korea’s ageing population will drive growth, cost-containment measures will continue to hinder pharmaceutical revenue growth. A strict pricing regime and economic risks will lead to a less optimistic growth outlook.

Sector Overview

Prescription Drugs

Prescription drug sales are estimated to amount to KRW23.6trn (USD18.1bn) in 2022. We expect this to rise to KRW29.3trn (USD26.6bn) by 2027 and KRW35.3trn (USD32.1bn) by 2032. This would reflect a 10-year CAGR of 4.1% in local currency and 5.9% in US dollar terms. Prescription drugs are expected to remain the dominant class of drugs in the South Korean pharmaceutical market over our forecast period. In 2022, prescription drug sales as a percentage of total sales was 82.7% and is expected to rise to 84.2% in 2032.

Prescription drug sales in South Korea will benefit from a robust set of growth drivers over the coming years. The South Korean population’s historically high use of prescription medicines will sustain the demand for this sector of the medicines market over our 10-year forecast period, thereby creating revenue earning opportunities for drugmakers. Despite the government’s focus on reducing healthcare costs, rising chronic disease burden will ensure that prescription drugs remain the dominant market segment. With cost-containment initiatives on the rise, generic drugmakers could be the greatest beneficiaries from the country’s pharmaceutical trends over the long term, given their more competitive prices.

Prescription drug sales saw a significant increase in 2021 due to ongoing Covid-19 vaccine procurement by the government. We expect these will be one-off purchases, with heightened spending extending into 2022 due to booster dose acquisition. Following that, a lower growth rate in 2023 will return spending to trend.

Branded Drug Market

We estimate patented drug sales in South Korea to have amounted to KRW10.4trn (USD8.0bn) in 2022. This is expected to grow to KRW11.2trn (USD10.2bn) by 2027 and KRW12.8rn (USD11.6bn) by 2032, a 10-year CAGR of 2.1% in local currency and 3.8% in US dollar terms. Patented drugs are expected to account for a sizeable proportion of the overall market during this period, accounting for 43.9% of total prescription drug sales in 2022 due to Covid-19 vaccine acquisition, and declining to 36.3% by 2032.

Despite patent expirations and some moves towards cost containment, demand for patented drugs will continue to be stimulated by a wealthy population, strong healthcare provision and quality, the introduction of novel treatments for long-term and chronic diseases, and compulsory health insurance. However, the rising popularity of generic drugs will place downward pressure on South Korea’s patented medicines sales over the coming years.

Patented drug sales saw a significant increase in 2021 due to ongoing Covid-19 vaccine procurement by the government. We expect these will be one off purchases, with heightened spending extending into 2022 due to booster dose acquisition. Following that, a negative growth rate in 2023 will return spending to trend.

Generic Drug Market

The generic drug market in South Korea is expected to continue growing as a result of government regulations that place strict pricing controls on generic drugs. The government’s “same ingredient, same price” criteria encourage the use of generic drugs, which are often less expensive than their branded counterparts. Fierce price competition and market fragmentation, however, have limited growth in the market for generics. The number of newly approved generics has declined sharply in recent years, according to the Ministry of Food and Drug Safety (MFDS).

Despite the decline in newly approved generics, the market share of generics in South Korea is expected to continue to grow. A private-sector study conducted in 2017 showed that the market share of the first generic to launch after patent protection is removed typically reaches 40% in South Korea. Generic drug sales in South Korea are estimated to have reached KRW13.2trn (USD10.1bn) in 2022 and are expected to increase to KRW18.0trn (USD16.5bn) by 2027 and KRW22.5trn (USD20.5bn) by 2032, reflecting a 10-year CAGR of 5.5% in local currency and 7.2% in US dollar terms.

Opportunities for generic drugmakers in South Korea are expected to increase over the coming years as a result of cost-containment measures and strengthening domestic manufacturing capabilities. Many multinational drugmakers in South Korea are primarily branded manufacturers, but these firms are expected to strengthen their generic activities and form partnerships with local generic drugmakers. The well-established domestic generic medicine sector in South Korea poses a significant threat to sales of innovative products that no longer have patent protection.

Governmental incentives, such as the Rewards for Saving Drug Expenditure scheme, will also play a key role in encouraging the rapid penetration of generic drugs in South Korea. This system provides incentives to hospitals and pharmacies based on the purchase of low-priced medicines and serves to drive up the sale of generic drugs in the country. A new generic drug tiered pricing system was introduced in July 2020 to reduce the influx of poorly regulated generics into the market, which may limit the total value of the market. Overall, generic drugs are expected to play a dominant role in the market, largely owing to their low cost and government support for the sector.

