How did Korean diagnostic kit companies make us cry?

[헬스코리아뉴스 / 임대현] While the COVID-19 pandemic continues, it is being pointed out that Korean diagnostic kit companies are only using the COVID-19 crisis as a means of pursuing their own profits.

After the first confirmed case of COVID-19 in Korea was confirmed on January 20, 2020, the Korea Centers for Disease Control and Prevention (KCDC) shared diagnostic reagent protocols and encouraged private companies to develop diagnostic kits. Qibon introduced a self-developed test method that reduced the time required for confirmation by a quarter compared to the existing test method.

The Ministry of Food and Drug Safety (MFDS) also approved the first Corona 19 diagnostic kit on February 4 through an emergency use approval that temporarily exempts the license. Since then, the Ministry of Food and Drug Safety has approved emergency use of RT-PCR diagnostic kits from a total of 7 companies (Kogen Biotech, Seegene, Solgent, SD Biosensor, Bioseum, Biocore, Wells Bio).

Today’s Korean diagnostic kit companies were able to hit the jackpot in the global market in such a short period of time because of the active support of the government and the support of the people.

Nevertheless, companies that produce and sell diagnostic kits are being criticized for neglecting their public accountability and focusing too much on profit-seeking.

The Korean People’s Health Movement (PHM), through its recently published ‘Issue Brief’, slammed the Korean diagnostic kit companies for lack of public accountability. In a word, the development of diagnostic kits, which was a response at the national level, has been reduced to a tool that is only used by companies while neglecting the public nature.

According to an issue brief published by PHM on the 22nd, domestic companies that developed and produced COVID-19 diagnostic kits have been generating tremendous sales and profits since last year. Among them, SD Biosensor and Seegene achieved more than KRW 1 trillion in sales in 2020 for the first time in history.

Their operating profit and sales are mainly driven by the sale of COVID-19 diagnostic kits. In fact, the two companies showed rapid growth in 2020 after the spread of the diagnostic kits. Compared to 2019, SD biosensor saw a 23-fold increase in sales and a 486-fold increase in operating profit last year. In particular, this year, it achieved explosive growth due to the negative effects of the corona virus, achieving 70% of last year’s total sales in the first quarter. Seegene also saw a 9-fold increase in sales and a 30-fold increase in operating profit in 2020 compared to 2019.

SD Biosensor and Seegene have a much higher operating profit-to-sales ratio than other pharmaceutical companies such as Celltrion and Samsung Biologics. [아래 도표1 참조]

Government provides ‘unconditional’ public support to COVID-19 diagnostic kit companies

The government’s public support for COVID-19 diagnostic kit companies can be largely divided into transfer of technology developed by public research institutes, support for R&D expenses, support for production and export, and deregulation. [아래 도표2 참조]

#Transfer of technology developed by public research institutes = A public research institution is a public institution that conducts R&D, and the ownership of the results is also in the public domain. However, the COVID-19 diagnostic kit technology developed by public research institutes is being transferred exclusively to individual private companies, and it is being pointed out that it has become a means of profit pursuit rather than a shareable technology.

Specifically, in the case of the Electronic Components Research Institute (KETI), in order to transfer the technology of the rapid diagnostic kit developed, it is actively attempting to transfer technology to the private sector through the ‘KETI Enterprise Cooperation Platform’. Nevertheless, most public research institutes disclose only the name of the company with which the technology transfer contract has been signed and do not disclose information on the decision-making process, the form of technology transfer, and royalties or compensation for technology transfer. For example, the Ministry of National Defense is promoting the technology transfer and export of diagnostic kits developed by the Military Medical Research Institute, but did not even disclose the name of the company that actually signed the technology transfer contract. So far, only the Korea Institute of Science and Technology (KIST) has disclosed information on the technology fee (300 million won in advance, 3% of the regular royalties).

#R&D support = Every year, the government supports research and development costs for diagnostic kit companies in the name of academic research service projects. In the case of SD Biosensor, a representative company, along with other diagnostic kit companies (Kogen Biotech, Solgent), the Ministry of Science and ICT (Ministry of Science and Technology) received 5.21 billion won in support over the past five years to secure and accumulate infectious disease diagnostic technology capabilities.

The company also received 100 million won from the Korea Centers for Disease Control and Prevention from May to December 2020 under the name of ‘Development of serological tests for SARS-CoV-2’. has received research grants. The research contents were △Production and securing of specific antigen for Corona 19 enzyme-linked immunosorbent assay (Enzyme-Linked Immunosorbent Assay, ELISA, ELISA) △Development and performance evaluation of a prototype enzyme immunodiagnostic method. For example, the SD biosensor diagnostic kit technology was supported by the Ministry of Science and Technology and the Korea Centers for Disease Control and Prevention (KCDC).

The results of this R&D have not yet been accessible, but from 2016 to 2019, the SD biosensor was developed for the development of molecular diagnostic technology based on ‘isothermal nucleic acid amplification PCR-based Zika, dengue and chikungunia virus’ of ‘Practical Use’. Kit for ZIKV, DENV and CHIKV)’, you can read the report on the project that received R&D cost of 854.4 million won from the National Research Foundation of Korea.

