Medical Device Market and Rising Interests in R&D12 Ultrasound Scanners 13 Surgical Instruments 14...

KOREA

Medical Device Market and

Rising Interests in R&D

October 31, 2011

Synex Consulting, Ltd.Seoul, Korea

2Synex-MassMedic Presentation2011-10-31

Copyright © 2011 Synex Consulting, Ltd. All rights reserved. This content isprotected by Republic of Korea and International copyright laws and may not becopied, reprinted, published, translated, resold, hosted, or otherwise distributed byany means without explicit permission. Disclaimer: the information contained in thisreport is the opinion of Synex Consulting, Ltd. It is provided for general informationpurposes only, and does not constitute professional advice. We believe the contentsto be true and accurate at the date of writing but can give no assurances orwarranties regarding the accuracy, currency, or applicability of any of the contents inrelation to specific situations and particular circumstances.

Young Kim

• 2002 – presentPresidentSynex Consulting, Ltd.Seoul, Korea

• 1988 – 2001Senior Commercial SpecialistAmerican Embassy, Seoul, Korea International Trade Administration U.S. Department of Commerce

3

Fact Sheet: Synex Consulting, Ltd.

Descriptions Features

Established April 2002

Business Outsource consulting firm assisting medical device and pharmaceutical business firms to fulfill regulatory and government requirements for introducing new products to market

Specialty Third-party license holder and market development consulting for inbound business into Korea

Service Areas Regulatory ApprovalDevice Qualify System Certification SupportReimbursement ApprovalClinical Research (CRO)Market Research

Leadership 10-20 years experiences in working at multinational healthcare business environment

Employees 50 people


Agenda

• View Korea as a medical device market • Device Business Environments

– Regulatory Approval– Reimbursement Approval– Distribution

• New Strategic Directions – Clinical Study– Device R&D

• Opportunities for Collaboration


Country Profile by Comparison

Geography

Location-Northeastern part of Asia between China and Japan

Land Space-About 24,340 acres (98,480 sq km), slightly larger than the state of Indiana

-About 190 miles from the east end to the west end

-About 310 miles from the northern end to the southern end

Capital City: Seoul


OECD populationThousands, year 2007

Population


Population in Korea• 16% of the U.S.

population• Same level with

Spain• Slightly smaller

than UK and Italy

Population• Demographics

– Population: 48.9 million (2010) • 26th Largest population in the world• Italy (60 million), Spain (46.1 million), Ukraine (45.9 million)

– Average life expectancy at birth: 79.1– Median age: 37.3

• Social Issues – Increasing Elderly Population

• +65 (2009): 5.2 million (10.7% of total population)• Raising welfare, healthcare budget

– Low Birth Rate• Average 1.15 child per woman for lifetime• Government strong policy for encourage child


Economy• Strong economic growths in the middle of world economic crisis

– Average 4.6% per annum for a decade before crisis– 7.8% growth for Q1 2010 – About 4% growth expected for 2011

• Individual Income– Slightly lower than OECD average– Gross national income per capita (2008): US$27,838*

• Greece (US$27,947)• Israel (US$27,222)• New Zealand (US$24,997)

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

Gross national income Net national income

KOREA OECD Average


Individual Incomes

GDP per capitaUS dollars, current prices and PPPs, 2008


0

10 000

20 000

30 000

40 000

50 000

60 00084 713

US$, 2008

China 5 970

Korea 27 658

EU 27 30 651

Italy 31 253

Spain 31 455

France 33 090

Japan 34 132

United States 47 186

Norway 58 717

Luxembourg 84 713

Incomes of Korean citizens• About 60% of U.S. citizens • Approaching the EU average• Slightly lower than Spain, France and Japan

R&D Investment

Gross domestic expenditure on R&DAs a percentage of GDP


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

2008 or latest available year 1999 or first available year

2008 or latest available year (%)

OECD total 2.28

Germany 2.53

Iceland 2.65

Austria 2.67

Denmark 2.72

United States 2.77

Switzerland 2.90

Korea 3.21

Japan 3.44

Finland 3.49

Sweden 3.75

Israel 4.86

• High emphasis on technology R&D • Strong in IT, electronics, automobiles, biotechnology, etc.