OTC Drug Market

OTC drug sales are estimated to have amounted to KRW4.9trn (USD3.8bn) in 2022. We expect this to rise marginally to KRW6.0trn (USD5.5bn) by 2027 and KRW6.6trn (USD6.0bn) by 2032. This reflects a 10-year CAGR of 2.9% in local currency and 4.7% in US dollar terms. OTC drugs will continue to see their market share in value terms decline gradually over the coming years as South Korea’s disease burden increasingly favours prescription drugs. OTC medicine sales as a percentage of total sales was 17.3% in 2022, but decreasing to 15.7% by 2032.

Despite aggregate OTC medicine spending set to increase, the sector will continue to lag behind other market segments in South Korea. In particular, OTC medicine growth will be hindered by the fast-growing demand for prescription medicines among the population. In addition, posing downside risk to our OTC medicine forecast is the increased access to healthcare services, including expanding reimbursement of medicines. This will be negative for manufacturers of OTC medicines, as the need for self-medication will fall in line with greater access to affordable healthcare.

The Ecosystem of Healthcare

South Korea’s biomedical R&D sector will continue to flourish in line with growing investment from multinational drugmakers. The country’s business-friendly environment, rapid drug approval time and increasingly stringent regulatory standards will further increase the country’s appeal to foreign drugmakers. The South Korean government’s investment in the big data field will create wider access to genomic data by pharmaceutical and healthcare companies, potentially leading to increasing discoveries of treatable targets and the ability to deliver more precise medical treatment.

In July 2020, the government unveiled its plans to invest KRW2.8trn (USD2.3bn) in developing new key technologies to foster the bio-health industry over the next decade. The Ministries of Health and Welfare, Science and ICT, and Trade, Industry and Energy said on Friday that two interagency projects – new drug development and regenerative medicine technology development –
had passed the preliminary feasibility study last month. The two national projects are part of the Bio-Health Industry Innovation Strategy announced by the government in May 2020. In pursuing new drug development as a state project, the government will provide step-by-step support, starting from basic research, going through nonclinical and clinical trials, and reaching test manufacture and mass production.

The South Korean pharmaceuticals market is one of the most developed in Asia, alongside Japan and Australia. In 2022, total pharmaceutical sales amounted to KRW28.6trn (USD21.9bn) with a per capita pharmaceutical spend of USD424.3. As a proportion of total healthcare expenditure, medicine spending amounted to 14.2% in 2022. However, we expect pharmaceutical spending to come under further pressure from cost-containment measures, with the government looking to rein-in public spending on medicines.

South Korea’s strong ties with the US, which is both the world’s largest pharmaceutical market and a leading hub for new drug discovery, will facilitate local company forays into R&D. At a company level, this has created opportunities for joint partnerships, such as the agreement made between Celltrion and Hospira, now owned by Pfizer, to develop and market biosimilars. Similarly, Hanmi’s collaborative agreement with Eli Lilly for its autoimmune treatment will facilitate the product’s development and commercialisation. Critically, such partnerships will help South Korean drugmakers in growing their exposure to international markets – enhancing revenues and their capacity to invest in R&D.


The South Korean government will continue to be a central actor supporting the medical research industry. In addition to boasting a robust regulatory environment and an advanced medical infrastructure, the country’s government remains committed to the strengthening of the domestic pharmaceutical and healthcare system.

South Korea’s government has been active in trying to promote the country’s medicine manufacturing industry, establishing the Songdo international city in the Incheon Free Economic Zone (IFEZ), which is now considered a worldwide bio industry hub, along with other bio clusters, such as San Francisco and Singapore. South Korea is also focusing on establishing itself as a biotech hub, with a growing focus on novel technologies, such as gene editing. In addition, South Korea is adopting artificial intelligence (AI) to streamline drug discovery and improve process efficiency.

With the goal of creating the world’s top bio-hub centre and supporting overseas expansion and development, by expanding the value chain and building infrastructure, the commissioner of IFEZ Kim Jin-Yong announced several plans. These include developing the research and service industry for global medical healthcare, and building infrastructure for research development and commercialisation to create global competitiveness. Pharmaceutical businesses in the economic zone can easily access Seoul’s highly educated workforce as elite universities including Yonsei University, Incheon Global Campus and Incheon National University are located in close proximity. Large research labs and manufacturing facilities from companies such as Celltrion, Samsung
Biologics, Samsung Bioepis, Charles River Laboratories, Ajinomoto Genexine and GE Healthcare are also located in Songdo.

