2000/679/EC: Commission Decision of 25 October 2000 suspending the examination procedure concerning obstacles to trade in pharmaceutical products on the market of the Republic of Korea (notified under document number C(2000) 3098)
Date: 2000-10-25
Institutions: European Commission
Subjects: South Korea, common commercial policy, international trade, market protection, pharmaceutical product, trade restriction

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Official Journal of the European Communities

7.11.2000

COMMISSION DECISION

of 25 October 2000

suspending the examination procedure concerning obstacles to trade in pharmaceutical products
on the market of the Republic of Korea

(notified under document number C(2000) 3098)

(2000/679/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 3286/94 of 22
December 1994 laying down Community procedures in the
field of the common commercial policy in order to ensure the
exercise of the Community's rights under international trade
rules, in particular those established under the auspices of the
World Trade Organisation (1), as amended by Regulation (EC)
No 356/95 (2), and in particular Article 11(2)(a) thereof,

After consulting the Advisory Committee,

Whereas:

A. PROCEDURAL BACKGROUND

(1)

(2)

Industries

On 15 June 1999 (EFPIA (European Federation of Phar-
maceutical
lodged a
complaint under Article 4 of Council Regulation (EC) No
3286/94 (hereinafter the Regulation) on behalf of those
of its members which have an interest to market their
products in Korea.

and Associations)

The complainant alleged that Community sales of phar-
maceutical products in Korea are hindered by a number
of obstacles to trade within the meaning of Article 2(1)
of the Regulation, i.e. ‘a practice adopted or maintained
by a third country and in respect of which international
trade rules establish a right of action’. The alleged
obstacles to trade were:

— discrimination in pricing and reimbursement prac-

tices,

— excessive regulatory requirements,

— intellectual property issues.

The complainant also claimed a general lack of transpar-
ency of the Korean regulatory system.

(3)

At the time the complaint was logded the Korean regula-
tory system governing pharmaceuticals was undergoing
to assess
a period of change. This made it difficult
whether there was sufficient evidence in the complaint
of the existence of WTO violations in respect of some of

(4)

(5)

the issues. However, the Commission decided that the
complaint contained sufficient evidence to justify the
initiation of an examination procedure on the grounds
of discrimination in pricing and reimbursement prac-
tices. In order to make a proper assessment of the new
legal and regulatory environment
the Commission
decided that it would also take into account any infor-
mation discovered during the investigation that related
to other issues raised in the complaint. A corresponding
notice was published in the Official
the
European Communities (3).

Journal of

B. REACTION OF THE KOREAN GOVERNMENT TO THE
INITIATION OF THE EXAMINATION PROCEDURE

Following the initiation of
the investigation a note
verbale was sent to the Korean authorities requesting
that they respond to a questionnaire on the alleged
barriers to trade in pharmaceutical products. The Korean
Governement replied by note verbale informing the
Commission of the changes and planned changes to the
Korean
pharmaceuticals
governing
sectors. The changes concerned all the issued contained
in EFPIA's complaint.

legislation

the

C. THE FINDINGS OF THE INVESTIGATION

Pricing and reimbursement issues

The complaint alleged discrimination against
foreign
products regarding both the method for determining
reimbursement prices and the system for reimburse-
ment. The rules introduced during the investigation
appear to have eliminated the discriminatory elements
Imported products were admitted
previously existing.
for the first time on the list of reimbursable pharmaceu-
ticals (i.e. those pharmaceutical products that are eligible
for reimbursement by the State health care system) on 1
July 1999.
Imported products are now reimbursed
according to the same rules as domestic products and
the unfavourable treatment of
innovative products
should have been removed by the new rules for price
calculation agreed upon by the task force for pricing.

(1) OJ L 349, 31.12.1994, p. 71.
(2) OJ L 41, 23.2.1995, p. 3.

(3) OJ C 218, 30.7.1999.

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Official Journal of the European Communities

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(6)

to

the

eliminate

Furthermore, on 15 November 1999 the Korean author-
ities introduced the actual transaction price (ATP) system
of reimbursement for pharmaceutical products. This is
intended
previously
demanded by the purchaser of pharmaceuticals, which
industry as it
represented a problem for international
was claimed that domestic producers had an advantage
as their products were reimbursed at a price level that
allowed them to offer substantial discounts. The system
includes the introduction of a complex electronic data
exchange system.

discounts

(7)

However, both on the issue of reimbursement at actual
transaction price and on the pricing of innovative prod-
ucts the new rules have entered into force very recently
and have not yet been fully implemented.

