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Herb Medicine Industry Promotion Initiative

The government announced its 2nd Herb Medicine Industry Promotion Initiative highlighting a total investment of about one trillion won over the next five years (2011~2015), aiming to nurture oriental medicines into a new promising industry and expand the size of related markets to a 10 trillion-won scale. Targeting revival of a shrunken oriental medicine market and the achievement of scientific, commercialized and globalized oriental medicines, the 2nd Herb Medicine Industry Promotion Initiative consists of 26 tasks in four fields - advancement of oriental medical care services, reinforcement of quality management systems for oriental medicines, expansion of R&D support and globalization of the oriental medicine industry. <Landscape for Oriental Medicines to Change by 2015>
Fields Oriental Medicine Services Achievement Indicators Medical Care Market Size Treatment Satisfaction Level Ratio of Specialized Hospitals Present 2.88 Tril. 61% 2015 3.62 Tril. Won 75% 9.3% Remarks To conduct surveys of general public Specialized hospitals among all oriental medicine hospitals

Safety of Oriental Medicine Materials Oriental Medicine Industry R&D

History Tracking & Management Items Safety Standard Items

5 each 314 (58%)

20 each 437 (80%) 40 (5-year cumulative) 5.67 Tril. 1 year 95% Confirmation tests

Success Cases in 13 (5-year Commercialization cumulative) Industry Market Size 3.68 Tril. Tech Gap with Advanced Countries 3 years Tech Level vs. Advanced Countries 80%

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In contrast to average year-on-year increases in medical fees of 14% and 9% in the past two years at all medical institutions, oriental medical fees rose only 7% and 4%, and their share of medical fees also fell: 6.1% ('02) 5.9% ('06) 5.6% ('07) 5.3% ('08). To advance oriental medicine services and strengthen oriental medicine's role in a low-birth & aging society, the government plans to: o Prepare financial support methods and support oriental medicine services for infertile couples in low-income classes, study introduction of a selective system for oriental medicine hospitals for the elderly and chronic diseases, including paralysis, and ways of utilizing some of the idle beds at oriental medicinal hospitals as beds for recuperation of the elderly. o Introduce 'Oriental Medicines' History Tracking & Management System' that registers production and manufacturing information by distribution stage to secure the safety of oriental medicines in order to address public uncertainty over safety, including transformation of imported oriental medicine materials into domestic materials. o Invest 341.2 billion won over the next five years in R&D support, invest in development of standard treatment technologies for acupuncture and moxa and establish a basis for standard oriental medical prescriptions as well as diagnostic criteria by disease, frequency of treatment, treatment period, etc. <Status of Oriental Medical Care Services and Public Demand Survey Results on R&D of Oriental Medicines> Total (n = 468)

High medical fees

Ineffective treatment

Long treatment period

Different treatments by doctor

Difficulty in taking medicines

Painful Poor Occurrence treatment & condition of of side operation medical effects facilities

Others

Source: Korea Health Industry Development Institute (2008)

o Grow the oriental medicine field into a 50 billion won-scale market and nurture oriental medicines into a US$10 million key export item by 2015 through development of global oriental medicine materials and R&D of core technologies for oriental medical equipment. - Domestic oriental medical equipment market scale (production basis) was l24.9 billion won and exports of the equipment reached US$4.52 million in 2008.

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Major Tasks for 2nd Oriental Medicine Cultivation & Development Plan
- Comprehensive Conceptual Diagram Vision & Goals Vision: Enhance people's health and secure safety through oriental medicines Goals: o Scientific foundation, commercialization and globalization of oriental medicines o Creation of 'catch-up' foundation Leading 'differentiation'

Promotion Direction & Achievement Targets o Quantitative expansion & establishment of infrastructures Actively respond to aging society & external opening o Post response Establish preventive oriental medicines (materials) safety system o Secure & research basic capabilities Secure & research differentiated core technologies o Secure domestic market foundation Enhance international competitiveness
Achievement Targets Global market share People's oriental medicine satisfaction level Creation of industrialized market Commercialization of new products Objectives 2010 2015 3.1% 4.0% 61% 75% 7.4 tril. 10 tril. 13 cases (5-yr. cumulative) over 40 cases (5-yr. cumulative)