The South Korean government has also rolled out several measures to develop the nation as a global biotech and medical industry hub by 2020. More recently, in March 2018, the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA) initiated a new task force to oversee preparations for a support centre that will leverage AI to help Korean pharmaceutical companies accelerate new drug development processes, identify promising drug candidates and determine the right biomarkers for clinical trials. The task force includes the KPBMA, the state-led Korea Health Industry Development Institute, Korea Conformity Laboratories, AI technology firms, industry advisors, as well as 17 local pharmaceutical companies including Hanmi Pharmaceutical, Green Cross, Boryung Pharmaceutical, Daewoong Pharmaceutical, Crystal Genomics, Dong-A ST, LG Chem and Handok Pharmaceuticals. This ramp-up in government support will be critical as South Korean drugmakers commence their international expansion. This is particularly the case in the field of biosimilars, where firms such as Celltrion and Samsung Bioepis have established a global presence. The ongoing business transformation among South Korean companies towards drug discovery will see the introduction of more innovative treatments. Moreover, South Korean firms have made significant investments in R&D as they seek to shift away from their traditional focus on generic drugs. Spurred on by government incentives such as subsidies and tax breaks, the ratio of R&D spending to sales has increased among South Korean drugmakers.

In May 2022, the Korean government announced it would inject KRW877.8bn (USD693.0mn) into the pharmaceutical industry to enhance R&D for new drugs and manpower. The 2022 plan for the pharmaceutical industry includes plans for 152 detailed tasks in four policies: improving regulations, supporting exports, enhancing the workforce, and R&D for new drugs. The government has increased funding for new drugs significantly from KRW45.1bn (USD35mn) in 2021 to KRW134.2bn (USD100mn) in 2022.

Moreover, South Korea will continue to enforce relevant laws and legislations to increase medicine accessibility and ensure that innovative products are appropriately valued. In late November 2022, South Korea’s MFDS announced a new programme titled the Global Innovative Products on Fast Track (GIFT) which is similar to the US FDA’s breakthrough therapy designation system. The GIFT programme is in addition to the already implemented 2020 Korean Fast Track Approval system. Under the Korean Fast Track system over the last two years, over 20 drugs have received fast track approvals including orphan, cancer, and Covid-19 drugs. Approval for fast-track drugs normally takes less than 90 days, with Covid-19 vaccine approvals taking about 30 days. The GIFT program is geared towards further accelerating the review timeframes, especially for breakthrough products. In 2021, the Expedited Review and Pre- Submission Consultation Divisions were created by the National Institute of Food and Drug Safety Evaluation (NIFDS) to evaluate orphan drugs and other pharmaceuticals designed to treat severe health conditions, infectious diseases, and other pharmaceuticals and medical devices that are considered advanced or innovative. Under the new processes employed by the two divisions, such products can expect to half the time approval normally takes.

The local pharmaceutical industry is well developed, supported by the government’s encouragement of new drug R&D. While domestic players are large and are taking steps to match the initiatives of international drugmakers, most local drugmakers focus on biosimilars and generic drugs. In recent years, South Korean pharmaceutical companies have become competitive on a global stage on the back of robust R&D spending and policy support from the government. Still, South Korean firms lag behind their rivals in the development of new drugs, especially blockbuster medicines.

Biosimilar production is a key area of growth for South Korea’s pharmaceutical industry and will see continued governmental support. This includes cultivating a domestic regulatory environment that facilitates the launch of biosimilars. Moreover, biosimilars will be able to generate cost savings for the South Korean medical system, which has a growing need to control spending as chronic diseases become more prevalent.

The pandemic has also opened up a window of opportunity for South Korean pharmaceutical and biotech companies to advance to the global stage. Several local players posted strong earnings by exporting self-developed test kits to foreign countries and secured contract manufacturing deals for Covid-19 vaccines. As a result, the number of pharmaceutical and biotech firms with sales exceeding KRW1trn (USD860.2mn) increased to nine in 2020 from six a year earlier.

Korea aims to develop itself as a vaccine hub. The current government has pledged that the country will aim to become the world’s fifth largest vaccine producing country in the next four years. This announcement came together with the government’s plan to inject KRW2.2trn (USD1.9bn) in the pharmaceutical industry over the next five years, which reflects the government’s commitment to nurturing the healthcare industry as one of the country’s three innovative growth drivers. The investment will be used to expand production and research facilities, as well as secure technologies required to be self-sufficient in manufacturing of drugs and medical equipment.

Korea’s potential as a global vaccine production and distribution hub has been recognised after several contract manufacturing organisations secured manufacturing deals for some of the most widely used Covid-19 vaccines. Samsung Biologics, a biopharmaceutical unit of Korea’s top conglomerate Samsung Group, posted all-time high earnings for the second quarter of 2021, backed by new contract manufacturing deals, including the one with Moderna in May 2021 for the fill-and-finish process of its mRNA Covid-19 vaccine. Samsung Biologics expects the sales growth to continue, as it is expanding production capacity with the construction of its fourth plant in Songdo, Incheon. Samsung Biologics has also built a messenger RNA vaccine drug substance production facility in the Songdo area that provides end-to-end mRNA services, with production of Covid-19 vaccines starting in May 2022. SK Bioscience, another major drug manufacturer, has also posted improved earnings by signing contracts to produce the AstraZeneca and Novavax vaccines.