Regulatory requirements

(8)

New rules on clinical trials for newly marketed products
entered into force on 1 January 2000. The new regula-
tion governing marketing of new pharmaceuticals has
abolished the obligation to carry out clinical trials in
Korea but maintains the requirement for the applicant to
submit a so-called bridging study with data obtained on
Koreans. However, the legislation lacks detail as to the
circumstances in which a bridging study will be consid-
ered sufficient and this leaves the industry with some
concerns that they may be required to carry out clinical
trials in Korea on all new products. As regards the other
regulatory issue,
foreign
producers to subcontract production to a local manufac-
turer without transferring the product licence, the rules
introduced on 1 January 2000 only allow it between
companies with manufacturing licences
in Korea.
However, no violation of WTO rules has been found on
this issue.

the possibiltiy for

that

is,

Intellectual property issues

(9)

On data protection, although it appears that the system
still does not guarantee full protection to data submitted
to obtain marketing authorisation, no case of unfair use
of confidential data was reported in the context of the
investigation.

(10)

(11)

(12)

medicine. That now removes the scope for discrim-
ination of foreign products.

Transparency

to understand which is

It is true that it is not easy, even for the industry on the
spot,
regulation
governing a certain matter due to the continuous devel-
opments in the system and to the difficulties of transla-
tion of this very technical matter. However, the legisla-
tion governing the system has been published and
generally made available.

the latest

D. RECOMMENDATIONS

The Commission considers that the system ruling phar-
maceutical products in Korea has undergone substantial
change since the lodging of the complaint under the
Regulation and that these changes have improved the
possibility for the Community industry to enter the
Korean market. However, most of the new legislation
introduced has not yet been implemented and there are
indications that implementation may be delayed or that
the legislation may be interpreted in a trade restrictive
way. These concerns are confirmed by the latest devel-
opments.

The industry's main concerns lay with the implementa-
the ATP reimbursement system. During the
tion of
investigation the Korean authorities
informed the
Commission services that the full implementation of the
ATP system would be completed by 1 May 2000.
subsequently the Korean authorities have
However,
stated that this will not take place until May 2001 as the
electronic exchange of data, essential for the operation
of the system, foreseen for the reporting of the transac-
tion prices will not be fully in place until that date. This
will become an even greater concern after 1 July 2000 if
the planned introduction of separation of prescribing
and dispensing of pharmaceutical products takes place.
There are approximately 20 000 pharmacies that would
then be required to report on the prices of pharmaceu-
ticals and the delay in introduction of the electronic
reporting system makes it likely that no accurate assess-
ment of prices can take place.

As for the issue of patent term restoration the change in
the rules concerning clinical trials has been taken into
account in the latest amendment to the Regulation on
patent term extension. That text says that, for medicines
developed abroad and exempt
trials in
Korea, the extension period includes both the period
spent in clinical trials abroad and the time taken by
KFDA to examine the file and give approval to the new

from clinical

(13)

The Commission considers therefore that it would be
appropriate to monitor the effect of the changes in the
less than six
Korean legislation for a period of not
months from the date of entry into force of
this
Decision given that some of the changes have not been
fully introduced and others have not yet been intro-
duced. Such monitoring would give an indication
whether the changes have in fact improved the situation
with regard to the barriers to trade in pharmaceutical
products in Korea alleged in the complaint.

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Official Journal of the European Communities

7.11.2000

(14)

The examination procedure concerning the Korean regime governing the pharmaceuticals sector
should therefore be suspended and the Commission should supervise the situation in accordance
with Article 11(2)(b) of the Regulation.

(15) A report on the enforcement of the new regulations will be issued after six months from the date of
the suspension. Any further action which might appear necessary will be proposed on the basis of
that report.

HAS DECIDED:

Sole Article

The examination procedure concerning obstacles to trade in pharmaceutical products on the market of the
Republic of Korea is hereby suspended.

Done at Brussels, 25 October 2000.

For the Commission

Pascal LAMY

Member of the Commission