Drug innovation needed to attract investors

Drug innovation needed to attract investors

Sep 01, 2005

Adopting a more global view of "innovation" with respect to medical drugs can help Korea attract more foreign investment, according to the head of a German pharmaceutical company.
Geoffrey Whitehead, country manager of Schwarz Pharma Korea Co., said the Korean government only focuses on the economic aspect of pharmaceutical products, which turns away many international investors.

"International pharmaceutical companies are having problems here because the government has a different opinion of what innovation is," he said, stressing that its preoccupation is with "how can it get the drug cheapest."

Whitehead's candid comments come as Korea struggles to become the Northeast Asian hub on a variety of fronts, including finance, logistics and biotechnology.

"Modern medicine today comes at a significant cost of development, and unless a company can recoup that cost and get a decent price for the product, it can't continue its R&D (research and development) here," he said.

The Australian-born businessman stressed that respect for R&D is essential for attracting foreign capital into Korea and for the country to envision a goal to serve as a locus of regional power.

"Money comes from company funds, those who are saying 'that's a very good place to invest' because the government has been very responsive to R&D. And that's not happening," said Whitehead, who also serves as the pharmaceutical committee chairman for the European Union Chamber of Commerce in Korea.

Reinforcing the country's dire need for improvement, about only two foreign pharmaceutical companies have continued to manufacture in Asia's fourth-largest economy, according to Whitehead.

The expatriate of six years explained that the others have basically stopped because of many problems associated with industrial situations and pricing themselves out of the market. Having to compete with the massive number of domestic generic companies producing copies of blockbuster products is another major disincentive.

"It's unattractive and an inability by the government to take a less biased view of an industry that contributes a lot to the development," said Whitehead.

This means a lot of potential risk.

According to Whitehead, when the original drug comes off patent, the Korean government gives copied drugs 80 percent of the original price, without the R&D involved. For local companies, this means fewer reasons to invest in R&D and more reasons to copy a hot new drug on the market.

"Planning here is impossible because we can spend all this money to bring a new drug into the market, and at the end we're never going to know if we're going to get the price that we should get," stressed the head of the 2-year-old company.

The EUCCK has grown more vocal about how Korea needs to more aggressively pursue global standards and reform regulations to make the country more investment-friendly.

Whitehead strongly suggested the government let go of its arbitrary pricing process and uphold the principles of "equality, transparency and open access" before the country loses more appeal to foreign investors.

"Original research (in Korea's pharmaceutical industry) is very limited. It's almost nonexistent, partly because there's got to be recognition by the government," he said. "For a company (both local and foreign) to put money into R&D, it needs to be rewarded for that innovation."

Whitehead was recruited in 2003 to take on the challenging role of building from scratch the Korean operation of Schwarz Pharma. Collaborating with research companies, biotech firms and universities, the parent company integrates the technology and commercializes it.

The family-owned business - which plans to roll out a new range of compounds for treatments of disorders related to the central nervous system - believes the Korean market is strategically important regionally based on its market size and potential.

Some of the company's latest cutting-edge treatments are for such illnesses as Parkinson's disease, overactive bladder syndrome and epilepsy.