Four Grand Strategies

Strengthen oriental medicine (materials) quality management system

Advance oriental medical care service

Four Grand Strategies

Develop and globalize oriental medicine industry

R&D of oriental medicines and secure core technologies

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Detailed Plans by Field (New/Continued Tasks)

Strategy 1. Advance Oriental Medical Care Service (Task 1) Strengthen the role of oriental medicine responding to low-birth and aging society Enhance infertility treatment rates in response to low birth o Establish standardized infertility treatment methods and develop guidelines for oriental medicinal clinical examinations ('12) o Promote establishment of standard oriental medicine surgical treatments ('13) Strengthen oriental medicine's role in response to aging society o Utilize a certain level of idle beds at oriental medicine hospitals for geriatric patients ('13) o Study introduction of selective hospital system ('12) (Task 2) Create foundation for advance of the oriental medicine industry into global market Attract foreign patients for oriental medicine treatment o Develop overseas patient attraction manual ('11) o Develop oriental medicine-specialized tourism products ('11) Promote globalization of oriental medical care service o Hold 'World Traditional Medicine Expo (tentative name) ('13) o Establish oriental medical hospitals abroad and increase overseas advance of oriental medical doctors ('13) o Expand overseas oriental medical service ('12) Reinforce oriental medicine-related international cooperation o Boost support for oriental medicine standardization project ('11~) o Expand designation of cooperation centers in WHO traditional medicine field ('11~) (Task 3) Strengthen accessibility to oriental medical care service and improve quality level Enhance oriental medical care service quality o Prepare criteria for designation and evaluation of specialist hospitals ('11~) o Implement oriental medical institution certification system ('11~) Improve systems to activate western & oriental combined medical care services o R&D of separate insurance reimbursement rates ('12~) o Provide useful information for selection of western & oriental combined medical care institutions ('12~) Promote improvement of oriental medical care system o Organize and operate 'Oriental Medicine System Improvement T/F,' identify system improvement tasks and promote improvements ('11~) (Task 4) Strengthen oriental medicine's public health care roles Reinforce the roles of oriental medicine at National Oriental Medical Center o Strengthen oriental medicine public health & care project functions at national oriental medical centers ('12) o Reinforce research and examination functions of National Oriental Medical Clinical Research Center ('11~) Strengthen oriental medical health promotion businesses at community health centers o Reinforce oriental medical examination facilities at community health centers and regional health services ('11~) o Increase the number of herb community health centers: 65 ('10) 110 ('15) Continued New Continued Continued Continued Continued Continued New New New

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Strategy 2. Strengthen oriental medicine (materials) quality management system (Task 1) Advance oriental medicine distribution system Improve oriental medicine distribution system o Introduce history and tracking management system for oriental medicines ('11) o Prohibit simple processing and packaged sale behavior of oriental medicines wholesalers o Strengthen punishment for oriental medical institutions if standard oriental medicines are not used ('11) Introduce certificate-of-origin system for oriental medicines o Prepare ways for notification of places of production for oriental medicines used at oriental medical hospitals ('11) Promote direct trade of Korean-made oriental medicinal materials o Select agencies to carry out implementation of support businesses for direct trade of oriental medicinal materials and prepare support methods ('11) Substance-rich operation of supply & demand adjustment system o Revamp detailed operation regulations of the Supply & Demand Adjustment Committee and prepare supply & demand-related legislation basis ('11) (Task 2) Prepare scientific oriental medicine safety management system Develop quality standards and scientific assessment methods for oriental medicines o Advance standards and develop scientific assessment methods, etc. ('11~) o Prepare reasonable hazard criteria by item, etc. ('11~) o Rationalize heavy metals for oriental medicine materials (~'15) Activate systems for manufacture and distribution of excellent oriental medicines o Introduce production and quality management criteria (GMP) for standard oriental medicines on a gradual basis o Implement GMP-GSP system education and publicity for general public ('12) Strategy 3. Secure core technologies for R&D of oriental medicines (Task 1) Strengthen oriental medicine R&D capability Build oriental medical technology standards system o Develop standard moxa and acupuncture treatment technologies ('11~) o Promote efficacy standardization projects for oriental medicines and oriental medicinal materials ('11~) o Build the foundation for standardization of oriental medical care technologies and equipment (~'15) Establish the foundation for basic oriental medicines through clinical research o Promote development of examination technologies for oriental medicines and clinical test methodologies (~'15) o Promote development of guidebooks for clinical examinations ('11) o Build physical constitution information collection system ('15) Industrialize core oriental medicine technologies o Develop oriental medicines for treatment of hard-to-cure diseases (~'15) o Promote development of source technologies for oriental medical equipment ('15) o Promote R&D of new natural medicines and materials (~'15) (Task 2) Expand support infrastructure for R&D of oriental medicines Support R&D infrastructure o Build oriental medicine knowledge & information resources database ('12) and promote digitalization of traditional books ('13) o Secure standard natural materials and establish banks ('11~) Continued Continued Continued New New Continued Continued Continued New New

