Korea's medical advantage

By John Burton

When Korea recently airlifted test kits for the coronavirus (COVID-19) to the U.S. government as well as the state of Maryland, it was important for two reasons. The first was that it was another example of Korea's growing "soft power." The second was that it highlighted that Korea is becoming a global provider of medical supplies.

The latter may become a crucial factor in the wake of the pandemic. If the fight against COVID-19 has been described as a "new world war," then medicine and equipment are the principal weapons. What the pandemic has revealed is that some countries, such as China, have become medical arsenals, while others, such as the United States, have revealed surprising vulnerabilities.

With a global shortage of medical supplies, some countries have imposed restrictions on their exports. Other countries have decided to build up their own medical supply chains to achieve self-sufficiency in critical items. The world may soon witness a situation similar to the global arms race where some countries become leading sources of medical goods and enhance their power as a result.

Medical preparedness may become the new national security priority around the world just as international terrorism once did in the wake of the September 11 attacks in the U.S.

Korea looks set to become a major player in this international competition. Even prior to the pandemic, the government recognized that the biotech sector provided an opportunity for economic growth, with global sales in this industry already surpassing those for semiconductors or automobiles. Another source of motivation to succeed in this sector is Korea's rapidly aging population, which will soon become among the oldest in the world.

The administration of President Moon Jae-in has selected the health sector as one of several future strategic industries. Korea has the scientific talent and technical capability to achieve this goal, with the country having among the world's highest proportion of researchers. But it lags behind in some areas, such as the development and application of artificial intelligence and big data. The government now wants to address this weakness by prioritizing these technologies to drive innovation.

In a prescient move, Korea a year ago announced measures that will go into effect in May to provide government regulatory and financial support for the development of innovative medical devices and drugs.

The government wants to promote new medical technology such as medical imaging, remote patient monitoring and medical information systems based on AI, big data, robotics, and virtual and augmented technologies ― the tools of the so-called Fourth Industrial Revolution. The program is meant to improve cooperation in joint research among hospitals, universities, research institutions and industries.

Local patents for medical devices and medical information systems have already increased dramatically over the last several years. A clear and early benefit of this effort was the use of smartphone and cloud-based applications to track COVID-19 cases, which have been widely hailed as helping keep the outbreak under control in Korea.

Another reason for optimism that Korea can succeed in becoming a leading global medical technology hub is the country's high rate of R&D spending, which amounts to 4 percent of gross domestic product, which is double that of China and Europe on average.

The government, for example, is spending $1.4 billion on creating a digital platform for big data analytics and AI that will soon incorporate the medical records of Korea's more than 50 million citizens. The information collected will help support the development of innovative drugs and smart medical devices. The government is also easing regulatory oversight to streamline the market introduction of these new products.

Increased government spending by the Moon administration on health care, part of its expanded welfare program, will also boost the pharmaceutical industry as it seeks to bring more novel drugs to the market to meet the needs of elderly patients. Among other measures, the government is offering tax benefits and incentives for clinical trials of local drugs and investing in R&D facilities.

Korea's ability to turn out COVID-19 test kits is one small example of the potential attractiveness of its pharmaceutical industry to the outside world. This could prove important in penetrating the American market, for example, as the virus crisis has convinced the U.S. to reduce its dependence on drugs made in China.

Korea has gained a reputation for innovative medicines as shown by increased research and product licensing agreement with international drugmakers. But one drawback to an export push is that the local biotech industry remains fragmented with few large companies able to compete against big foreign players. That will hurt the industry's ability to build up markets overseas.

Although the global coronavirus outbreak has inflicted severe short-term damage on the Korean economy, one potential benefit is that it will spur the growth of the biotech sector, which will be positive for the country's long-term economic future.

John Burton (johnburtonft@yahoo.com), a former Korea correspondent for the Financial Times, is a Washington, D.C.-based journalist and consultant.