Healthcare Expenditure & Resources

Descriptions Korea US

Total Healthcare Expenditure as % of GDP 7.0% (2010) 17.4% (2009)

Total Healthcare Expenditure per capital per capita, US% purchasing power parity

US$1,980 (2010) US$7,960 (2009)

Annual growth rate of public expenditure on health per capita, in real terms

11.5% (2008-2009) 5.8% (2008-2009)

Physicians, Density per 1 000 population (head counts) 1.9 (2010) 2.4 (2009)

Total hospital beds, Per 1 000 population 8.3 (2009) 3.1 (2009)

Average length of stay: acute care, Days 10.6 (2003) 5.4 (2009)


• Spend much less money for healthcare than other countries of similar economy size

• Healthcare depends heavily on acute care at hospitals • Rising demand for long-term care

Healthcare Resources (2008)

• Healthcare Organizations– University hospitals (tertiary centers): 43– Medium-size general hospitals: 269– Small-size hospitals: 1,883– Clinics: 26,528– Dental hospitals: 168– Dental offices: 13,339

• All healthcare organizations paid by NHI


National Health Insurance (NHI)

• Compulsory public health insurance– The sole national insurer in Korea– Ministry of Health and Welfare operates the NHI system – All income-earning citizens must contribute certain percentages

of incomes.– All hospitals and clinics must be reimbursed by the NHI

reimbursement plan.– Free access to healthcare organizations with no geographic limits– Patients co-pay 20-50 percent of the published amount of fees for

covered services or products• Patients pay full costs for uncovered services or products

• Public long-term care insurance to support independent living of senior citizens


Points to Remember

• Korea is the second largest device market in Asia.

• Korea’s economy is making a strong growth in the middle of slow economy worldwide.

• Korea spends less money in healthcare than other countries of similar economy and has potentials for further growth significantly.


An Overview of Medical Device Market in Korea

Copyright © 2009-2011 Synex Consulting, Ltd. All rights reserved.

Korea in the World Medical Device Market• The 13th largest market• The 2nd largest market in Asia following China• US$2.9 billion in volume• 1.2% of the world device market

18*Sources: Espicom, Korea Medical Device Industry Association

USA, 39.7%

Japan, 9.3%

Germany, 8.3%

France, 3.9%

Itlay, 3.7%

UK, 3.5%China, 2.9%

Canada, 2.1%Russia, 2.1%

Spain, 1.8%Switzerland,

1.7%

Australia, 1.4% Korea, 1.2% Maxico, 1.1%The Netherlands, 1.0%

Austria, 1.0% Ranks Countries US$ MillionsWorld Market

Share

1 USA 92,663 39.7%

2 Japan 21,713 9.3%

3 Germany 18,843 8.3%

4 France 9,071 3.9%

5 Itlay 8,703 3.7%

6 UK 8,284 3.5%

7 China 6,695 2.9%

8 Canada 4,922 2.1%

9 Russia 4,913 2.1%

10 Spain 4,257 1.8%

11 Switzerland 3,969 1.7%

12 Australia 3,370 1.4%

13 Korea 2,855 1.2%

14 Maxico 2,608 1.1%

15 The Netherlands 2,371 1.0%

16 Austria 2,222 1.0%


• 3,800 Device Manufacturers or Importers

• 6,000-7,000 new products approved every year.

Device Suppliers


• Korea imported 66% of the devices supplied to market in 2009- The share of imports for high-tech devices is approaching 95% of

the market. • Domestic manufacturers are also growing internationally.

– About 45% of production is being exported.

US$ millions Year Changes from the previous year

Total Market 3,644 2009 Up 9.9%

Local Production 2,764 2009 Up 13%

Export 1,519 2009 Up 16.3

Import 2,398 2009 Up 9.9%

Device Trade Deficits -880 2009

Portfolio: Import vs. Export


Volume Imported Devices

1 Stents2 MRI3 CT Scanners4 Dialysis Device5 Artificial Knee Implants6 Lenses for Eyeglasses7 Medical charged-particle radiation therapy system8 Dental Implants9 Soft Contact Lenses

10 Surgical Lases11 single photon emission computed tomography12 Ultrasound Scanners13 Surgical Instruments14 Angiographic X-ray Equipment15 Percutaneous Catheters16 Digital X-ray Equipment17 Spinal Fixation Devices18 X-ray Films19 Medical Probes20 Surgical Staples

