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Executive Summary
Current issues facing the medical device industry in South Korea include a new healthcare technology assessment system for medical devices. The U.S. Embassy in Korea works closely with partners to ensure that U.S. medical device industry interests are represented.
Medical Devices and Equipment
Unit: USD billions
|
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2016
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2017
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2018 (Est.) *
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2019 (Est.) *
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Total Market Size
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5.059
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5.480
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5.920
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5.813
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Total Local Production
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4.826
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5.149
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5.458
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5.461
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Total Exports
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2.919
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3.164
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3.417
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3.356
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Total Imports
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3.151
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3.496
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3.880
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3.708
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Imports from the U.S.
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1.474
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1.641
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1.822
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1.741
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Exchange Rate: 1 USD
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1,161
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1,131
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1,110 (Est.)
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1,120 (Est.)
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Total Market Size = (Total Local Production + Total Imports) – (Total Exports)
Source: Korea Medical Devices Industry Association, KMDIA
*Note: Estimates based on historical average annual growth rate of 8%. In addition, 2019 estimated dollar amounts are reflected given higher estimated exchange rate.
The Korean medical device market is estimated to reach USD 5.8 billion in 2019. U.S. medical device manufacturers carefully watch government pricing and reimbursement policies as Korea grapples with cost containment under its national healthcare system.
The importation of medical devices requires the assignment of an importer or representative based in South Korea to manage medical device approvals and to ensure regulatory compliance. As part of pre-market approval requirements, the Government of Korea requires testing reports on safety and efficacy. In addition to medical device approvals, companies all need to negotiate pricing terms with the Korean Health Insurance Review & Assessment Service (HIRA).
Healthcare Policy Issues
Medical device companies face several non-tariff barrier issues in Korea. In February 2019, Korea’s Ministry of Food and Drug Safety (MFDS) asked for stakeholder comments on new standards for 110 class 1 medical devices, which may result in Korea-specific standards, or standards non-aligned with international best practices. In addition, Korea has been designing an Integrated Medical Device Information System (IMDIS) since 2018 to introduce the Unique Device Identifier (UDI) system. However, in designing the IMDIS database, MFDS has asked companies to also provide pricing information, which no other jurisdiction in the world has done to date, and which does not facilitate UDI issuance or tracking.
Innovative pharmaceutical companies seeking to sell in South Korea face non-tariff barriers to trade that substantially limit incentives to invest in the development of new medicines for patients. One study found that during the 2007–2014 period, new drug prices in South Korea were less than half of the average (44%) in Organization for Economic Co-operation and Development (OECD) countries. Issues of concern include a complex and lengthy regulatory approval process, after which it can take up to another 24 months for the product to be eligible for reimbursement; and therapeutic reference pricing, which bases the prices of patented drugs on heavily discounted off-patent originators and generic products deemed to be in the same therapeutic class. Additionally, in 2016 South Korea issued a revised pricing policy (known as the “7.7 Pricing Policy”) that authorized premium pricing based on certain discriminatory criteria. As part of the KORUS amendment process, Korea agreed to amend its Premium Pricing Policy for innovative drugs to make it consistent with Korea’s commitments under KORUS. While Korea amended the Policy early January this year, some U.S. firms continue to be concerned about the ability of their products to qualify for premium pricing levels.
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Market Entry
All domestic and foreign medical devices are subject to pre-market licenses from the Ministry of Drug and Safety (MFDS – Korea’s FDA).
Distribution/Business Practices/Key Competitive Factors
Medical devices are distributed mainly through local distributors. A local distributor may directly cover the whole country on an exclusive basis, or a master distributor may contract with other regional sub-dealers for sales nationwide.
Sales leads for medical devices in Korea are normally created through steady communication with local subsidiaries or between distributors/commission agents and physicians on an individual basis. Local representatives call on physicians frequently and provide information on products to maintain good relationships.
One reliable distributor to cover the country on an exclusive basis is highly recommended for the Korean market since Korea is a geographically small country, and major users for high end medical devices are limited to general hospitals and university hospitals. More than one distributor often confuses clients in terms of representation and prices and diminishes the reliability of the foreign supplier.
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Current Market Trends
Korea depends on high-end medical devices from the US, the EU, and Japan to supply about 60% of total market demand. Korean companies manufacture comparatively lower-end (mid-technology) medical devices.
