NOVEMBER, 1999
1st issue
 Contents
Welcoming Remarks

Welcome to the first issue of KIMS Update which will visit your desk twice a month. With the first issue, we would like to take the time to introduce ourselves. It is our mission to use this newsletter to provide current and needed information to the members of the International pharmaceutical business group who are the stakeholders in the Korean HealthCare System. We are the Korean branch of Havas MediMedia, the fourth largest global medical communication group and the world's leading drug information supplier. Havas is the publishing and multimedia arm of Vivendi, a French quoted company, who is one of Europe's largest diversified corporations comprising utilities, construction, property and communications businesses. Havas MediMedia has four main businesses, drug information system, journals and customized communications, practice management services and consumer healthcare media. In the recent interview with Gerard Lashermes, Vice-chairman of Havas MediMedia Executive Committee, he remarked as follows:

 [My development plans are] to consolidate and improve on our position as a major player in medical communication as well as in each local market where we are present. That means: entering markets where we're not present, such as Japan; achieving critical mass in other markets, such as North America; reinforcing our presence in emerging markets, like South America. There's a lot to do, but the challenge in our business is in new technology and our efforts must be concentrated on what tomorrow's publishing world will be. It doesn't mean being the biggest, it means being the best.

As a local office, we are determined to provide our readers with the necessary regional information; in addition, as a multinational company, we can provide a truly global network. We are a Total Marketing Services firm who publishes KIMS (Korean Index of Medical Specialties), annual, KIMS CD-Rom, and PharmIndex. Our online service (www.kimsonline.co.kr and www.asia-hol.com ) provides our clients with many useful tools including various directories, daily news updates, free e-mail, and more. Our firm publishes Korean Edition of JAMA and Medical Progress. In addition, we also provide PR services and other Communication related services as well as Direct Mailing & Healthcare charts. As a firm who strides to improve continuously, we always welcome any feedback or comments regarding any of our services from our readers. Please do not hesitate to contact us regarding any of your concerns.

From the Editor,
Jiny Kim ([email protected])
Top
Policy Spotlight

New Information System: Revolutionizing the Industry

The Ministry of Health and Welfare (MOHW) is planning to make some changes to the current status of the pharmaceutical industry in Korea. The objectives for the current reforms are to modernize the current business system, especially with the use of information technology, to make the industry more transparent, and to support the necessary changes with new policy measures.
As the industry grew rapidly, among many things, the distribution channel of the pharmaceutical industry has become much disorganized. The reason behind the disorganization is due to the direct distribution to the hospitals, clinics, and pharmacies from the manufacturers overlapping with the wholesalers also functioning as middleman. To put some order into this picture, the MOHW has decided to take some measures that will give clearer picture of the current maze.
With the development of new information system, the MOHW believes that the current picture of the drug distribution channel will change. The MOHW plans to use the Internet as a main source of all business functions. The orders will be taken over the Internet through web based EDI (Electronic Document Interchange). A trade association affiliated with either the manufacturers or the wholesalers, will make the deliveries from these orders. There will be a periodic billing, which will consolidate all the fees including the prescription fees, prices of the drugs, and others, between all the involved parties to a single balance.
The information regarding this system as well as other information targeted for the users will be distributed through the system when it is in place. The database of the drugs, average traded prices, transaction information, and market information will be provided by the MOHW. With a call center, the consumers can have some level of comfort at using the system.
There are many advantages to the new system. The main objective that the information system will achieve is to have more transparency regarding the transactions between the parties. The capability of real time on-line track of transaction by the new software will provide the basis for achieving this objective. In addition, utilizing the new software will achieve efficiency by saving some cost and the manpower wasted among the distribution channel, especially due to the overlapping of the distribution. With the newly gained efficiency, many manufacturers and the pharmaceutical companies can invest more heavily into the R&D cost. This will result in providing some of the domestic firms to compete with the foreign pharmaceutical companies in developing new drugs. Moreover, it will provide convenience to its clients due to the automatic log of the transactions, ability to order 24 hours a day, 365 days a year, and a call center will be present to provide troubleshooting answers to the consumers. The variety of the drugs present will also be another advantage to the system. The system will customize according to the customers depending on the categories such as pharmacies, hospitals, general hospitals, clinics, etc. In addition to the main services, the Internet can be utilized to post complaints, feedback, and other interactive forms of the consumers' responses to the current services and the system.
The new system is to be operating at the beginning of year 2001. Currently, the commercial parties are in the process of submitting the proposals to the MOHW for the development of the system. After the selection of the commercial party, constructing the system, and testing the system, the commercial party will run the system for next ten years, while the government will provide the support function. The new system will change many things in the pharmaceutical industry, and will revolutionize way the business is done now.
Top
Market Update