Ranks Items


Volume Export Devices

22

1 Untrasound Diagnostics Equipment2 Lenses for Eyeglasses3 Electric Warmers4 CT Scanner5 Electronic Stimulator6 Blood Glucose Test Strips7 Medical Probes8 Dental Implants9 Syringes10 Soft Contact Lenses11 Ophthalmic Refractometer12 Handpieces13 Patient Monitors14 Degital X-ray Equipment15 Surgical Lasers16 Blood Glucose Test Meters17 Stents18 Condoms19 Spinal Fixation Device20 Drug Infusion Pump

ItemsRanks

Market Leaders in Korea


Business Performances of Major Players

24Source: Financial Supervisory Service of Korea

Copyright © Synex 2009, All Rights Reserved

Firms Thousand US$ (2010)

Philips Korea 354,573

Johnson & Johnson Medical Korea 229,861

GE Healthcare Korea 211,297

Becton Dickinson Korea 106,546

Medtronic Korea 90,448

Tyco Healthcare 87,800

Gambro Korea 83,666

BBraun Korea 66,778

Boston Scientific Korea 63,039

Zimmer Korea 34,367

Abbott Korea 15,289

General Business Climates

Geographical Distribution• The five largest cities represent about 60%

of the total hospital beds of the country– Seoul and Kyonggi (38%)– Pusan (9%)– Daegu (5%)– Kwangju (4%)– Daijeon (4%)

• The Seoul and Kyonggi area (called ‘Seoul Metropolitan Area) represent about 60% of the imported high technology medical device market.

• The five super-size hospitals targeted for door-opening centers for new health technologies

– Asan Medical Center (AMC) – 2,600 beds– Samsung Medical Center (CMC) – 2,000 beds– Seoul National University Hospital (SNUH) – 1,600 beds– Yonsei Medical Center (YMC) – 1,880 beds– Catholic St. Mary’s Hospital (CMC) – 1,200 beds

26Copyright © Synex 2009, All Rights Reserved

Characteristics

• Doctors– Highly receptive to new technologies– Doctors at teaching hospitals are mostly trained in U.S. or

Europe– Most influential on purchasing decisions

• Hospitals– Large hospitals have a medical device committee to decide

about purchase of durable medical equipment• Take at least several months to finalize a purchasing decision

– Purchasing department– Outside purchasing organization (GPO)


End-User Characteristics

• Doctors– Highly receptive to new technologies– Doctors at teaching hospitals are mostly trained in U.S. – Most influential on purchasing decisions

• Hospitals– Large hospitals have a medical device committee to decide

about purchase of durable medical equipment• Take at least several months to finalize a purchasing decision

– Purchasing department– Outside purchasing organization (GPO)


• Headquartered in O-Song, Chungbuk– About 120 km South of Seoul

Korea Food & Drug Administration (KFDA)

Five Bureaus Food Safety BureauDrug Safety BureauBiopharm./Herbal Medicine BureauMedical Device Safety BureauRisk Prevention Policy Bureau

Regulatory


Pre-Market Requirements

Certificate of Product Notification

Technical File

Type Test

Class I Class II, III, IV

Certificate of Product Approval

I – IV ClassificationsNo reference country approval is necessaryNo local clinical study required; foreign study data is acceptedKFDA grants product import licenses to local business entities only.Each and every product code must be notified or approved by KFDA prior to the first shipment to Korea Validity: Permanent; no need for renewal

30

Decision Points for Regulatory Approval• Normally take 3-12 months including company

preparation time– General advices

• Class 1 device: 3 month• Class 2, 3, 4 devices: 6-9 months• Devices of new concepts: 9-12 months.

• Device distributors in Korea are mostly small and have limited experiences in regulatory affairs

• Decide whether you are going to allow your distributors to hold your product license or to retain third-party license holder– In case you allow your distributors to hold your product

license. • New distributors have to go through registration process again, unless the

old distributor agrees to transferring the product license.


Needs for Reimbursement Approval

• Medical Devices – Device suppliers submit applications to HIRA for devices

reimbursed as product fees, e.g.,• Stent• Pacemaker

– Firms are supposed to submit an application for approval within 30 days of KFDA approval

– No need to apply for devices for which costs of devices are deemed included in service fees, e.g.,

• Syringes• MRI• CT

– A brand-new health technology subject to Health Technology Assessment (HTA) before it can submit a reimbursement application

32

Three Government Agencies

• Ministry of Health and Welfare (MOHW)– Decide reimbursement policies and guidelines– Announce reimbursement coverage decisions and prices

• Health Insurance Review Agency (HIRA)– Accept and review applications for reimbursement approvals

submitted by device suppliers• Recommend reimbursement/non-reimbursement• Recommend prices, in case of reimbursement recommended

