As the U.S. and Korean governments continue discussions to “amend and modify” the US-Korea Free Trade Agreement (KORUS), it is important to put into perspective what an important and far-reaching agreement this is. KORUS is often referred to as the “Gold Standard” of U.S. trade agreements because of its forward-looking provisions in areas such as data movement. KORUS also advanced, on paper, some key provisions that would support life science innovation and expanded trade in pharmaceutical and medical technology products between the two countries. Unfortunately, as with some other areas of the KORUS agreement, Korea has fallen short of its commitments in the pharmaceutical and medical device sectors. Addressing outstanding implementation issues in these sectors is critical to the future of the agreement, jobs and growth in the U.S., and building an environment for innovation and continued investment for these sectors in Korea.
The Korean government under President Moon Jae-in clearly recognizes the importance of fostering innovation in leading industries. Last fall, President Moon announced the launch of the Fourth Industrial Revolution Committee, a public-private initiative aimed at carrying out his administration’s plans to drive economic growth, job creation, and innovation, with a focus on a people-centered economy catalyzed by new growth engines. According to President Moon, “innovative growth is our new government’s core strategy for economic growth.”
The health care sectors, specifically pharmaceutical and medical device manufacturers, are well-positioned to support such growth and innovation. This was recognized during the initial discussions and negotiations that led to the KORUS agreement in 2012, and the provisions of the agreement reflect that. Unfortunately, they have not been fully implemented and are undercutting the growth and development of the sector in Korea. If President Moon hopes to change this trend, his government should start with a renewed focus on full implementation of KORUS provisions on transparency, value of innovation, expeditious access to safe and effective pharmaceuticals and medical devices, and intellectual property.
U.S. companies, which have long been global leaders in health care innovation, often point out that there are several pillars critical to developing an innovation ecosystem that will foster investment and growth in these sectors. These include world-class clinical and regulatory infrastructure; strong protection for intellectual property; payment and reimbursement systems that are transparent and incentivize innovation; and structural support for the rapid pace of innovation, particularly in the medical technology sector. Korea has made impressive achievements in the first of these areas, having developed top-notch clinical and regulatory practices that often serve as a model globally. With respect to the other pillars, however, progress has been slower.
Full implementation of KORUS would expedite progress in fully developing the remaining three pillars and catalyze growth in the health care sectors. In the meantime, companies continue to voice concerns that many of Korea’s healthcare reimbursement policies do not take into account the high cost of bringing innovative healthcare products to patients, nor the long-term benefit of health care solutions that allow patients to return to work more quickly, minimize or avoid prolonged hospital stays, or reduce procedure times to create greater efficiencies in hospitals, among others. Fulfillment of Korea’s commitments under KORUS would not only help address these challenges and contribute to the Korean government’s goals under the fourth industrial revolution, but also promote increased exports of leading U.S. health care innovations to Korea, thereby supporting jobs here in the U.S.
The timing is now for the U.S. and Korean governments and private sectors to work together to preserve KORUS and ensure that it is working. As the two governments hope to conclude the negotiations swiftly and with limited changes, they should direct their efforts to Chapter 5 of the agreement and its implementation shortcomings. A fully implemented KORUS will create new jobs, generate growth, and help foster innovation in the U.S. and Korea.