In line with the government’s initiatives, the private sector has embarked on a series of new research and business projects too, with a new focus on acquiring technologies to develop mRNA vaccines that are now tested as potential treatment for cancers and autoimmune diseases. In June 2021, several pharmaceutical and biotech companies have also joined forces to combine their research capabilities to jointly develop an mRNA Covid-19 vaccine. This consortium led by Hanmi Pharmaceutical, GC

Pharma and ST Pharm stated they will together invest over KRW700bn (USD600mn) for future clinical studies and manufacturing facilities for mRNA vaccines.

South Korea also boasts around 47 multinationals, which operate either independently or in a joint venture. Major international players include GlaxoSmithKline (GSK), Sanofi-Aventis, Pfizer, Novartis, and Merck, Sharp & Dohme (MSD). In order to boost investment, the government provides special benefits to pharmaceutical companies and the government has rolled out several measures to develop the nation as a global biotechnology and medical industry hub. The comprehensive plan encompasses the following:

  • Higher tax benefits and incentives for clinical trials of indigenous drugs and investment in R&D facilities
  • Support for local pharmaceutical companies
  • Expansion of the government’s R&D budget for medical devices
  • Enhancement of exports by improving distribution channels
  • Streamlining policies for commercialisation of stem cell and precision medicines projects

This follows an announcement by the government in April 2016 to offer tax credits for R&D in selected sectors. Among the industries earmarked, biomedical technologies were granted a 30% tax credit, a 10% increase from current levels. Firms will also be able to receive tax credits of up to 10% for investments into developing biomedical facilities. A combination of these incentives, the highly skilled pool of labour and South Korea’s strategic position in Asia has led to several multinationals opting to establish manufacturing operations in the country.

Additionally, since signing a free trade agreement with the US in 2007, the country has lowered its import tariffs and improved regulatory transparency, thus attracting investments from foreign drugmakers. However, multinational pharmaceutical firms in the country will also face growing competition from local drugmakers in the branded prescription medicines segment of the country’s pharmaceutical market.

Clinical Trials

Asia’s attractiveness as a region for clinical research will continue to grow, with South Korea among the leading destinations. In 2021, there were 287 clinical trials registered in the country – a decrease from 487 in 2018, and also down from its peak of 677 in 2012.

Korea is rapidly becoming recognised as a global leader in clinical research. International sponsors cite numerous advantages within the country that consistently ensure speed and quality for the conduct of their clinical trials. In addition to a high population density, the Korean healthcare system provides universal coverage and is characterised by clusters of high-capacity hospitals concentrated in large cities like Seoul. Optimised recruitment practices combined with the large volumes of daily patient traffic that these institutions receive allow for rapid recruitment and accelerated study start-up times.

The Korean government has actively supported the growth of clinical trials and has indeed aimed to make the country a ‘hub’ for the industry. Since legislating the Korean Good Clinical Practice rules in 1995, the government has adopted a wide range of measures to simplify and strengthen the clinical trial environment. Until recently, excessive requirements for clinical trial approval, poor data protection measures, and the favoring of domestic pharmaceutical products plagued the development of clinical trials in the country. The government has made significant efforts to improve this situation as Korea aims to become a more open economy, and the regulatory system is showing strong potential to meet the growing demands for clinical research.

Korea has one of the world’s most efficient clinical trial approvals (30 working days), and its medical institutions and practices meet the highest international standards. Korea’s research-intensive ecosystem of collaborative innovation, along with the rapid growth of R&D expenditure, has increased the diversity of global talent found within the country, complemented by some of the most advanced IT infrastructure and training. With a highly educated and motivated workforce, Korean sites have proven track records in quality and efficiency in clinical trials.

Another significant advantage is the extensive support provided by theKorean government for the pharmaceutical R&D industry and clinical trials, including the establishment of the KoNECT. As a key intermediary between industry and the government, KoNECT is able to form partnerships with leading clinical research organisations, while working closely with the Ministry of Health and Welfare to support the sector’s growth. This position also allows it to facilitate the market entry of firms looking to conduct clinical trials in South Korea through its plan to create the ‘Korea Innovation Centre for Global Clinical Trials’ by 2015 – a one-stop service centre for global clinical trial sponsors.

There are other organizations set in place for the support of South Korea’s clinical research community, such as the Korea Innovation and Collaboration Center for Global Clinical Trials. This centre provides services such as office facilities for new entries to Korea, assisting in clinical trial planning and vendor selection, formation of investigator networks in Asia and hosting valuable information, such as investigator and patient databases.