– Clear reimbursement claims submitted by hospitals or pharmacies

• National Health Insurance Corporation (NHIC)– Collect premiums– Pay hospitals or pharmacies


Service Fees , 5,500

Drugs, 22,000

Medical Devices, 15,734

Devices reimbursed as product fees

• You can submit applications for reimbursement listing any time• Government announces new listings every months


Reimbursement Approval Process

• Reimbursement approval process for disposables or implantables basically same as products in the market takes 6 months

• Clinical evidence is the most important to better pricing.– Level of evidence is getting higher

• New technologies are subject to Health Technology Assessment (HTA), which takes 1 year. – Total reimbursement approval process may take 1.5 – 2 years. – Steps

• Health Technology Assessment: 1 year• Service Fee Approval: 6 months• Device Fee Approval: 6 months


Distributor ProfilesAbout 3,000 device suppliers• 2,000 manufacturers• 1,500 importers or distributors

Device importers or distributors are mostly small-sized with less than 10 employees.

Large device importers are mostly based in Seoul and become national distributors.

National distributors mostly sell to hospitals directly in the Seoul metropolitan area including Kyonggi-province and have sub-dealers by region for smaller cities.


Essential Competencies of Distributors

• Relationships with target doctors or customers– Experiences in the target segment of the market

• Financial capability– Long payment terms of hospitals in Korea

• e.g., 3-6 months

• Business Ethics – New voluntary code of conducts for device industry is

being reviewed by the Korean Fair Trade Commission

• Language and cultural barriers are substantial– Direct communication with customers or government officials

in English will be very limited. – You need in-good faith, reliable partners


Rising Interests in R&D

Copyright © 2009-2011 Synex Consulting, Ltd. All rights reserved.

Korea’s New Ambition

39

• President Lee Myung-Bak was inaugurated in 2008.• President Lee’s policy slogan is ‘Business-Friendly’. In the middle of slow

economy this year, the government has initiated various policies to help business grow.

• The new government designated seventeen high-value business sectors as “New Growth Engines” for the future economic growth in Korea.

– Demand of people in Korea for better healthcare is increasing explosively– Korea is becoming a place for healthcare vacation for people in Asia

• Medical device is on the top of national agenda together with pharmaceutical,biotech, etc. Medical device is under spotlight than ever at national level.

Device Vision 2015• Device Industry’s Goal

• The country of the 5th largest device industry in the world • 3% of the world market

• Key KFDA Strategies• Expedite International harmonization in regulatory system• Expand free trades with US, EU, Japan, etc. • Support infrastructure for clinical research

• Ministry of Science & Technology to support basic science

• Ministry of Health and Welfare is supporting to improve clinical development competency of study sites.

• Ministry of Knowledge & Economy support industrialization


Fully Aligned Governement Supports

*Courtesy : Korea Health Industry Development Institute

Basic research

Transla-tional

Research

Non-clinical/clinical study

KFDA Approval Marker entry and patient access

Industrialization/mass production

Input results of basic research

MEST

Healthcare R&D Fund

MKE

MOHWMOHW HIRA

KFDA Healthcare Service Providers

Healthcare Service

Providers


Korean Government R&D Grants to Healthcare Sectors 2003-2008

(Billion Won)

2003 2004 2005 2006 2007 2008 Total

Total Government Grants

6,515 7,082 7,799 8,909 9,762 11,078 51,145

Grants to Healthcare Sector

313 3,633 418 532 577 5,458 10,931

% 4.8 5.1 5.4 6 5.9 4.9 5.35

National Science and Technology Information Service (NTIS, www.ntis.go.kr)


Korean Government R&D Grants by Agency 2004-2008

(Billion Won)

2004 2005 2006 2007 2008 Total

Total 363 419 532 577 546 2,437

Ministry of Health and Welfare 150 161 172 1,655 176 2,314

Ministry of Education, Science & Technology

978 117 186 232 196 1,709

Ministry of Knowledge & Economy 51 89 113 106 99 458

Korea Food & Drug Administration 35 27 44 44 45 195

Small & Medium Business Administration

16 21 95 18 19 169

Others 12 21 55 10 8 106

National Science and Technology Information Service (NTIS, www.ntis.go.kr)


Two Strategic Directions

• Forster platforms for device clinical trials – Hospitals to have GCP-compliance

environements– Companies and professors to have grants for

clinical studies

• R&D grants for device R&D and commercialization– Companies and professors to have grants for

research in different stages– “Go global”


Major support areas by agency

Ministry of Health and

Welfare

Ministry of Education, Science & Technology

Ministry of Knowledge and

Economy

Basic Science Research

Industriali-zation

Translational Research

R&D Grant R&D Grant R&D Grant

Evaluate Evaluate Evaluate

•Worth for further R&D?•Clinical implication?•Go/No-go decision



*Courtesy for Conceptualization: Korea Health Industry Development Institute


Weaknesses

• Korea has limited experiences in device R&D, clinical study and commercialization process.