The report states that the public use of technology, such as ‘preemptive response possible through early diagnosis in case of an infectious disease outbreak’ and ‘minimize economic and social losses through the establishment of a response system in case of a national crisis, and contribute to securing the safety of public health’ It is vague and is mentioned at a general level. With this research, SD biosensor applied for 4 patents and had exclusive rights to the technology developed with national support.

#Production and export support = In addition to direct support for technology transfer and R&D expenses, the government supported the production and export of diagnostic kit companies in various ways. Since May of last year, the Ministry of SMEs and Startups has supported the production of diagnostic kit companies as part of the ‘Private-led smart factory spread through win-win cooperation with large and small businesses’ project.

The Ministry of SMEs and Startups visited diagnostic kit companies with the Korea Federation of Small and Medium Enterprises and Samsung Electronics to derive improvement tasks, and provided support for production efficiency and quality, such as establishing on-site management processes and introducing barcode systems. It has been announced that the project will invest 25 billion won in 2020.

Solgent, one of the diagnostic kit companies that received support for the project, announced at a report meeting in June of last year that productivity increased by 73% with the introduction of a smart factory.

The government has also implemented various export support policies to export the COVID-19 diagnostic kit technology, which has emerged as the core of ‘K-defense’ and ‘K-bio’ since the early days of COVID-19. For example, in March of last year, the Ministry of Health and Welfare provided a connection (matching) service between a medical institution holding a sample and a diagnostic company in order to facilitate the clinical efficacy evaluation using a corona sample as a measure to support the export of a COVID-19 diagnostic tool (kit).

#deregulation = The government also supported diagnostic kit companies through deregulation. This can be understood as an extension of the pre-COVID-19 situation. The government selected the bio-health industry as one of the three major next-generation industries in 2019 and has been easing restrictions on pharmaceuticals and biotechnology under the pretext of ‘making a bio-health powerhouse’.

Deregulation of government regulations on the 'biohealth' industry including medical devices such as diagnostic kits [출처: 정책주간지 공감(2020)
진단키트 등 의료기기를 포함한 ‘바이오헬스’ 산업에 대한 정부의 규제완화 [출처: 정책주간지 공감(2020)]

One of these examples is ‘Innovative Medical Device Company Certification’.

‘Innovative medical device company certification’ is the ‘Medical Device Industry Promotion and Innovative Medical Device Support Act (abbreviated as Medical Device Industry Act)’, which contains the responsibilities of the state and local governments to support innovative medical device companies, and the certification system in May last year. This was followed by implementation. Based on this law, the Ministry of Health and Welfare certified 30 medical device companies as the first innovative medical device companies in November last year. Among them, Seegene was selected as ‘innovation leading company’ and Novomix, Bioneer, Gencurix, and PCL were selected as ‘innovative leap forward company’. These are all companies that focus on ‘in vitro diagnostic medical devices’.

In accordance with the Medical Device Industry Act, the companies selected in this way can receive preferential treatment for government-supported projects, tax relief and regulatory relief, and policy support. In addition, the government has announced that, “Through the operation of a regular consultative body for innovative medical device companies, we plan to additionally discover policies and systems tailored to companies that need to foster the medical device industry.”

In addition, the Ministry of Food and Drug Safety is promoting the conversion of export licenses to formal licenses, establishment of a systematic approval support system for in vitro diagnostic products such as diagnostic reagents, and international standardization of diagnostic techniques after emergency use of diagnostic kits has been approved. In particular, for emergency use approval and conversion of products approved for export, step-by-step close support is provided to prepare the approval application documents (30 days → 7 days), clinical trial development and test execution period (90 days → 22 days), review and The permit period (80 days → 30 days) has been shortened significantly. In other words, they are giving generous support.

Seegene's Corona 19 diagnostic kit Allplex SARS-CoV-2 Assay
Seegene’s Corona 19 diagnostic kit Allplex SARS-CoV-2 Assay

As such, it is pointed out that the government’s tangible and intangible support policies played a decisive role in generating profits for diagnostic kit companies, but it is pointed out that the government is not demanding any public responsibility for these companies, thus causing criticism.

A PHM official said in a phone call with Health Korea News that day, “President Moon Jae-in emphasized the importance of global solidarity and cooperation in the COVID-19 crisis, but he was silent on the international community’s demand for improved access to diagnostic kits.” Although it promised to share the diagnostic kit technology through the National Research Council (CSIC), the UK gave a low-cost diagnostic kit for low- and middle-income countries to Mologic, a company that developed a diagnostic kit through public funding last year. Compared to making it possible to supply

“It is difficult to expect companies to step forward and give back to society in a situation where the government is giving up on the exercise of authority,” said the official. “R&D support through public tax and deregulation using the power of state institutions are practically public results. If the conditions of accountability are not specified to continue, this can only be interpreted as ‘throwing out a specific company’ in the unprecedented situation of COVID-19.”

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