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Best Prospects
The following were the top 10 medical devices imported to Korea in 2018:
- Soft contact lenses
- Intravascular catheters
- Dialyzers for hemodialysis
- IVD reagents for clinical immunochemistry
- Knee joint prostheses
- MRI devices
- CT systems
- Sight corrective ophthalmic lenses
- Staples for internal use (non-absorbent)
- Analysis products
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Market Size (as of 2018)
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Healthcare spending (including investment)
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… as percent of GDP:
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8.1%
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Hospitals, Procedures, Healthcare Professionals (as of 2018)
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Number of hospitals (including small clinics):
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71,102
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…Public (including military hospitals):
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3,812
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Number of hospital beds:
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707,349
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… available beds per capita:
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0.014
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…of which are in general hospitals:
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152,104
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Physicians:
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102,471
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…of which are surgeons:
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6,023
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…of which are internists:
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15,527
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…of which are pediatricians:
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5,670
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Dentists:
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25,792
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Demographics (as of 2017)
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Population:
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51.4 million
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Life expectancy men/women:
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79.7/85.7
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Infant mortality:
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2.8/1,000 live births
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Percent of population older than 65:
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13.9%
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…projection, 2030:
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25.0%
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Annual deaths:
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285,524
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…caused by [Cancer]
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80,320
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…caused by [Cardiac disease]
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16,712
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Prevalence of Pneumonia:
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523
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Sources: Health Insurance Review & Assessment Service (HIRA), Statistics Korea (KOSTAT), OECD Data
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Main Competitors
Currently, the United States has the largest import market share in Korea, followed by the EU and Japan.
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Current Demand
In 2019, total imports of medical devices were estimated at USD 3.7 billion, with U.S. imports totaling over USD 1.7 billion. While U.S. market share represents approximately 47% of the import market, demand for foreign advanced and innovative medical devices showed relatively slow growth in 2018.
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Registration Process
Pre-market License
All medical devices are required to obtain marketing clearance from the Ministry of Food and Drug Safety (MFDS) before they are manufactured in or imported into Korea. As of April 8, 2012, Korea Good Manufacturing Practice (KGMP) certification is required at manufacturers’ sites overseas (Class III and IV) or in Korea through their importers by documents (Class II), depending on cases and criteria. KGMP certification should be obtained to apply for a pre- market license.
Currently, medical devices are classified into four categories in Korea depending upon technical attributes and product use. MFDS requires pre-market notification for Class I devices and pre-market approval for Class II, III, and IV devices. Class III and IV devices must pass the most stringent technical review by MFDS with authorized labs to prove their safety and effectiveness. Since MFDS issues product licenses only to locally based firms, all foreign suppliers must submit required documentation and receive necessary approvals through their Korean importers or the U.S. supplier’s corporation located in Korea.
The lead time for approval is typically 6-12 months, including company working time for preparing applications. Although MFDS indicates its requirements for the approval in relevant regulations, specific detailed requirements could be different according to each product. Thus, U.S. firms should work closely with their Korean importers to determine the MFDS requirements on a case-by-case basis to obtain approvals.
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Reimbursement
Korea has a compulsory national healthcare system, called National Health Insurance (NHI) System. This national single-payer system was introduced in 1977 and has covered the entire population since 1989.
Over 97.5% of citizens in Korea pay a premium and have the right to access any physicians and medical institutions. The remaining 2.5% of the population are covered by a Medical Aid Program for the poor.
National Health Insurance Program & Reimbursement Pricing
South Korea has a compulsory National Health Insurance (NHI) system for 51 million citizens. The NHI system was introduced in 1977 and covered the entire population by 1989. The Korean government administers funds, coverage, coding, payment and pricing. Therefore, companies should negotiate pricing terms with the Korean government, as it has been implementing cost containment policies in many areas to reduce NHI budget spending.
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Barriers
Tariffs
Due to the Korea-US Free Trade Agreement (KORUS FTA) implemented on March 15, 2012, tariffs on most medical devices imported to Korea received duty-free treatment.
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U.S. Commercial Service Contact Information
Name: Joonho Yoon
Position: Commercial Specialist
Email: Joonho.Yoon@trade.gov
Phone: +82-2-397-4439