One Click to Patients' information to the Pharmaceutical Database

MediMedia Korea has developed new software integrating KIMS (a pharmaceu -tical product database) with KIMS My Chart (patient management system). This software is first of its kind in Korea. No longer do pharmacists have to use separate programs to perform the function; now, within one window, a pharmacist can confirm the patients' history, as well as check the new drug prescription. The software will be updated regularly with a module frame. Currently, the software has Product Identification Module, Product Information Module, and Drug Interaction Module. There are plans to add other modules such as Drug Allergy Module, Renal Dysfunction Module, Common Dosing Module, Maximum Dosing Module, and more. Each of these modules will provide the users much more in-depth knowledge in one click. The new software will provide a convenient way to keep up with the information technology. The software will be updated regularly with a module frame. Mr. Young T. Lee (CEO of MediMedia) comments, "With the new policy measures to segregate prescribing and dispensing, the pharmacists have to be keenly aware of the new technologies that will facilitate this transition. Hence, the number of pharmacy that will utilize such software is predicted to increase as the information technology will be crucial to all parties."
Top
Current Issue

Industry Foresee Impact When Prices Drop 30.7%

The Ministry of Health and Welfare (MOHW) has decided that the prices of the drugs that are currently be covered by the health insurance will decrease by 30.7% on average. This will be effective from November 15, 1999. Once the price falls, approximately 90.09 billion won will be saved from the perspective of health insurance.
From September 1998 to December 1998, the MOHW has conducted a research regarding the fair market price of the drugs. The MOHW's study gathered data from five hundred fifty medical facilities, including clinics. After interviewing and site surveying, the MOHW gathered data on pricing of 6,627 drugs and related products, approximately 90% of the products on the market during 1998 from the health care insurance listed drugs. The result from the study showed that on average, the drugs were overpriced by 30.7% from what suppose to be the fair market price. The range of the overpricing was from minimum of 0.3% to maximum of 85.3%. The highest overpriced item was Ofloxacin from Sam-chun-lee company; the fair market price for 100mg was supposed to be 67won, but the drug was listed for 455 won.
After these findings, the MOHW has decided to take drastic measures and decrease the prices of the drugs. The price structure of the drugs had built in rebates for the hospitals and the doctors, which might have served as an incentive to prescribe that particular drug. Overall, this incentive system could have led to the over-prescription of drugs. Many studies have found that Korea has relatively high consumption of drugs, especially compared to all the other developed countries, such as Japan, U.S.A., and Germany. The high consumption of drugs has huge impact on the insurance budget.
Through these measures, the main objectives that the MOHW wants to achieve are as follows:
  1. The price reduction will directly filter to the citizens of Korea by savings made to the insurance cost, and hence to the insurance premium in the future,
  2. The overconsumption rate of the drugs will improve, as many of the incentive to over-prescribe will disappear,
  3. To do away with many unfair practices such as high rebate rates and "dumping" rates in the pharmaceutical market, and
  4. To provide basis for other policy measures, such as segregation of prescribing and dispensing (to be effective as of July 2000).
Korea's economy is undergoing many changes, especially after its financial crisis in 1997. Many industries have been going through reforms in all facets of their businesses, and healthcare industry is no exception. To change Korea to be a fairer and more competitive market, necessary policy measures have to be in place. These studies and the actions that the MOHW is taking are the steps toward more transparent market practices and to a more healthy economy.
Top
What's New?

