Korean Gov't Eases Medical Regulations
Domestic research hospitals such as Seoul National University Hospital, Samsung Seoul Hospital and Seoul Asan Medical Center will be able to establish venture businesses in the field of bio-health. So far, domestic hospitals have had difficulties in launching new businesses due to the medical law prohibiting the establishment of subsidiaries. With the deregulation, many hospitals are expected to establish subsidiaries in the bio and healthcare sectors.
The Ministry of Health and Welfare announced on July 19 plans to allow research hospitals to set up high-tech holding companies dedicated to commercializing medical technology patents and incubating business start-ups. Currently, only universities are allowed to set up technology holding companies.
An official from the Ministry of Health and Welfare said, "The Ministry of Trade, Industry and Energy will revise its regulation on technology transfer to allow research hospitals to build high-tech holding companies from the second half of the year."
The Ministry of Health and Welfare has been operating a research-oriented hospital system since 2013 to promote the commercialization of ideas from hospitals. Large university hospitals in the metropolitan area like Severance Hospital and Kyungbuk University Hospital have been designated as research hospitals. So far, 67 companies have been founded based on the ideas suggested by the staff of research hospitals. However, none of them are subsidiaries that were invested directly by hospitals. The current medical law restricts hospitals from establishing subsidiaries.
For this reason, Korea University Anam Hospital and Korea University Guro Hospital have been supporting technology start-ups by establishing a holding company under the Korea University, instead of the hospitals. Hospitals belonging to a school corporation are in a better situation than those run by conglomerates, as they can use their school in creating start-ups. Seoul Asan Medical Center and Samsung Seoul Hospital that belong to a foundation or social welfare organization are bound by the inheritance and gift tax law, which prohibits them from holding more than 5% of a domestic company. As a result, the medical staff of these hospitals usually starts businesses themselves as individuals. This is drawing criticism that while overseas medical institutions come into the ring as “heavy weight” fighters, Korean doctors enter the ring as “flyweight” fighters.
The Ministry of Health and Welfare predicts that when hospitals can set up technology holding companies, they will be able to establish bio and healthcare companies with ideas from hospitals. Then the profits created from these companies will go back to the hospitals, creating a virtuous cycle. The Mayo Clinic in the US receives more than two technology proposals for commercialization every day through the Mayo Clinic Ventures, and commercializes about 25% of them. By 2016, there were 136 companies founded by Mayo Clinic Ventures. Of these, Mayo Clinic Ventures owns stakes in 81 companies. Profits from technology transfer exceed 540 billion won.