The Korean government has adopted several pharmaceutical policies aimed at limiting increases in pharmaceutical spending and facilitating cost-effective medication use. Governmental incentives will play a key role in encouraging rapid generic drug penetration in South Korea. This includes the Rewards for Saving Drug Expenditure scheme, which replaces the Market-Based Actual Transaction Pricing system. Implemented in September 2014, this system provides incentives to hospitals and pharmacies based on the purchase of lower-priced medicines as well as on a reduction in their use. These incentives are given out on a quarterly basis and serve to drive up the sale of generic drugs in the country.

South Korea-based drugmakers have well-established generic drug divisions and will be able to rapidly push out generic medicines. In the lead up to Cialis losing patent protection, Hanmi and CKD Pharmaceuticals used strong marketing campaigns to compete for market share. In the case of Hanmi, the company was able to draw reference to its generic equivalent of Palpal (sildenafil citrate) and, using an established sales force in the dysfunction drug sector, captured a large segment of the market.

Aggressively marketing their generic products will be a necessity for South Korean drugmakers. Beyond the need to capture a sizeable market share, this is also due to the pricing regime in South Korea. After losing patent protection, the price cap of the originator product is reduced to 70.0% and the generic equivalents to 59.5%. This is further depressed a year later with both branded and generic equivalents seeing a downward revision in the price to 53.6% of the original.

In July 2020, South Korea implemented a new generic tiered drug pricing policy to prevent generic drugs saturating the market without thorough approval. Under the new system, the price of generic drugs is determined differentially based on the two key requirements:

  • Whether or not a bioequivalence or clinical study sponsored by the approval holder has been performed.
  • Whether or not an active pharmaceutical ingredient (API) registered in a drug master file (DMF) has been used.

If both requirements are met, the drug price is calculated at 53.55% of the originator’s drug price, if one or neither requirement is met, the drug price is calculated at 45.52% or 38.69% of the original drug price, respectively. However this only applies to the first 20 registered drugs of one kind, from the 21st listed version of the same generic drug, the price is set at 85% of the lowest price among the previously listed drug prices, regardless of whether the drug meets the two requirements.

Data from Health Insurance Review and Assessment Service shows that following implementation of the new system, the number of generic products added to the reimbursement list has decreased significantly. According to data, between June and August 2020, over 2,000 drug products were registered on the insurance-reimbursement list. However, after the new pricing system, in January and February 2021, only 28 and 32 products were newly registered on the reimbursement list respectively.

Distribution: Wholesales & Retails

Pharmaceutical wholesalers are represented by various industry associations. One of them is the Korea Pharmaceutical Wholesalers Association (KPWA), which was established in 1962 and has several branches throughout South Korea. The main activities of the KPWA include the modernisation of the wholesale system in the face of implementation of Korean Good Supply Practice guidelines; education and training; and maintaining a code of ethics.

The Korea Pharmaceutical Traders Association (KPTA), which has around 370 members, was established in 1957 with the aim of promoting overseas trade of pharmaceutical products. The KPTA is involved in supporting overseas marketing through promotion in exhibitions, the management of the import process, and the research and testing of imported pharmaceuticals to guarantee quality to the South Korean consumer.

Other distributors are also expanding in South Korea. For example, Schenker Korea has been certified as meeting all the requirements of ISO 9001:2008, ISO 14001:2004, and Gunpo Domestic Distribution Center with an area of 20,000sq m completed in 2012 including 10 logistics centres and seven offices nationwide. Similarly, DKSH Business Unit Healthcare expanded its operations with the official launch of a new healthcare distribution centre in Seoul. DKSH Korea, rooted in a long history of DKSH Holdings, started its technology business under the company name of Kelex in 1989. Through the merger with Cosa-Liebermann Korea in 2010 and MiraeCare in 2012, DKSH Korea was established.

The Retail Landscape

In May 2012, the national assembly passed a bill to allow the sale of non-prescription drugs at retail outlets other than pharmacies. According to the bill, the Ministry of Health and Welfare (MOHW) can select up to 20 OTC drugs for liberalisation. In response to the liberalisation of the OTC drug sector in South Korea, the Korean Pharmaceutical Association announced that 4,000 pharmacies would operate until midnight on weekdays and 5,000 pharmacies would also operate on Sundays to cater to patients that require medicines outside of the normal operating hours.

While the government has made several attempts to allow the sale of OTCs in supermarkets and convenience stores, it was met with opposition from pharmacists who viewed the liberalisation as a loss of revenues. Nevertheless, in January 2012, the MOHW announced that cough drops and painkillers would be sold at 24-hour convenience stores, though not in supermarkets and discount stores. In mid-2012 the authorities also reclassified over 220 products as OTCs – though contraceptive pills now require a prescription, as do some 270 previously classified OTC medicines.

