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[Special] Will Korea have medical cluster like Mayo Clinic?Seoul to allow hospitals to establish ‘industry-hospital cooperation body’
  • By Kwak Sung-sun
  • Published 2018.08.27 14:38
  • Updated 2018.08.27 14:38
  • comments 0

Around the U.S. medical center Mayo Clinic in Rochester, Minn., healthcare technology-based companies have shaped a medical cluster centering on the hospital.

The companies were established by physicians working at Mayo Clinic who could build up their various ideas from clinical experiences and share them with business enterprises.

In Korea, too, anticipation for such picture is growing as the Ministry of Health and Welfare recently announced that it would allow hospitals to establish “industry-hospital cooperation organizations,” as part of the policy to promote the healthcare industry.

The ministry’s plans include certifying research-centered hospitals instead of designating them, increasing the number of research-centered hospitals from the current 10, and allowing them to establish an industry-hospital cooperation body.

“The government aims to help hospitals and research doctors to develop innovative medical devices and business models, which will enhance the medical devices industry,” the health and welfare ministry said. “We will encourage hospitals not only to conduct R&D on medical devices but put their achievements into practical use and start a business.”

For research-centered hospitals, the government will get rid of institutional barriers that impede R&D on innovative medical technologies and their practical use, it added.

President Moon Jae-in (center) announced the government’s plan to deregulate and promote the medical devices sector, at the Bundang Seoul National University Hospital’s Healthcare Innovation Park on July 19.

Under the scheme, hospitals will be able to establish a holding company, which has been only available through an industry-academy cooperation body to date.

University-affiliated ones among research-centered hospitals support physicians’ opening of business via a holding firm within the school. However, large-sized hospitals owned by foundations or social welfare corporations, such as Asan Medical Center or Samsung Medical Center, have different situations.

Foundations and social welfare corporations cannot establish a holding firm in any of their subsidiaries or hospitals because they are subject to the inheritance tax law that prohibits holding more than 5 percent stake in other local subsidiaries.

Thus, professors working at such hospitals tend to open a small business themselves, which makes it difficult to compete against international companies in scale even if their ideas are outstanding.

Research-centered hospitals welcome government’s plan

Research-centered hospitals have welcomed the government’s plan to allow industry-hospital cooperation bodies.

“Doctors found it difficult to start a business with a technology or a patent that came out of research-based hospitals,” said an official at a research-centered, university-affiliated hospital. “They could set up a firm within an industry-academy cooperation team, but complicated accounting and other issues made them give up on business. The upcoming industry-hospital cooperation model will resolve this problem,”

Another official at another research-centered, university-affiliated hospital said research-based hospitals have long demanded the government allow industry-hospital cooperation organizations.

“However, the government should note that such a scheme might prompt hospitals to focus too much on profits. Thus, the scheme should have a condition that revenues earned through industry-hospital cooperation bodies should be reinvested in the hospital,” he said.

‘Only some will use industry-hospital cooperation body’

Some observers said only a handful of hospitals would welcome the plan and establish an industry-hospital cooperation organization.

“Each research-centered hospital has a different system. Rather than school-affiliated hospitals, foundation-owned Samsung Medical Center, Asan Medical Center or social welfare corporations-affiliated hospitals will have a great interest in having an industry-hospital cooperation body,” said an official at a research-centered hospital in the Seoul Metropolitan area. “Research-based hospitals affiliated with a university but independently manage the budget and workforce will find no reason to have an industry-hospital cooperation body.”

As universities have recently faced a reduction in the number of students and a freeze of tuition, they are suffering financial problems. In this situation, schools will not want their hospitals to go independent, the official said.

An official at a foundation-affiliated research-centered hospital said allowing industry-hospital cooperation bodies will serve as a significant opportunity for hospitals to consider setting up such entities.

“Some say only large-sized foundation-affiliated hospitals will use the system, but it will be a matter of choice. However, the government should make sure that industry-academy cooperation organizations and industry-hospital cooperation ones are established and operated under the same principles,” the official said.

He pointed out that the size of order for external research could affect establishing an industry-hospital cooperation body.

“Even if a hospital gets certified to become a research-centered hospital, it needs to win an order for external research at least worth 30-40 billion won ($27 million to $36 million) a year. If an order is smaller than this, the hospital will have to invest workforce and equipment inevitably,” he added.

Industry calmly responds to government’s plan

While research-centered hospitals expressed high expectations for the government’s plan to allow industry-hospital cooperation bodies, related industry officials calmly responded.

As businesses have partnered with hospitals under the industry-academy cooperation system, they will have no significant change but additional options for industry-hospital cooperation ones.

An official at a company in stem cell business said that the government’s plan would be “not so bad.”

“Whether we work with industry-academy one or industry-hospital one, there will not be much difference,” he said.

However, working with the industry-hospital cooperation body will be more professional. So, it will be good for companies if the government prepares well for the relations between industry-academy cooperation organizations and industry-hospital cooperation ones, he added.

Concerns about the reckless use of new medical technologies

Industry watchers raised concerns that a holding company within a hospital could cause hospitals to abuse new drugs or new medical technologies.

“Allowing a holding company within a hospital through an industry-hospital cooperation body is providing the hospital with authority to carry out research-related businesses,” said an industry official. “Let’s take a stem cell therapy as an example. Normally, hospitals should use it to patients after getting approval from the Ministry of Food and Drug Safety. However, a holding firm might use it to patients at a doctor’s discretion for research.”

If the government allows deregulation excessively, it could be problematic, he added.


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