Research Report
"A Legal Study on Strengthening the Global Competitiveness of the Korean Bio and Pharmaceutical Industry
Ⅰ. Background and Purpose of Research
▶ Research Background
○ The COVID-19 pandemic has starkly exposed the vulnerabilities of global supply chains, prompting a growing recognition that the biopharmaceutical industry is more than just an economic sector - it's a strategic asset for national security and public health
○ Building on this recognition, the US and the EU are now actively pursuing policies to boost domestic pharmaceutical production capabilities, stockpile key medicines strategically, and diversify global supply chains
- The US has designated biotechnology and pharmaceutical supply chains as national strategic assets through the Biosecure Act and presidential executive orders, actively supporting R&D and investment in production facilities
- The European Union is driving the adoption of the Critical Medicines Act and the Biotech Act, which will establish a comprehensive framework for joint stockpiling, public procurement, regulatory innovation in biotechnology, digitalization, and international cooperation
○ In light of the recent trend of supply chain restructuring in the bio and pharmaceutical industry, the domestic bio and pharmaceutical industry lacks a systematic and integrated legal system to support securing stable supply chains and strengthening global competitiveness
- In terms of international competitiveness, the domestic bio and pharmaceutical industries are competitive in biosimilars and some clinical fields, while core and raw materials are particularly vulnerable to supply chain restructuring and are not securing global competitiveness
▶ Research objectives
○ The purpose of this study is to prepare a system improvement plan for the sustainability and global competitiveness of the domestic bio and pharmaceutical industry by analyzing the current status and legal basis of the domestic bio and pharmaceutical industry and examining the international bio and pharmaceutical industry's supply chain reorganization policy and legislation to strengthen global competitiveness
- In the current status and legal research of the bio and pharmaceutical sectors in Korea, it analyzes the legal and institutional limitations of traditional industrial promotion policies, presents various technical and policy alternatives in line with supply chain reorganization and legislative trends in the United States and the European Union, and induces strengthening the international competitiveness of the bio and pharmaceutical industry by designing legislation suitable for global regulatory trends
- Ultimately, we want to establish an institutional foundation for the bio-pharmaceutical industry to move beyond being a simple "backrunner" and become a hub in the bio-pharmaceutical sector that leads the global supply chain and market
○ The framework for a governance system that enables collaboration among government, business, academia, and international organizations is institutionalized through legislation
- The purpose of this report is not to propose a single policy, but to systematically develop a comprehensive, long-term strategy and regulatory framework that encompasses the entire bio-pharmaceutical industry ecosystem
- To counter the supply chain strategies of major countries like the US and EU, which focus on domestic supply chains, we will establish a legal framework to effectively support Korean companies' exports, technology partnerships, and international certifications
- Enhancing our ability to respond to international trade regulations, global certifications, and environmental and sustainability standards is also a key objective
○ The report aims to not only boost industrial competitiveness, but also to enhance the country's self-sufficiency in pharmaceuticals and build crisis management capabilities from the perspectives of public health and national medical security
- The core objective of this study is to develop a legislative strategy centered on two key pillars: supply chain protection and innovative competitiveness
Ⅱ. Contents
▶ An Analysis of the Current Status of the Domestic Bio and Pharmaceutical Industries
○ The bio-pharmaceutical industry refers to an industry group that researches, develops, and produces biopharmaceuticals (antibody drugs, vaccines, gene therapy drugs, etc.) that use cells, proteins, and genes as raw materials using life science and biotechnology
○ In the analysis of the current status of the domestic bio and pharmaceutical industry, it ranks 13th in the world with a global market share of less than 1%, but has global competitiveness in biosimilars and some innovation capabilities
- The domestic bio-pharmaceutical industry continues to increase in production scale and exports
- In the biosimilar sector, it has a leading share in the global market, and some large companies are leading the global expansion
○ The domestic bio and pharmaceutical industry is highly dependent on imports of raw materials and core drugs, so supply chain risks are high
- With more than 70% dependence on China and India, there is a possibility of supply chain disconnection due to international disputes and pandemic
○ Analysis of the factors of the absence of competitiveness in the domestic bio and pharmaceutical industries
- Although domestic manufacturing capacity has been accumulated to a considerable extent, new drug development pipelines are concentrated in some companies, and small and medium-sized venture companies are unable to enter the global market due to financial, manpower, and regulatory barriers
- Supply chain-wide real-time monitoring and risk management systems are also lacking and crisis responsiveness remains low
▶ Analysis of K-bio/pharmaceutical industry-related policies and legal systems
○ The domestic bio and pharmaceutical industry legislation is focused on 'industrial promotion' and focuses on legal basis and budget support only in some areas such as R&D and export support
- The Pharmaceutical Industry Promotion Act stipulates a number of support programs necessary for industrial production facility investment, R&D, and licensing procedures, but lacks strategic self-sufficiency provisions such as global supply chain protection and key drug stockpiling
- The Special Act on National Advanced Strategic Industries was enacted for the purpose of strategic support and technology protection to foster high-tech industries, but policy linkage is limited because the bio industry is relatively subordinate to the legal priority