We believe the convenience store-pharmacy hybrid addresses the concerns of both parties: pharmacists will not see a loss of revenues, and consumers will not have to visit a pharmacy to obtain medicines. Additionally, we believe that the large number of convenience stores in South Korea (more than 10,000) and the potential establishment of additional pharmacies in these stores, as well as in grocery retail outlets, will work to create revenue-earning opportunities across the board, on account of wider patient reach.

The Regulation

The Ministry of Food and Drug Safety (MFDS), formerly known as the Korea Food and Drug Administration, is the governmental agency that regulates food, pharmaceuticals, medical devices and cosmetics in South Korea. It was founded in 1996 with the creation of Medical Devices Management Division and Bioproduct Technical Support Division. The organisation was restructured in 2013 when it was renamed and upgraded to a ministry. To reinforce global competitiveness of Korean pharmaceutical industry, the MFDS has been applying the enactments and revisions of International Conference on Harmonization guidelines to the pharmaceutical regulations and guidelines in Korea.

The MFDS approves drugs with safety and efficacy based on internationally harmonised laws and regulations. In Korea, there are six pharmaceutical laws and regulations (for example, the Pharmaceutical Affairs Act and the Regulation on Safety of Medicinal Products) and 18 notifications (for example, Regulation on Pharmaceuticals Approval, Notification, and Review). Under the MFDS, the Pharmaceutical Safety Bureau, the Medical Device Safety Bureau, the Medical Device Information and Technology Assistance Center, and the National Institute of Food and Drug Safety Evaluation hold primary responsibility of the review, approval and regulation of medical device and pharmaceutical products.

The basis for market regulation is the Pharmaceuticals Affairs Act, which was first brought into force in 1953 and has been amended a number of times since. The law ensures the efficacy and safety of medical and pharmaceutical products, including medical devices, and their manufacture and import. The law was amended in 2011, following the ratification of the free trade agreement between South Korea and the US. In terms of quality control, the country also established its own good manufacturing practices – not just for pharmaceutical products but also for herbal medicines.

Bioequivalence tests in South Korea are internationally competitive, as they are conducted based on Good Clinical
Practice guidelines and are reviewed with internationally harmonised evaluation standards. The MFDS has designated 35 institutions (as of January 2016) to perform bioequivalence tests. The ministry also regularly inspects testing institutions to confirm their compliance with relevant laws, as well as their operation status. All such efforts have enhanced the reliability of the bioequivalence tests of the country.

The Korean Pharmacopoeia (KP) is a pharmaceutical order implemented by the Korean government with regards to the improvement of public health. The KP defines the standard for quality and safety. Drugs endorsed by the KP are acknowledged to be safe and efficacious in the treatment and prevention of diseases. The classification for pharmaceuticals are as follows:

  • Drug products that do not require a safety and efficacy review: Drugs that have already been deemed safe and efficacious or are listed in the Korean and US Pharmacopeia. These drugs only require a MFDS notification submission.
  • Drug products that require a safety and efficacy review, and intensive management.

The MFDS announced in August 2022 that it had amended its biologicals standard and test method guidelines so the abnormal toxicity test (ATT) is no longer required. This followed the WHO’s guidance in 2018 to remove the test, and is not mandatory in the EU, the US and Canada. South Korea banned animal testing of cosmetics in 2018, while a ban on the distribution and sale of cosmetics tested on animals (including ingredients) came into effect in February 2022.

Improvements in the overall regulatory environment continue to be overshadowed by international pressure to implement reforms in areas such as market access, reimbursement levels and general transparency. Various aspects of the market, though in the process of change, are considered to be discriminatory and opaque, with pricing, reimbursement and intellectual property issues drawing the most criticism.

Leading Policies

Biosimilar Regulations

Biosimilar medicines made up the lion’s share of 2019 biopharmaceutical exports from the Republic of Korea, whose biopharmaceutical market is expanding rapidly. The country exported USD1.28bn in biopharmaceuticals in 2019, 68.2%, or USD874.5mn, of which were biosimilars, according to a report in the Korea Biomedical Review. Celltrion Healthcare’s Remsima (infliximab), Truxima (rituximab) and Herzuma (trastuzumab); LG Chem’s Eucept (etanercept); and Chong Kun Dang’s Aranesp (darbepoetin alfa), were among the Republic of Korea’s biosimilar exports in 2019.

The MFDS, through its National Institute of Food and Drug Safety Evaluation, is responsible for the scientific evaluation of medicines developed by pharmaceutical companies for use in South Korea. The MFDS guideline covers considerations for the authorisation of biosimilars, selection of reference products and quality, and non-clinical and clinical evaluation of biosimilars.

The Korean guideline for biosimilars was co-developed with the WHO guidelines in 2009, and is also harmonised with the EU guidelines in its scope and data requirements for authorisation. The guideline requires a demonstration of similarity and a comprehensive characterisation at the quality level to enable a reduction in the non-clinical and clinical data required for authorisation. The regulatory decision is then based on a comprehensive evaluation of quality, safety and efficacy data.

