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Tiny R&D Investment by Local Pharmaceuticals
Drug Investment
Tiny R&D Investment by Local Pharmaceuticals
  • By matthew
  • May 12, 2014, 09:45
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It turns out that local pharmaceutical companies’ R&D investment in new drugs amounts to only one tenth of that of Japanese counterparts.

Presently, the local pharmaceutical industry is in a similar state to that of Japan in the 1980s, as exemplified by downward trends of drug prices. Some point out that the industry needs to follow Japan’s example, whose drug industry grew to be the world’s number 2, on the back of R&D investment reinforcement.

According to Korea Health Industry Development Institute (KHIDI) on May 11, as of 2011, Japanese pharmaceutical companies’ total R&D costs reached US$11.4 billion, over 10 times those of Korea’s in size.

In R&D investment in 2011, by country, the U.S. topped with US$49.4 billion, trailed by Japan with US$11.4 billion, England with US$6.9 billion, Germany with US$5.2 billion, and China with US$5 billion. Korea ranked number nine in the OECD with US$1 billion.

Also, the drug industry’s R&D investment vs. that of the overall industries in Korea accounted for a scanty 2 percent, which is noticeably lower than that of Japan with 10 percent, or those of other top ranking countries.

According to Japan’s Ministry of Healthy, Labor, and Welfare’s research on medical drugs and equipment industry in 2012, 300 companies in the cited industry invested 1.7 trillion yen (US$17 billion)in R&D, amounting to 5.6 billion yen (US$55 million) per company on the average.

In the same year, among the global top 1,000 R&D investment companies, 93 were pharmaceutical companies, 14 among (15.1 percent) which were Japanese companies with their R&D spending averaging 750 million euros (US$1 billion) per annum and R&D intensity averaging 16.4 percent.

All except two, Japanese drug companies that made the top 1,000 rank showed high R&D intensity, over 10 percent. R&D intensify refers to a ratio of a firm’s R&D spending out of the total sales. 

Contrarily, only one local pharmaceutical company, Dong-A Social Holdings (ranking 868) made the top 1000, but its R&D spending was smaller than that of Japan’s 14th ranking Nippon Shinyaku (ranking 863).

KHIDI research er Kim Ji-young said, “Japanese pharmaceutical industry went through a tough time after a massive drug price cut-down in the mid 1980 like our pharmaceutical industry is going through right now, but a few companies used the crisis as the new opportunity. Through global new drug development and M&A, Japan is number two in the global arena. Our pharmaceutical industry needs to benchmark Japan in order to leap into being global companies and enter into the advanced pharmaceutical market.”