AHP and Warner-Lambert, Biggest Pharmaceutical Industry Merger

Worth USD of $65 billion, American Home Products Corp. and Warner-Lambert Co. are merging in the biggest deal in the pharmaceutical industry. The new company will be called American Warner. This deal is between the No. 5 and No. 7 U.S. pharmaceutical companies in sales ranks. Some predict that this merger will also instigate more Mergers and Acquisition deals in the industry. Although this merger still has some uncertain issues to resolve such as the famous fen-phen case and more, it is certain that the impact of this merger will be huge in the pharmaceutical industry. Both companies are multi-national corporations, and their presence in Korea is a well-known one. It is still unknown what impact this merger will have on these local offices. However, with many positive outlooks from the analysts regarding this merger, the local level offices should also share this outlook.

Complaints: New Information System

Venture Corporations:
Although the new information system that will revolutionize the way that Korea currently do business in the pharmaceutical industry will bring many positive results, there are few groups who are unhappy with the way that MOHW is running this process. One of the groups who are complaining regarding the current method is the venture corporation. The size of these firms, usually range from the small to medium size corporation, limits them from participating in the competition of developing this system. For these firms, it is very difficult to raise the capital needed to start this project. Although they might have the idea and the efficiency for this project, the project budget of 33 billion won provides these venture corporations with much obstacles.

Wholesalers:
Many wholesalers for the pharmaceutical industry are in much confusion. With the new system ready to do away with their business function, they are very nervous. "Although there will be overwhelming changes in the market, we have no idea what to do. We don't have much plan, and this news came too suddenly for us," a wholesaler comments. Some complain that there was lack of information given to all the stakeholders of the current system.

Are you Y2K ready?

If you are not Y2K ready by end of this month, you might be facing a more serious problem than you thought you had. The MOHW is demanding that you shut off all the medical devices that have not passed the Y2K test starting from this December. There might be severe problems such as devices not operating starting from January 1, which can endanger many patients. It might be worth your time to make sure that all your systems including all the medical devices are Y2K ready.

Transparency in Accounting

It is a wide known fact that with the reforms to the economy toward a more free market system, more transparent the corporations should be. However, the MOHW is finding that this is not an easy task especially with many medical provider organizations in Korea. The MOHW is planning to pass stricter measures in hospital accounting. In addition, these institutions will be required to submit their annual financial statements to the MOHW.
Top
Keeping track

Who? Personal Spotlight

Dr. Hyun-Joon Sohn is a name that Korean venture corporations are getting to know well. Recently, Dr. Sohn (CEO) and 79 other members formed a venture corporation named MedVAN. The eighty members are all shareholders, and with their personal funds, raised 800 million won. All the shareholders come with a wealth of knowledge, as their current professions are all tied with the health care industry, such as doctors, pharmacists, professors, etc. The corporation is formed to develop a program which will be used for the segregating prescribing and dispensing next July.

The first project for MedVAN is to develop a system where the prescription that the doctor wrote will be electronically delivered without patients having to carry a hard copy to the pharmacy. He foresees this system will be very widely used. Even the countries that already has the segregation and dispensing, such as Japan, uses fax to transmit the prescription from the doctors to the pharmacists. Currently, MedVAN found some partners for the project that provides a great synergy for their venture. However, MedVAN is continuing in seeking other collaborates, as the capital needed for this project is estimated to be more than 30 billion won.

Dr. Sohn comments, "MedVAN hopes to contribute greatly in Korean Health Care System, where the information technology has been lagging. The outlook for the firm as well as the project are both positive."
Email us

We welcome a chance to exchange information. Do you have any information that you want to share with the rest of the readers of KIMS Update? Do you have some questions on particular issue that you want to know more about? Do you have any answers? Your responses are very important and highly valued at KIMS Update. Please e-mail your comments, questions, problems, solutions to [email protected]. Thank you.
Top

Copyright(C) 1999 by MEDIMEDIA KOREA
All rights reserved.