Reference products are authorised on the basis of a complete dossier package in South Korea. However, the guideline does allow for the use of out-sourced reference products provided that sufficient information to justify the comparability to reference products, sourced in the South Korean market, is demonstrated. MFDS provides a list of the available reference products on its website. Current biological reference products in South Korea include Remicade (infliximab), Enbrel (etanercept), MabThera (rituximab), Humira (adalimumab), Herceptin (trastuzumab), Nesp (darbepoetin alfa), Lantus (insulin glargine) and Eprex (epoetin alfa).

Advertising Regulations

Under the Pharmaceutical Affairs Act:

  • Advertising is only allowed for MFDS-approved products.
  • Advertising must comply with the MFDS’ approved indications, efficacies and other conditions.
  • Individual healthcare professionals cannot be recommended.
  • Direct-to-consumer advertising must be reviewed in advance by the MFDS or its designated body.
  • Direct-to-consumer advertising for prescription drugs is not allowed.

Intellectual Property

Patent protection is the responsibility of the Korean Intellectual Property (IP) Office. Though South Korea is a signatory to the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights accord, the level of patent protection granted to products is a major cause for concern for the international drug industry.

In February 2022, the Pharmaceutical Researchers and Manufacturers of America (PhRMA) published its annual submission for the United States Trade Representative’s Special 301 Report, highlighting the challenges faced in the key international markets for innovative pharmaceutical firms. South Korea featured in the 2022 submission and the country is placed on the ‘Priority Watch List’. Notably, India shares this status in the Asia Pacific region.

Key issues highlighted in the PhRMA submission are the country’s drug pricing policies, which severely devalue the US intellectual property and are inconsistent with Korea’s commitments under the US-Korea Free Trade Agreement (KORUS FTA). Moreover, the pricing policies favour Korea’s own pharmaceutical industry at the expense of US drugmakers. PhRMA also highlights three key IP protection issues including, Inadequate damages for patent infringement, patent enforcement concerns, and issues with patent term restoration (PTR).

Patent Infringement, Enforcement, And Restoration

In South Korea, when a generic competitor is released into the market, the price of the original innovative drug is automatically reduced. In a Supreme Court decision in November 2020, the Court found that the generic drug companies are not liable for damages incurred due to mandatory price reduction to a patented product, even in the event that the patent was upheld and the generic company entered the market illegally.

Several patent enforcement concerns were listed by PhRMA, one of the main issued relates to the discretion afforded to the Ministry of Food and Drug Safety (MFDS) in regard to whether a patent is listed on the Green List or whether it will permit a change to the patent listing and the limited period of only nine months for a sales stay. Moreover, if an innovative drugmaker chooses not to seek a stay of a second generic/biosimilar, any stay granted against the first generic/ biosimilar application is cancelled. In addition, PhRMA notes that preliminary injunctions take a number of months to be granted, which removes the innovative drugmakers ability to prevent damages incurred due to potentially patent infringing products entering the market.

PhRMA highlights that while South Korea has implemented PTR, two major concerns remain. Firstly, the PTR calculation does not currently include international trials that were used for the approval of a Korean product, this has a discriminatory effect on companies outside of Korea that carry out key clinical trials. An all-or-nothing approach to granting PTR, whereby if the Patent Office determines a certain duration of PTR that is less than the full amount originally requested by the patentee and the patentee challenges that determination and subsequently loses the challenge, no PTR is granted, undermining a patentees right to appeal.
In addition to the challenges highlighted above, PhRMA member companies highlight that Korea’s Ministry of Health and
Welfare repeatedly change its pharmaceutical pricing and reimbursement policies without considering the long-term implications for innovation and market predictability. This results in an uncertain business environment for innovative pharmaceutical companies. Moreover, there are repetitive and excessive price cut mechanisms, such as price-volume agreements that serve to limit potential gains.


Pricing and reimbursement decisions are made by two separate organisations, the National Health Insurance Corporation (NHIC) and the Health Insurance Review and Assessment service (HIRA). The Ministry of Health and Welfare reviews the organisations’ assessments and authorises the final pricing and reimbursement announcement. During the process, HIRA considers clinical utility and cost effectiveness, whereas NHIC evaluates comparative pricing, reference markets, budgetary impact and incremental cost- effectiveness ratio of a new drug. The NHIC also has a price negotiation system to determine if a new drug should be listed/ approved and at what price.

