South Korea: big opportunities for digital health firms

South Korea faces a growing need for the digitisation of medical practices and for advanced solutions to support a rapidly aging population – presenting a US $5 billion plus market with significant prospects for western tech companies.

With a track record of turning startups into successful scaleups, South Korea also offers ample opportunities for firms seeking to become world leaders, and for those looking for strategic investments and global partners. And gaining regulatory approval in the country opens doors to other east and south-east Asian markets, where Korean companies are highly regarded.

Let’s take a closer look at the reasons the country is such an attractive market for international firms, and where the openings lie.

Aging population

The rapid aging of the South Korean population has become a major concern for the government and is one of the big drivers of growth in the country’s healthcare market. Sixteen per cent of the population is over 65 and this is expected to surpass 25% by 2025, bringing inevitable age-related diseases with all their complexities.

Hence, the Government is looking for advanced solutions that will enable it to support such a large number of older people and continue to provide quality medical services at an appropriate cost – and this is a need many western firms are well-placed to help it meet.

Another major concern is the prevalence of diabetes, which has increased from 1.5% to over 10% of the population in the past 40 years, and is becoming common among children as well. This has increased the demand for diabetes care and related portable and wearable monitoring devices.

To combat the associated rising medical costs and ensure the sustainability of its world-class medical care despite these trends, the Korean government has long encouraged investment in its digital healthcare industry. Digital health technologies are already a central feature of Korea’s medical industry, and they’ve contributed greatly to the country’s swift and flexible response to COVID-19.

The Korea Health Industry Development Institute’s (KHIDI) ‘Digital Health: Industry Analysis & Forecast Research Report’ of December 2020 estimates the country’s digital health sector to be worth $5.3 billion, an approximately 40% increase from 2015.

Health Information Technologies

Korean healthcare organisations also view Health Information Technologies (HIT) as a necessity to remain competitive in the market, and are expected to spend $948.2 million on these this year.

The country’s medical institutions are already highly digitised and embrace HIT solutions to improve their delivery of care. According to a 2020 Ministry of Health & Welfare (MoHW) report, 100% of tertiary hospitals in Korea use electronic medical record (EMR) systems, followed by 95.8% of general hospitals and 90.5% of hospitals with 100 or fewer beds.

Korea’s adoption of EMR systems is much higher than the OECD overall average of 81%, and this mirrors the country’s almost-complete digitisation of patient data, digital storage of clinical images, electronic hospital administration databases and expanding use of remote sensor technology.

The government plans to develop smart medical infrastructure based on digital technology, highlighting in its Korean New Deal an aim to create 18 smart hospitals by 2025 to allow real-time monitoring, diagnosis and treatment of patients.

This means hospitals will need to implement HIT solutions to digitise their operations fully, providing significant opportunities for international companies with suitable technologies.

And health data are set to become more mobile than ever, creating openings for companies developing mobile HIT solutions.

According to the MoHW, the current use of mobile EMR systems by tertiary hospitals is approximately 45% and expected to double over the next three years, while I expect smaller hospitals to follow suit to stay competitive.

Usage rates of HIT solutions by hospital type

Telemedicine

Can you imagine a country banning telemedicine? This is true of South Korea, where telemedicine practices are technically illegal.

But despite this, the Korean government is pro-telemedicine and the country has made significant technological advances in the field, presenting clear opportunities for firms with relevant products and services.

Although President Moon Jae-in made a campaign promise in 2017 not to allow telemedicine, the government has since designated Gangwon province as a regulation-free zone for digital health technologies, and has permitted telemedicine between doctors and patients there from July 2019.

In addition, during the COVID-19 pandemic, to limit face-to-face contact between doctors and patients and decrease virus transmission, the Ministry of Health & Welfare issued an administrative order allowing healthcare providers to implement telemedicine. In response, several hospitals have introduced applications for doctors to provide inpatient and outpatient care remotely. Furthermore, medication delivery services – which are normally prohibited in Korea under the Pharmaceutical Affairs Act – have been allowed.

Korea has also made significant advances regulation-wise and, in 2020, the National Healthcare Reimbursement Act was amended to enable telemedicine services to be covered under Korea’s National Health Insurance.

The MoHW recently announced that, under current regulations, doctor-to-patient telemonitoring is allowed for some diseases including diabetes and peritoneal dialysis. Furthermore, the Infectious Disease Control & Prevention Act (IFDCPA) was amended in December 2020 to include a legal basis for telemedicine in the event of serious alert levels relating to infectious disease.

So, telemedicine is allowed under the IFDCPA, even though no amendment has been made to the Medical Service Act.

And most patients and doctors have shown satisfaction with the quality and convenience of telemedicine during this conditional period, and expressed a desire to continue using it - even after the pandemic ends.

Although the MoHW’s administrative order expired in November 2021, as the government relaxes restrictions and implements a ‘living with COVID-19’ strategy, companies and industry experts are lobbying for the continuation of telemedicine to help the domestic market to flourish.

Recent surveys have shown 54% of Koreans are open to trying it and its implementation could create a market worth $1.9 billion, even if only 20% of Koreans participate.

Throughout the pandemic, Korean hospitals have partnered with local and international telehealth solution providers to diagnose and monitor patients with mild symptoms. Some hospitals have also used imported robots to test suspected patients while protecting doctors and other personnel from the risk of infection. And many Korean healthcare providers are continuously assessing both domestic and overseas solutions for implementation in their practices.

