I. Overview 1. Market Conditions 1

I. Overview
1. Market Conditions
1) The Domestic Pharmaceutical Market Conditions
In 2006, the size of overall domestic pharmaceutical products was about 1.45% of the Korea
GDP since its total yearly turnover was KRW 12.265 trillion (national GDP was KRW 847
trillion) and that of final drug products was also KRW 10.548 trillion. Most of all, the
prescription drugs took a most part of it, reaching 74.7%. During the same year, in terms of
drug production, the sum of production of top 10 pharmaceutical companies was 28.2% of
the total (the total yearly turnover in this sector was KRW 3.46 trillion) while that of top 10
companies was KRW 3.85 trillion in terms of market sales under the estimation of
competitive market structure basis.
The overall front of the pharmaceutical market was competitive while some multinational
pharmaceutical companies held a market dominant position in a number of the drug markets.
2) Key Features of Competitive Structure of the Pharmaceutical Market
The pharmaceutical market is quite different from other product markets since the final right
of choosing a certain brand does not lie with its purchasers, who are patients, but with doctors
who prescribe the drugs. Therefore, pharmaceutical companies need to strive for maintaining
a good relationship with doctors, running their product sale promotion and marketing
activities for the medical practitioners and hospitals. In particular, the companies engaged in
rebate competition to keep and increase prescription of their own drugs while preventing their
competitors from receiving their drugs for prescription. In December 2007, the KFTC
estimated consumer damage as around KRW 2.18 trillion which had increased from the
rebate in the pharmaceutical market.
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3) Distribution Structure of Medicines
There were two different distribution structures in the domestic medicine