Moreover, the predominant policy of the country’s pricing regime that continues to cause headwinds for drugmakers is the use of price-volume agreements. Under these agreements, the price of a medicine is reduced once sales exceed a pre-agreed forecast volume by 30% or more. This has stunted medicine sales growth since its introduction in 2009. The country’s National Health Insurance Service also employs health technology assessments to decide on which medicines should be placed on the reimbursement lists, which has also led to a significant number of rejections for medicine reimbursement. Moreover, while the country’s high burden of non-communicable disease continues to stimulate interest among drugmakers, the approval of high-value pharmaceuticals for chronic disease treatment further incentivises the government to increase its cost-containment measures and encourage the switch to lower-value generic medicines, where possible.


Economic evidence, including budget impact and pharmaco-economic evaluation, is critical for reimbursement decision-making in South Korea. Pharmaco-economic evaluation plays an important role in the efficiency of medicine reimbursement decision- making. HIRA is responsible for reimbursement assessment while the NHIC conducts price negotiations with pharmaceutical companies.

The rapidly increasing health expenditure has created a greater requirement for proof of ‘value for money’ in the approval and funding of new medical technologies. Consequently, the South Korean government introduced the Positive List System in December 2006. Overall, the purpose of the Positive List System was to maximise the cost-effectiveness of drugs used for health insurance benefit. The Positive List System selects drugs that are effective in both therapeutic and economic aspects for health insurance benefit coverage.
After a pharmaceutical company submits an application for a new drug to HIRA, the organisation performs an economic evaluation and assesses the benefit of inclusion of the drug. Based on HIRA’s assessment results, the NHIC negotiates with the pharmaceutical company for pricing. If the negotiation fails, drugs are not placed on the list. Nevertheless, there is a Drug Reimbursement Coordination Committee that mediates necessary drugs that can be reimbursed.

Finally, the MOHW publishes the final price to the public after review by the Health Insurance Policy Review Committee within the ministry.
Incremental cost-effectiveness ratio is a central criteria for the reimbursement decision. HIRA does not have an explicit incremental cost-effectiveness ratio threshold. The drugs will be accepted or rejected, however, in reference to GDP per capita, considering the incremental cost-effectiveness ratio regarding disease severity, societal burden, quality of life and innovations.

According to PhRMA ‘s 2022 Submission, Korea’s HIRA often disregards evidence of clinical benefit and values innovative medicines using unreasonably low and outdated thresholds for cost-effectiveness that have declined in real terms over time. PhRMA also notes South Korea also does not provide sufficient transparency and due process for companies that apply for reimbursement, contrary to Korea’s commitments under KORUS Article 5.3.

In December 2022, it was announced that the South Korean government will additionally reference Australia when setting drug prices from January 2023. To date, the country has calculated the foreign average drug price of seven countries, also known as A7 which includes the US, UK, Germany, France, Italy, Switzerland, and Japan. With the addition of Canada, the Health Insurance Review and Assessment Service (HIRA) will look at the drug prices of eight countries when setting medicine prices in South Korea. HIRA will judge the appropriateness of the insurance benefit by considering the lowest price among the adjusted prices in eight foreign countries. With this revision, the foreign average drug price calculation method will also change by reflecting the exchange rate, value-added tax, and the scope of distributions, in addition to the ex-factory shipment price in each of the eight foreign countries. This development is in line with our Pharmaceutical Key Themes For 2023 where we highlighted that in 2023, developed markets will increasingly re-evaluate pharmaceutical innovation incentives with changes to pricing regulation, and a greater focus on clinical benefit and budget impact.

Changes to the reference pricing methodology will impact the revenues for innovative drugmakers. While the proposed changes will improve South Korea’s ability to approve new, innovative medicines by increasing the effectiveness of the reimbursement scheme and freeing up the budget, it will reduce profits of multinational drugmakers by forcing prices to remain low, with drugmakers unable to negotiate and increase their prices in South Korea alone. This will result in reduced profits for drugmakers.

The pharmaceutical industry raises growing concern with risk to innovation. Korea Research-Based Pharma Industry Association (KRPIA) expressed concerns over the government’s plan to additionally reference Canada when setting drug prices. KRPIA represents 47 multinational pharmaceutical companies operating in the Korean market. According to KRPIA, ‘the recent decision by HIRA will severely undermine the accessibility of new drugs for patients in Korea. It will also impede the development of the country’s pharmaceutical industry and runs counter to the new government’s policy of increasing healthcare support for the vulnerable and bringing about innovative growth in the biopharmaceutical industry.’ KRPIA further explained that South Korea already sets one of the lowest drug prices worldwide through its current reference price method. For instance, when comparing the prices of pharmaceuticals in Korea and OECD countries, the price level of drugs in Korea is only 65% of the average prices in OECD countries. With low prices for new drugs already an issue in the country, KRPIA believes that the addition of Canada as a reference country will further delay the introduction of new innovative drugs and treatments for severe or rare diseases in South Korea.


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BioPharma Unit, Hera Group