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o Support and cultivate SRCs (Science Research Centers) and MRCs (Medical Research Centers) for oriental medicines ('11~) o Prepare ways to establish cooperative clinical test systems and increase clinical testing agencies ( '12) Nurture manpower specialized in clinical tests of oriental medicines o Plan and promote 'Oriental Medicine's Clinical Research-Specialized Manpower Cultivation Project' (~'15) o Establish platform to support clinical research of oriental medical technology development project ('11~) o Prepare joint research programs with excellent overseas researchers ('12~) Strategy 4. Accelerate development and globalization of oriental medicines (Task 1) Support creation of oriental medicine clusters Support creation of metropolitan oriental medicine clusters o Establish "Oriental Medicine Promotion Foundation' ('11~) o Promote cooperation projects linking special oriental medicine districts, BT complexes, R&D technology convergence estates ('12) o Support oriental medicine clustering projects consisting of industries, academia and research institutes and establish Oriental Medicine Promotion Center (~'15) Cultivate regional industrialization capabilities for oriental medicines o Promote technology transfer and commercialization of oriental medicinal foods, cosmetics, etc. (~'15) o Promote region-specific industries, including development of regional oriental herb research institutes (~'15) (Task 2) Support activation of industrialization of oriental medicines Activate growth and distribution of oriental medicinal materials o Strengthen cooperation linking oriental herb industries and regional specialization projects of medicinal plants (~'15) o Prepare price and quality reliability systems through excellent medicine distribution support facilities ('11~) o Activate GAP (Good Agricultural Practice) and marketing (~'15) Invigorate production of oriental medicines o Promote oriental medicine industries through revision and enactment of laws and systems regarding oriental medicinal cosmetics, etc. and improvements of restrictions ('11~) o Promote development of natural oriental medicines and support overseas advance ('11~) Activate development of cultural content for oriental medicines and medical tourism o Create oriental medical tourism districts and support development of tourism products ('12~) o Strengthen cultural content, including oriental medicine expos, regional festivals, and event marketing ('11~) New Continued Continued New Continued New

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Changes in Oriental Medicine Sector Over Past Five Years

<Fig. 1> Oriental Medicine-Related Market
Market ( 100 mil.) 2.86 tril. Oriental medical service industry 1.90 tril. Oriental herbgrowing industry 726 bil. 668 bil. 500 bil. 205 bil. 1.83 tril. Oriental medicine distribution industry Oriental medicinal cosmetics industry 1.20 tril. 1 tril. Oriental medical equipment industry 24.8 bil. 20 bil. Oriental medicine industry 251.9 bil. 162,8 bil. Added value

Ginseng/red ginseng industry

2009 2004

509 bil.

<Fig. 2> Oriental Medical Service Market

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<Fig. 3> Trends of Oriental Medical Examination Fee Ratios

<Fig. 4> Production of Oriental Medicines

(Unit: 100 mil. won, %)

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<Fig. 5> Domestic Oriental Medicinal Cosmetics Market

(Unit: 100 mil. won)

<Fig. 7> Status of Oriental Medical Care Clinics & Hospitals by Year
(Unit: Number of Places)

Oriental Medical Care Clinics

Oriental Medical Care Hospitals

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