Boston, MA -- (SBWIRE) -- 02/18/2014 -- We highlight that, despite challenging conditions, South Korea does offer some form of certainty given that the government has yet to initiate fresh rounds of extensive medicine price cuts, providing short-term stability to the pharmaceutical market. Stringent price containment goes against the country's aim to develop its pharmaceutical sector, and therefore in order to foster the sector's growth, potential changes must be made to drug pricing regulation, representing an upside risk to our outlook.

Headline Expenditure Projections

- Pharmaceuticals: KRW16,106.7bn (US$14.45bn) in 2013 to KRW16,543.74bn (US$15.04bn) in 2014; +2.7% in local currency terms and +4.1% in US dollar terms.
- Healthcare: KRW101,672bn (US$91.19bn) in 2013 to KRW108,555bn (US$98.69bn) in 2014; +6.8% in local currency terms and +8.2% in US dollar terms.

Risk/Reward Ratings

In Q2 2014, South Korea ranks fourth out of the 19 countries surveyed in the Asia Pacific region. South Korea's score for its Rewards variable is third to Japan, Taiwan and China, 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.

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Key Trends & Developments

- In January 2014, Allergan and Medytox closed the licence agreement that was previously announced on September 25 2013. Under the terms of the agreement, Allergan will pay Medytox an up-front cash payment of US$65mn within seven business days of closing. Medytox has granted Allergan exclusive rights, worldwide outside of Korea, to develop and, if approved, commercialise certain neurotoxin product candidates currently in development, including a potential liquid injectable product.
- In December 2014, the Ministry of Health and Welfare announced that it will implement its market-based actual transaction price (M-ATP) system, effective from February 2014. Following the announcement, six pharmaceutical industry interest groups, including the Korean Pharmaceutical Manufacturers Association, the Korean Pharmaceutical Wholesalers Association, and the Korean Research-based Pharmaceutical Industry Association, released a joint statement objecting to the proposal, stating that it will negatively affect the growth of the pharmaceutical industry.
- In November 2014, Hanmi Pharmaceutical announced that the first fixed dose combination (FDC) drug composed of ARB (angiotensin receptor blocker) hypertension drug and the Statin hyperlipidaemia drug has received marketing approval from the Korean Food and Drug Administration (KFDA) in Korea. The FDC drug, dubbed Rovelito, was jointly developed with Sanofi-Aventis Korea.

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