Last year, South Korea overcame the big hurdles of the global financial crisis. It also hosted a successful summit meeting of the Group of 20 rich and emerging-market nations, taking Korea a step closer to the ranks of advanced nations. Another significant development last year was the Korean government's designation of the pharmaceutical industry as a new growth engine, underscoring the government's undivided support for the biotechnology industry. To strengthen the country's biotechnology industry, the government has vowed to support exports in a myriad of ways. One of these is to give various tax breaks to companies investing in the research and development of new drugs.

The pharmaceutical sector is an area that Korea, a future leader in the global economy, needs to foster as a core industry. A 1 trillion-won R&D investment in the biotechnology industry, according to some reports, is believed to have double the economic effects generated by the automobile industry and the automobile, ship and aircraft mechanical parts manufacturing industry combined, 1.8 times that of the electronics industry, and 1.6 times that of the total industry average contributing to the growth of the gross domestic product. The role of the pharmaceutical industry in improving the general health of the people is receiving ever more attention as the country faces the challenges of a rapidly aging population and a rise in chronic illnesses.

Under such conditions, our research-oriented pharmaceutical industry will endeavor more than ever to become an investment leader in R&D for the development of new drugs in order to provide innovative and necessary medicines to patients.

Korea has, in fact, already entered the ranks of advanced countries in terms of attracting multinational clinical research. Multinational pharmaceutical companies have been continuously increasing R&D investment here in this country, and recently, there has been a significant rise in initial clinical trials. These trends reflect Korea's talented human resources in the area of R&D and its sophisticated infrastructure. Worthy to note is that Korea has been constantly developing the infrastructure necessary for attracting more R&D initiatives, with the steady inflow of R&D investments from global pharmaceutical companies.

The many companies involved in developing new drugs, however, are still working under difficult conditions. After the introduction of the drug optimization scheme in 2006, pharmaceutical companies have had to endure a drop in drug prices at various levels. These levels include a 20 percent drop in the value of medication with an expired patent, an overall drop in the drug value-quantity ratio, rebates and other sliding scale pricing factors. Furthermore, the prices of new drugs have been unfairly evaluated since 2006 as newly patented local products registered after that year have been fetching only 35 percent of what the A9 nations have been garnering. With the recent implementation of M-ATP, pharmaceutical companies have been forced to cut prices further. Such unfavorable treatment of new drugs will only serve to discourage R&D investments. The changed pricing scheme, which took effect on Oct. 1, 2010, means that should pharmaceutical companies purchase medicinal products at a lower rate than that offered by an insurance policy, 70 percent of that difference is provided through health insurance benefits.

KRPIA will continue its efforts to push for a stable and predictable policy environment, and promote transparent and fair market conditions for the sake of new drug development, which demands long-term commitment and heavy costs. I would say the foremost challenge at this time is instilling a predictable drug-pricing system and an adequate compensation program for new products in order to encourage more investment. KRPIA will strive to ensure that newly developed drugs by researched-based pharmaceutical companies are fairly evaluated and receive the justice their developments deserve.

Based on such a sound medical-care infrastructure, KRPIA is committed to serving as an important partner to Korea's healthcare sector to not only contribute to the nation's economic growth but also help improve the health of the Korean citizens and advance the country's healthcare industry. Furthermore, we pledge to aggressively promote the provision of innovative drugs through steady research efforts so all the citizens can live happier and healthier lives. To this end, we humbly ask you all for your continuous cooperation and interest.