• Industry has limited resources for experiences in playing in the global device market.


Device Clinical Trials

As of May 2011, a total of 94 university hospitals has been accredited by KFDA as qualified medical device clinical trial centers.

KFDA introduced a new accreditation system to device trial centers. To assure adequate patient protection and quality studies. Seoul 32

Kyonggi 16

Kangwon 4

Chunbuk 4 Deagu 5

Kwangju 6Chunnam 2

Kyong-nam2Busan 5

Chungbuk 3Chungnam 4

Inchon 3

Kyongbuk 1Daejeon 5

Jeju-do 1

Ulsan 1

94 Medical Device Clinical Trial Centers Qualified by KFDA


•Clinical studies are increasing

–In 2007-2011, about 120 study protocols were approved by KFDA.

–KFDA is very active in attracting multinational device firms to Korea as a site of

multi-center developmental studies, so investigators and supportive staff members

can learn about high-level of clinical studies.

–KFDA official review time is 30 days.

020406080

FiledApproved

*KFDA Approvals of Medical Device Clinical Studies

Device Clinical Trials


Strengths • Investigators

– World-class physicians, early adaptors of new technologies

– Enthusiasm in device R&D– Many experiences in pharmaceutical global

studies• 126 centers have accredited by KFDA for drug trials• KFDA approval 400 drug trials in 2008, of which 216 trials

were global trials.

• Institutions– GCP system in place– Strong IRB support– Enthusiasm in device R&D– Diligent QA for quality

49

Strengths

• Patients – Highly receptive of new medical technologies – Positive on global device firms– Fast enrolment

• Government– Strong support for global studies– 30-day review time

• Industry – Strong technology platforms in certain areas, e.g.,

electronics, IT, BT, NT, plastics, chemistry, etc.


Track Records in Drug Trials • Korea is one of the most popular clinical study sites in the world for

pharmaceutical firms – Reasonable cost (60-70% of US or EU)– Fast subject enrolment – Quality data


Opportunities for CollaborationExport/Distribution

US Device

Mfg.

Korean

Partners

KOLs

• Korea has potentials for further growth in device markets.

– Korean economy is growing continually– Korean doctors and patients are receptive to new medical

products and technologies

• Korea has already become the most popular place for medical vacation from other Asian countries

• You may want to start your new product market from Korea to other Asian countries.

• Start with training KOL doctors– Training KOLs are usually conducted overseas at

company training centers, academic conferences– KOLs will train their colleagues locally.

• Consider clinical study projects for doctors– They will welcome and spread good words on your

products.


Opportunities for CollaborationClinical Study • Sites, investigators and device

industry in Korea can help global device firms with faster, reliable data and feedbacks.

• Device clinical trial is a crucial part of device R&D to market. Efficient execution of study is beneficial to all parties for speed up bringing to new technology to market globally: patients, physician and payers.

• Through clinical research, device firms will have an early access to the growing market in Korea.

Sponsors

Investi-

gators

Sites


Opportunities for Collaboration

Medical Device R&D

• Public R&D grants are plentiful in Korea. U.S. firms must partner with Korean firms to benefit R&D grants.

• Device firms mostly have limited experiences in successful R&D and commercialization in both domestic and overseas market.

• Korean firms will appreciate U.S. firms bringing with ideas and experiences for collaboration.

US Device

Firms

Investi-

gators

Korean

Device

Firms


Questions?

Comments?

56

Contact Us!

[email protected]

82-2-6202-3300 (Switchboard)82-2-6202-3311 (direct)

Synex Consulting, Ltd.Daejong Building143-48 Samsung-dong, Gangnam-guSeoul 135-601, South Korea

mailto:[email protected]

Medical Device Market and Rising Interests in R&D12 Ultrasound Scanners 13 Surgical Instruments 14...

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