Russia’s invasion of Ukraine and the ongoing war are likely to hurt the Korean health industry, a report said. Economic sanctions against Russia will hit many small medical device manufacturers, and the government needs to support them.

On Wednesday, the Korea Health Industry Development Institute (KHIDI) released a report on the impact of the Russian-Ukraine war on the Korean health industry.

In February, the report noted, major Western countries, including the U.S., pushed to freeze Russia’s financial assets and restrict transactions. Moscow released a list of 48 “unfriendly countries,” including South Korea, the U.S., the U.K., Australia, Japan, and the EU, and imposed diplomatic sanctions against them.

In 2021, Korea’s pharmaceutical product export to Russia and Ukraine reported about $100 million and $20 million, respectively, taking up about 1 percent and 0.2 percent of the total drug export of $9.92 billion.

In 2020, Korea had 14 companies that shipped drugs to Russia. Exports of the top three companies – GC Pharma (67.5 percent), Hanmi Pharmaceutical (9.4 percent), and Handok (3.3 percent) – accounted for 80 percent of the total drug exports.

However, the proportion of the three firms’ export to Russia out of the total revenue was less than 1 percent.

The KHIDI report said Korea’s drug export to Russia and Ukraine was small, and the nation had a small number of exporters. Thus, the ongoing war’s short-term impact will remain small in the pharmaceutical sector compared to other industries.

However, Korean vaccine makers face a direct impact on their plan to manufacture Russian Covid-19 vaccines, the report pointed out.

The WHO and the EMA have suspended their evaluation of Russia’s Sputnik V Covid-19 vaccine because Russia invaded Ukraine, affecting the contract manufacturing of Korean companies, including Hankuk Korus Pharm, Jetema, and Isu Abxis.

Korea’s export of medical devices to Russia and Ukraine recorded $270 million and $40 million, respectively, in 2021. The export volume was on a fast rise, and they accounted for 4.1 percent and 0.7 percent of the total medical device export

Korea had as many as 270 medical device exporters to Russia and Ukraine, unlike the pharmaceutical sector. Given the amount of export, many of them are small-sized enterprises.

In 2021, Korea’s top medical devices exported to Russia were implants (27.2 percent), ultrasound imaging devices (16 percent), and radiography devices (14.4 percent).

Export of diagnostic reagents to Russia in the wake of Covid-19 surged in 2020.

As of 2021, Russia relied more than 90 percent of implants on imported products, and Korean implants ranked first with a 40 percent market share.

For Osstem Implant, a dental equipment manufacturer, Russia is the third-largest export destination, next to the U.S. and China.

As the company has a Russian subsidiary, the company is likely to suffer a setback in sales.

In the ultrasound imaging equipment field, major exporters, including Samsung Medison, will face a negative impact because of the Russia-Ukraine war.

“According to local and international studies, the global supply chain is expected to remain uncertain for a while due to more sanctions against Russia and the soaring of the dollar and raw material prices,” the KHIDI said.

“In the Korean health industry, most companies are small-sized and depend highly on imported items. They will be greatly affected by the Russian-Ukraine war and worsening profitability due to fluctuating exchange rates and rising oil prices.”