U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

(PhRMA), however, U.S. pharmaceutical companies currently have limited access to the
Korean market due to nontariff market access barriers. 372
According to the PhRMA, Korean government’s current lack of strong intellectual property
rights protection for pharmaceuticals reportedly discourages U.S. companies from marketing
patented medicines in Korea. 373 The FTA would expand the intellectual property protections
for pharmaceuticals in three important areas. 374 First, it would require the implementation of
measures to prevent the marketing approval of a generic drug by drug regulators while the
patent on the original drug is still in effect, a so-called “patent linkage” system. 375 Second,
the data-exclusivity provisions would preclude third parties from relying on the safety or
efficacy data submitted by the originator to obtain marketing approval for a pharmaceutical
product for 5 years for a new product and 3 years for a previously approved chemical
entity. 376 Third, the patent extension provision would allow companies to request an
extension of the patent term for a pharmaceutical product as compensation for unreasonable
delays in the patent or marketing approval processes. 377
The USTR has previously recognized that the lack of transparency in the Korean health
regulatory and reimbursement systems may be an impediment to U.S. companies. 378 The
FTA would increase transparency for health-care programs administered by the central level
of government in the two countries. 379 The provisions of the FTA chapter 5 aimed at
increasing transparency in the marketing approval and pricing of pharmaceutical products
are summarized in appendix D of this report. These provisions are expected to give
stakeholders a meaningful opportunity to participate in the development of rules and
regulations in the pharmaceutical sector. 380
In 2006, the USTR found that Korea’s complex distribution system for pharmaceuticals and
lack of transparency in regulation and reimbursement may have contributed to unethical
business practices that have harmed U.S. companies. 381 In testimony at the Commission’s
hearing, PhRMA said that the code of conduct that multinational pharmaceutical companies
adhere to in their work with health-care professionals is not being applied and enforced in
Korea’s generic industry. 382 According to the USTR, the FTA would promote ethical
business practices by requiring appropriate measures and enforcement in both countries “to
372 May, testimony before the USITC, June 20, 2007, 185.
373 Ibid., 186.
374 For additional information on the intellectual property provisions of the FTA, see ch. 6 of this report.
375 USTR, “Final - United States - Korea FTA Texts,” 2007, Article 18.9.4.
376 Ibid., Articles 18.9.1-18.9.3.
377 Ibid., Article 18.8.6.
378 USTR, “Korea,” 2006 National Trade Estimate Report on Foreign Trade Barriers, March 31, 2006,
415. See also Lee and Lee, “Feasability and Economic Effects of a Korea-U.S. FTA,” December 30, 2005,
66, and Schott, Bradford, and Moll, “Negotiating the Korea-United States Free Trade Agreement,”
June 2006, 10.
379 The Korean central government provides universal health-care coverage through its National Health
Insurance system, which covered 96 percent of Koreans in 1999, and the Medical Aid Program, which covers
the remaining population. Most provision of health care, however, is performed by private health-care
institutions. See EIU, “Industry Briefing, South Korea: Healthcare and Pharmaceuticals Profile,”
January 5, 2007. The Medicaid program in the United States is explicitly recognized as a regional health-care
program, not a health-care program of the central level of government. See USTR, “Final - United States -
Korea FTA Texts,” 2007, ch. 5, footnote 3.
380 May, testimony before the USITC, June 20, 2007, 189.
381 USTR, “Korea,” 2006 National Trade Estimate Report on Foreign Trade Barriers, March 31, 2006,
416; and USKBC and the AMCHAM in Korea, U.S.-Korea Free Trade Agreement Position Paper, 2006, 20.
382 May, testimony before the USITC, June 20, 2007, 287–8.
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