Global pharmaceutical companies operating in Korea are facing growing criticism for being stingy on social contribution.
Korean subsidiaries of global pharmaceutical companies account for 30% of total medicine sales in Korea. Sales of new drugs from these companies have been robust as punishment for illegal rebates has been strengthened. But they have not been active in social contribution.
According to the Financial Supervisory Service's electronic disclosure system on April 24, 35 Korean subsidiaries of global pharmaceutical companies (including those which settle accounts in November) posted 5.64 trillion won (US$5.1 billion) in sales. Their sales grew 2.9% and their net profit swelled 129.3% year on year.
Experts in the industry estimate that sales of global pharmaceutical companies' Korean operations, if limited companies that are not obligated to disclose audit reports are included, will top seven trillion won.
Earlier, MSD Korea, BMS Korea, and Lily Korea Co., Ltd. entered the Korean market as joint-stock companies and then switched to limited companies. As sales of Korean pharmaceutical companies last year totaled about 26 trillion won (US$23.4 billion), Korean subsidiaries of global pharmaceutical companies accounted for 27% of total sales.
In particular, Pfizer, which ranks first among global drug makers in Korea, posted 751.6 billion won (US$676 million) in sales and 44.8 billion won (US$43 million) in operating profit, setting new records. Its sales increased 10.3% and operating profit, 574.6%. Pfizer Korea is the seventh largest among pharmaceutical companies in Korea, including Korean pharmaceutical companies. Pfizer Korea is closely trailing sixth-ranked Chong Kun Dang (884.3 billion won or US$795 million in sales) by outclassing 8th-ranked Dong-A ST (555 billion wonor US$499 in sales). Some experts say that if this trend holds, Pfizer Korea will become one of the Big 5 drug makers in Korea. Currently the Big 5 are Yuhan Corp., Green Cross, Kwangdong, Daewoong and Hanmi.
Analysis says that although Korean pharmaceutical companies began to keep foreign competitors in check by releasing generic drugs as soon as patents on new drugs sold by global pharmaceutical companies expired, global pharmaceutical companies have cemented their high positions as Korean patients prefer original products. The punishment of illegal rebates by the government has also strengthened global pharmaceutical companies’ positions.
However, social contribution activities by global pharmaceutical companies, which post hundreds of billions of won in annual sales and receive pay dividends of several tens of billions of won each year, leave much to be desired. According to the KRPIA, an interest group for global pharmaceutical companies operating in Korea, global pharmaceutical companies' social contributions (donations plus spot goods) amounted to 25.9 billion won (US$23 million), or 0.48% of total sales, last year.
"Sales of global pharmaceutical companies in Korea are expected to exceed 30% of the Korean pharmaceutical market this year," said an official in the Korean pharmaceutical industry. “While Korean pharmaceutical companies are subject to a corporate tax rate of 22%, global pharmaceutical companies in Korea can enjoy corporate tax rates of 5% to 15%, so the gap is growing in actual profits."