As the government's policy of cutting drug prices continues, midsize Korean pharmaceutical companies are turning their eyes from a generics-centered business model to the beauty and healthcare market. The strategy is to broaden their portfolios into areas with less price regulation than pharmaceuticals and the potential for high added value.
According to the industry on the 11th, major traditional drugmakers are entering beauty and healthcare fields such as cosmetics and medical aesthetic devices one after another as they seek new growth engines.
They have moved beyond simple product launches to expand operations through organizational restructuring and mergers and acquisitions (M&A), a strategy seen as aimed at improving a business structure centered on generic drugs whose price cuts have been signaled.
Ahngook Pharmaceutical is accelerating the expansion of its beauty and medical aesthetics business. The company plans to put on the agenda an amendment to its articles of incorporation, centered on entering the aesthetics business, at a regular shareholders meeting on the 26th. It is also considering creating a dedicated beauty and aesthetics organization. The plan is to build a business structure that covers everything from product development to manufacturing and sales, going beyond simple distribution.
Ahngook Pharmaceutical holds as flagship items the generic of the primary hypercholesterolemia treatment "Febarojet (pitavastatin calcium and ezetimibe)" and the antitussive and expectorant "Sinecod Syrup."
It is also laying the business foundation step by step. Ahngook Pharmaceutical filed trademarks related to cosmetic dermatology last year and recently began reorganizing by hiring experienced sales staff for dermatology and plastic surgery. In November last year, it acquired the healthcare corporations Dmedi Korea, further expanding its related business base.
Kyungdong Pharm, which holds generics centered on cardiovascular and antihypertensive drugs, has targeted the beauty and wellness market through cross-industry collaboration. In November last year, it signed a memorandum of understanding (MOU) with Hanil Electric Co. to jointly develop new products in beauty and wellness. The two companies plan to pursue a "total wellness solution" business that combines health functional foods (inner beauty), functional cosmetics, and supportive beauty devices.
Behind the shift by traditional drugmakers toward beauty and healthcare lies a sense of crisis over the government's policy of cutting generic drug prices. The government is pushing to lower prices for new generics to the 40% range of original drugs, down from the current 53.55%.
The industry sees it as unlikely that a generics-centered business structure alone can defend profitability if large-scale price cuts materialize amid global uncertainty. In response, centered on the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), corporations have formed an emergency committee and are raising concerns about the drug price reform plan.
Generics account for more than 90% of the drug business structures of Ahngook Pharmaceutical and Kyungdong Pharm. As a result, corporations have chosen the aesthetic medicine field as a cash cow (revenue source) that can quickly fill revenue gaps. Compared with drugs, beauty and healthcare products such as cosmetics, fillers, skin boosters, and medical aesthetic devices have relatively shorter development periods and lower barriers to overseas expansion. If a brand is successfully established, there is also the advantage of securing a stable revenue source.
Dongkook Pharmaceutical is cited as a case that achieved external growth early by making the cosmetics business a new growth pillar. The company grew based on generic drugs such as the treatments for prostate cancer and precocious puberty "Lorelin Depot (leuprorelin)." In 2015, it entered the beauty market by launching the cosmetics brand "Centellian24." The brand raised recognition with a product line that applied the ingredient concept of the wound treatment "Madecassol" to cosmetics. Its flagship product, "Madeca Cream," is said to be driving brand growth by emphasizing a soothing and regenerating image for the skin. Since 2019, the beauty institutional sector has recorded an average annual growth rate of more than 15%, and bolstered by the expansion of the cosmetics business, the company is expected to surpass 1 trillion won in annual revenue this year.
However, some say that as a large number of domestic corporations have entered the aesthetic medicine market, competition has intensified, making it difficult to guarantee stable revenue through expansion alone. An industry official said, "While cosmetics and health functional foods have lower initial entry barriers than drugs, competition is fierce, and it costs a lot to build brand awareness and distribution networks," adding, "Even major drugmakers that have entered the beauty and aesthetics market touting their expertise are recently showing limits in expanding market share, so meticulous market analysis and business strategy are required."