A revision bill to ease requirements for the state designation of innovative pharmaceutical companies will give privilege to conglomerates such as Samsung and SK, a lawmaker said.

The government recognizes “Innovative Pharmaceutical Companies” for their innovative R&D on new drugs and business expansion in the global market.

Rep. Kim Soon-rye of the Liberty Korea Party torments government officials with questions, during the parliamentary audit of the Ministry of Health and Welfare on Tuesday.

Rep. Kim Soon-rye of the opposition Liberty Korea Party, who is also a member of the National Assembly’s Health and Welfare Committee, raised suspicion about a political motive behind the revision bill, at a parliamentary audit on the Korea Health Industry Development Institution (KHIDI) on Tuesday.

Kim said the government should grant the certification of innovative pharmaceutical firms to small- and medium-sized enterprises that focus on new drug development, rather than to conglomerates.

After Finance Minister Kim Dong-yeon met Samsung Electronics Vice Chairman Lee Jae-yong in August and told him that the government would actively review deregulations in the biotech industry, a revision bill on changing requirements for innovative pharmaceuticals came under the subcommittee without any dispute between the ruling and opposition parties, Kim said.

“The bill almost the passed the National Assembly with the support of the government and the ruling party,” she added.

Thirteen lawmakers of the ruling Democratic Party (led by Rep. Nam In-soon) and one lawmaker of the splinter Justice Party proposed the revision bill.

The revision bill expanded the scope of pharmaceutical companies to include “a firm that installs and operates a research institute or a separate R&D department for new drug development and production” to be eligible for innovative companies. The lawmakers who support the bill said the nation needs to broaden the scope of companies to nurture innovative pharmaceutical firms more effectively.

However, the easing of the requirement could unfairly benefit conglomerates with a separate research subsidiary, even if they are not eligible for R&D requirements for innovative pharmaceutical firms. Innovative pharmaceutical companies should spend more than 7 percent of revenue on R&D if they earn less than 100 billion won ($88.7 million) in annual sales, and more than 5 percent if they make 100 billion won or more in annual sales.

According to Kim, Samsung BioLogics failed to receive the innovative drugmaker certification despite repeated inquiries to the Ministry of Health and Welfare and the KHIDI, which runs the certification system.

However, if Samsung BioLogics’ affiliated firm Samsung Bioepis becomes eligible for the certification with the help of the revision bill, Samsung BioLogics could benefit from the changed system, Kim said.

An official involved in certifying innovative drugmakers told Kim that the revision bill would allow Samsung BioLogics and SK Biopharmaceuticals, a subsidiary of SK Group, to meet the requirements for innovative drug companies.

Lee Young-chan, president of the KHIDI, said the institute was discussing with the health and welfare ministry to improve the certification system.

“We are reviewing ideas to improve the system so that companies that put much effort in R&D can benefit the government’s support,” Lee said.

The certified, innovative pharmaceutical companies enjoy favors in applying for a state R&D project, tax incentives on R&D spending, eased regulations for the construction of research facilities, borrowing policy funds, and workforce support from the government.

An aide to Rep. Kim said the lawmaker’s Kim’s mentioning of Samsung was to raise concerns that conglomerates could shift the form of a subsidiary to receive the government’s support.

hwz@docdocdoc.co.kr

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