By Mathew Maavak
One contentious issue surrounding the ongoing Korea-U.S. FTA negotiations concerns the pharmaceutical industry.
Washington had already pulled one tactical coup by announcing that it had no intentions of "running local facilities;" a concession Seoul was ready to make. One of the most niggling questions, however, remain.
Will the cost of pharmaceuticals increase once the FTA is clinched? Apart from drugs, there is also the question of generic drugs which are currently manufactured for the local market under license.
"Through an FTA with the United States, we worry about the lengthening of the duration of licensing rights and that the costs of generic drugs might rise," said Kim Sun-ho, spokesman for the Korea Pharmaceutical Manufacturers Association.
"We hope the Korean government will not give up on making the best decision for our pharmaceutical industry."
The U.S. pharmaceutical industry has been having major, long-running dilemma over drugs produced through an arduous -- and expensive -- research and development process. This cost is passed on to American citizens, who have to depend on various insurance schemes to cover medical expenses.
For a comparative glimpse, the cost of the latest heart drug manufactured in India will be a fraction of that in the United States. One could literally add two or three zeroes for these latest cures unless they are subsidized somehow, through insurance or a national health-care plan.
Sometimes, these medications are produced through a process of reverse engineering by foreign firms to avoid patent infringements. Often, they are produced under license abroad. But licenses are usually only granted for generic drugs, not the latest range.
If the latest drugs were to be sold abroad, the costs would have to be borne by the respective governments.
The pharmaceutical industry claims that most of the research and development costs are recouped within the United States and the developed world, where heavy taxation keep their national health-care plans afloat.
Most economies just can't afford such subsidies, unless they are produced through the reverse engineering process. This is called the "free rider" problem in economics, where end-users abroad contribute little or nothing to firms that originally develop products.
The free rider problem, though, throws up its own woes. The latest antibiotic developed by a U.S. pharmaceutical firm can be subjected to a dual pricing system. The label meant for humans are far costlier than ones meant for the pet market.
Often, U.S. doctors prescribe such medication to poor patients bereft of an insurance plan. It is generally the same stuff, of the same quality but sold under a different name. It seems like the farming lobby is getting some subsidy here and it is no wonder why many Americans routinely get caught for sneaking in medications from Mexico and Canada.
Is there a solution? Various avenues have to be explored. One avenue would be a joint R&D development in exchange for cheaper drugs and health-care services. It must be a two-way flow, beneficial to both parties. That way, the core U.S. contention that Seoul needs the latest health-care benefits and practices can be met, without burdening the local health-care system and people in general.
But the instrument for working out a win-win formula in this area is going to be highly tortuous.
Published in the Korea Herald on July 13, 2006.
Most of Mathew Maavak's commentaries can be read here or visit the Panoptic World homepage.