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

goods; and high-technology medical, surgical, and dental instruments and appliances. 512 By
eliminating tariffs, the FTA should make U.S.-made medical devices more cost-competitive
with those of Korean and foreign competitors.
The FTA contains a specific pharmaceuticals and medical devices chapter 513 that addresses
NTMs in Korea such as reimbursement, regulatory, 514 and unethical business practices. 515 For
instance, the chapter details the creation of an independent review mechanism 516 that would
allow medical device manufacturers to challenge the Korean government’s pricing and
reimbursement decisions for medical devices. 517 Further, regulatory cooperation would be
promoted by encouraging each party to recognize the results of certification and testing
completed in the other party’s territory. 518 Unethical practices by pharmaceutical and medical
device manufacturers or suppliers are discouraged by prohibiting them from providing
incentives to health-care professionals or health-care institutions 519 for listing, purchasing,
or prescribing drugs or devices eligible for reimbursement by central government health-care
programs. 520
The FTA would establish a medicines and medical devices committee cosponsored by the
health and trade officials of each party to monitor and support the implementation of the
obligations in the chapter. 521 U.S. medical device manufacturers should also benefit from the
provisions of the FTA’s TBT chapter, which would reduce duplication, provide more
transparency, and encourage the use of international standards in Korea’s regulatory
approval process. 522 By addressing all of these issues, the FTA would likely lead to a
decrease in the price and an increase in the quantity of U.S.-made medical devices in Korea.
According to industry experts, Korea currently maintains nontransparent reimbursement and
pricing policies 523 in its government-administered health-care insurance system that
discriminate against U.S. and other foreign manufacturers of medical devices and
insufficiently reward their innovation. 524 U.S. industry officials report that regulations issued
512 AdvaMed, testimony before the Trade Policy Staff Committee, Office of the USTR, March 14, 2006,
1–11.
513 For additional information on a summary of the pharmaceuticals and medical devices chapter of the
FTA, see chap. 2 of this report and the pharmaceuticals section of this chapter.
514 USKBC and the AMCHAM in Korea, U.S.-Korea Free Trade Agreement Position Paper, 2006, 20.
515 Inside Washington Publications, “U.S., Korea FTA Contains Strong PhARMA Text, Excludes
Kaesong,” April 3, 2007, 1.
516 Ambassador Lee, testimony before the USITC, June 20, 2007, 17; and USTR, “Trade Facts: Free
Trade with Korea Summary of the U.S.-Korean FTA.” Washington, DC: USTR, April 2007, 5.
517 May, testimony before the USITC, June 20, 2007, 288–289; Stangarone, “Anatomy of a Deal: The
KORUS FTA,” 1; and Inside Washington Publications, “U.S., Korea FTA Contains Strong PhARMA Text,
Excludes Kaesong,” April 3, 2007
518 USTR, “Final - United States - Korea FTA Texts,” 2007, Article 5.6.
519 Reis, testimony before the USITC, June 20, 2007, 28; and May, testimony before the USITC,
June 20, 2007, 287.
520 USTR, “Final - United States - Korea FTA Texts,” 2007, Article 5.5.
521 Ibid., Article 5.7; Ambassador Lee, testimony before the USITC, June 20, 2007, 17; and May,
testimony before the USITC, June 20, 2007, 189.
522 For additional analysis regarding TBTs and other NTMs, see chap. 5 of this report.
523 The Korean government sets prices even for services and products for which it does not provide
reimbursement. Diller, “Healthcare: Products and Supplies: Asia,” March 2007, 32.
524 Diller, “Healthcare: Products and Supplies: Asia,” March 2007, 23; Gross and Weintraub, “Medical
Device Reimbursement in Korea,” July 2005, 1; and AdvaMed, testimony before the Trade Policy Staff
Committee, Office of the USTR, March 14, 2006, 1–11.
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