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

y the Ministry of Health and Welfare reportedly show a bias toward domestic products. 525
For instance, reimbursement prices for imported products are capped based on documented
free on board (FOB) prices, while the reimbursement levels for domestic manufacturers and
distributors are negotiated based on self-generated and often undocumented manufacturing
cost data. 526 According to industry experts, the imposition of arbitrary price limits on medical
technology constitutes a practice that does not adequately reflect the market costs of doing
business in Korea, the high costs associated with research and development, or the medical
and economic benefits of innovative medical technology. 527 The FTA would address these
issues by increasing the transparency of the Korean National Health Insurance
reimbursement system for medical devices. The program establishes prices for those
products.
Medical devices also are reportedly subject to overly complex and costly certification,
testing, inspection, and other regulatory approval requirements in Korea. 528 Many
manufacturers claim that the Korea Food and Drug Administration (KFDA) rules, requiring
them to submit detailed data on certain medical products, are excessive and delay market
access. 529 Further, according to industry analysts, Korean regulatory authorities do not allow
medical devices into the country that have not been approved in their country of
manufacture, 530 a duplicative requirement not faced by Korean producers. 531
KFDA also requires reregistration of all medical device production transferred to a
manufacturing site outside of its original country of origin. 532 This reregistration is equivalent
to a new registration. The U.S. industry would like Korea to expand existing licenses to
cover dual sites and permit notification of the change to KFDA without the need for
reregistration. 533 Eliminating the need for reregistration may be possible if Korea introduces
and adopts a verifiable and enforceable Good Manufacturing Practices paradigm consistent
with international standards, which the United States hopes would happen sometime in
2007. 534
Widespread use of unethical business practices in the Korean health-care system continues
to be a significant problem reported in the Korean market for some medical devices. 535 Major
contributors to the problem are the complex distribution system and lack of transparency in
the government decision-making process, which leads to improper practices by wholesalers
and distributors. 536 By providing more transparency and predictability in Korea’s medical
525 AdvaMed, testimony before the Trade Policy Staff Committee, Office of the USTR, March 14, 2006,
1–11.
526 U.S. industry officials, interview by Commission staff, May 4, 2007.
527 Gross and Weintraub, “Medical Device Reimbursement in Korea,” July 2005, 1–2; and AdvaMed,
testimony before the Trade Policy Staff Committee, Office of the USTR, March 14, 2006, 1–11.
528 EIU, “Country Commerce: South Korea,” July 2006, 106; and Gross and Minot, “Medical Device
Registration in Korea: An Overview,” January 2007, 1-4.
529 WTO, Trade Policy Review Body (TPRB), “TPR, Republic of Korea, Report by the Secretariat,”
September 17, 2004, 59.
530 Gross and Minot, “Medical Device Registration in Korea: An Overview,” January 2007, 1.
531 U.S. industry officials, telephone interviews by Commission staff, May 22–23, 2007.
532 USTR, 2007 National Trade Estimate Report on Foreign Trade Barriers, April 2007, 370.
533 U.S. industry officials, telephone interviews by Commission staff, May 22–23, 2007; and USTR, 2007
National Trade Estimate Report on Foreign Trade Barriers, April 2007, 370.
534 USTR, 2007 National Trade Estimate Report on Foreign Trade Barriers, April 2007, 370.
535 Ibid.
536 U.S. industry officials, telephone interviews by Commission staff, May 22–23, 2007.
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