During his election campaign, President-elect Yoon Suk-Yeol - who will assume office on 10 May - described telemedicine as “an inevitable reality,” adding that:

“Leading in a direction that does not conflict with the interests of the medical field and businesses pursuing new innovations, we will make sure that all the people can enjoy the benefits of innovative systems and cutting-edge technology in all fields, including non-face-to-face treatment.”

AI-based solutions & precision medicine

Poised to become a leader in all sectors of AI by 2030, the South Korean government has also long encouraged investment in AI-based healthcare solutions, making this another primary area of opportunity for western companies.

Korea’s AI healthcare market was estimated to be worth $257 million in 2020 and is expected to reach $2.1 billion by 2025. As of last September, 85 AI-based medical devices were approved by the Ministry of Food & Drug Safety (MFDS) – a sharp increase from only four in 2018.

Since May 2018, a consortium sponsored by the Korean government has been developing an AI-based medical solution called Dr Answer – Korea’s version of IBM Watson. Led by Seoul’s Asan Medical Center, it involves 25 local hospitals and medical institutions and 21 AI software developers including DEEP Bio, JLK Inspection and Kakao Brain. The platform analyses patients’ medical data to predict, diagnose and provide treatment plans for major diseases.

The current iteration of the platform, Dr Answer 2.0, comprises 24 software programs and can help diagnose 12 diseases including cancers, cardiac disorders and Alzheimer’s. The unique selling points of these platforms are that the main database consists of Korean data and the platforms will become eligible for reimbursement once approved by the MFDS.

Korea is also a fast follower. The Secretary General of one of the three national precision medicine programmes recently commented that, although the country started later than other nations, it has made significant developments in precision medicine. And this has prompted overseas interest in Korean solutions and collaborations.

For example, we recently brokered a major deal for our German precision medicine technology client Molecular Health – to enable South Korea’s Konyang University Hospital to transform its cancer care. The deal was an early result from the business development programmes we’re running for Molecular Health in South Korea, Japan and Taiwan.

Konyang University Hospital - with which we brokered a major deal for precision medicine tech client Molecular Health

As another example of collaboration, last July, Korea’s Lunit announced a partnership with Guardant Health, a leading US precision oncology company which has invested $26 million in the Korean firm. As part of the agreement, Guardant Health will eventually use Lunit’s AI platform to develop precision oncology products to improve cancer care.

While the number of approved AI-based medical devices continues to increase, an update to the country’s reimbursement model for AI solutions is still required as there is a gap between new technologies and the evaluation criteria used. Companies wishing to commercialise their solutions in Korea need to be wary of hurdles. Nonetheless, I anticipate that changes to the reimbursement system will occur soon as the AI market develops.

I also expect Korea to continue to look for external innovation to fill its gaps around Big Data applications as rapidly as possible. These efforts, coordinated by the Korean government, will result in significant opportunities for international companies which are strong in precision medicine platforms, data analytics, data interpretation and the application of analytics to develop Big Data-based medical diagnostic and treatment devices.

All these are necessary to boost the pace of adoption of Big Data solutions. And, to accelerate developments, the Korean Government recently initiated targeted regulatory reforms to implement clear standards for de-identification of personal information, and to provide a shortened approval process for Big Data and AI-based medical devices.

In addition, a regulatory sandbox system has been implemented to allow digital health companies to test their new services without a lengthy approval process and to demonstrate the benefits to public health. And reimbursement guidelines for AI-based healthcare solutions set out in December 2020 signal the government’s further commitment to support the swift implementation of advanced medical technologies.

Collaboration with telcos

Meanwhile, telecommunication companies such as SK Telecom and KT oversee the development of the mobile networks and ICT infrastructure needed to implement digital health solutions in Korea. These telcos have already established partnerships with hospitals across the globe from South America to EMEA, south-east and central Asia, and are providing healthcare solutions to them.

Furthermore, both companies are capitalising on their experiences in ICT infrastructure to help develop AI and Big Data-based medical technologies. However, as they lack experience in the medical sphere, they need to partner with medtech companies to succeed – presenting yet another area of opportunity.

SK Telecom, for example, entered into a strategic partnership with US firm GE Healthcare last September to develop digital health infrastructure combining their respective know-hows in fast data networks and advanced digital health products.

And KT signed agreements with North American ICU-grade biosensor developer Sibel Health in November 2020, and with US bioelectronics developer NeuroSigma last June, to boost its standing in digital health and transform itself beyond a telecommunications company.

I see many similar openings for international firms with promising technologies.

Significant opportunities

So, with the Korean government, major hospitals, large conglomerates and a growing number of tech startups all investing heavily in the field, South Korea offers significant opportunities for western companies looking to license their technologies, attract investment and establish partnerships in order to grow globally.

And, notably, success in Korea serves as an excellent gateway to eastern and south-eastern Asian markets, where Korean companies are held in high esteem.

As with any high-profile opportunity area, success in Korea’s digital healthcare market favours early movers – firms which are prepared to act fast and make bold moves to help shape the country’s technology landscape.

To discuss the opportunities for your digital health business in South Korea, please contact: Ruslan Tursunov, Head of Digital Health & Life Science at Intralink Korea, at ruslan.tursunov@intralinkgroup.com