- The Act on the Safety and Support of Advanced Regenerative Medicine and Advanced Biopharmaceuticals is limited to the field of Advanced Regenerative Medicine, so there is also a lack of legislation to support biopharmaceuticals in general, such as protein drugs and biosimilars, which covers special cases of finance, taxation, and regulation
○ Lack of strategic legislation in line with recent global trends such as supply chain stabilization, stockpiling of key medicines, public procurement and ESG linkage
- Lack of integrated legislation to address multi-layered issues such as supply chain crisis response, self-sufficiency, technological security, and international cooperation
- The current legislation lacks cooperation and policy linkage between ministries due to overlapping laws under the jurisdiction of various ministries, and companies in the field do not have easy systematic support due to the fragmentation of regulations and support
- While major countries legally and institutionally combine supply chain, digital innovation, and environmental sustainability, Korea still operates separate industrial promotion policies and supply chain security policies
▶ An Analysis of the Regulation of Bio and Pharmaceutical Industries in Major Foreign Countries
○ The United States designates the bio and pharmaceutical industries as national strategic industries and introduces the Biosecure Act and related executive orders to legislate supply chain protection and technological security
- The main content is to expand domestic production of key drugs and raw materials, induce reshoring of manufacturing facilities, and promote investment and R&D of enterprises through public procurement and tax incentives
- The United States strengthens federal stockpiling programs to legally establish a system to respond quickly to crises, and establishes AI and big data-based supply chain prediction and monitoring systems
○ The EU also promotes a comprehensive legal system to secure competitiveness in the bio and pharmaceutical industries, focusing on the Critical Medicines Act and the BioTech Act
- The EU's policies include environmental and sustainability requirements in member states' common core drug stockpile system and strategic project designation, supply chain vulnerability assessment, and public procurement standards
- The EU's Biotech Act includes various financial and institutional measures to support R&D, commercialization, and market entry throughout the entire cycle, and specifies measures to ensure the sustainability of supply chains and production facilities
○ Compared to Korea, major countries are integrating and strategically reorganizing related laws while simultaneously promoting supply chain management and industrial innovation
- Compared to major foreign countries, the legal system is quite inadequate or fragmented in terms of supply chain protection, stockpiling of key drugs, regulatory innovation, and digital transformation support
- The 'key drug designation and stockpiling system', 'supply chain early warning system', 'connection of public procurement and environmental standards', and 'AI-based regulatory sandbox' are legally insufficient
- To secure the global competitiveness of the domestic bio and pharmaceutical industry, it is necessary to prepare an integrated legal system that encompasses industrial, supply chain, digital innovation, and technological security, as in major countries, beyond just partially supplementing existing laws
▶ Improvement of the legal system for fostering and supporting the K-bio and pharmaceutical industries
○ The improvement of legislation is carried out in a way that combines the revision of existing laws and the enactment of new laws
- The Pharmaceutical Industry Promotion Act establishes provisions for strategic drug designation and supply chain management
- Promoting AI and big data-based R&D and establishing new provisions to support global supply chain cooperation
- The Advanced Regenerative Medicine Act needs to expand the application of the law to biopharmaceuticals as a whole. New provisions for using medical data, AI-based screening systems, and global clinical promotion were established
- The National Advanced Strategic Industries Act shall include biotechnology in strategic industries and establish provisions for the establishment of production bases. The Foreign Investment Promotion Act shall introduce a biotechnology investment pre-examination system, and the Industrial Technology Protection Act shall strengthen the provisions for preventing leakage of bio data
- It is necessary to enact the basic laws of integrated bio and pharmaceuticals, to reorganize overlapping provisions of existing laws, and to secure global standard consistency and supply chain competitiveness
Ⅲ. Expected Effects
▶ Strengthen capacity to respond to supply chain crises to strengthen global competitiveness in the domestic bio and pharmaceutical industry
○ Supply chain crisis response capabilities are legally institutionalized to establish a crisis management system at the national level
- The self-sufficiency rate of core and raw materials gradually rises, reducing the risk of supply interruptions even in the face of a pandemic or international dispute
- The ability to respond to supply chain crises is legally institutionalized and a crisis management system is established at the national level
- Promote ESG management and a sustainable industrial ecosystem by linking environmental and sustainability standards to public procurement
○ Strengthen global competitiveness of domestic bio and pharmaceutical industries
- Establishment of legal and institutional infrastructure for domestic bio and pharmaceutical industries to preemptively respond to U.S. and EU supply chain self-sufficiency policies and trade regulations
- Expanding global cooperation in the bio and pharmaceutical sectors and strengthening international partnerships allow Korea to establish itself as a key hub for global supply chains
- The link between public procurement policy and R&D support reduces the time and cost required for small and medium-sized venture companies to enter the market by developing innovative products
- It is easier to enter overseas markets through mutual recognition and joint clinical cooperation with global regulatory agencies