I can't prove it one way or the other, but others were skeptical too.

https://skeptics.stackexchange.com/questions/9272/did-pills-from-china-seized-in-south-korea-contain-the-powdered-flesh-of-dead-ba

The story was broadly reported in 2012 by The Atlantic, The Daily Mail UK, etc. https://www.dailymail.co.uk/news/article-2140702/South-Korea-customs-officials-thousands-pills-filled-powdered-human-baby-flesh.html

Fox news reported it https://www.foxnews.com/world/bizarre-craze-behind-smuggling-of-pills-containing-the-powdered-flesh-of-babies

One of top comments at reddit https://www.reddit.com/r/IsItBullshit/comments/4ts06s/isitbullshit_capsules_filled_with_dried_human/ Claims that the pills were made from leftover placentas?

Another person at reddit explains their skepticism:

Let me point out that the news source being cited there isn't actually directly quoting any sort of Korean source or giving names but just using the generic term "Custom officials". This is normally a sign that the "news" is actually bullshit since they are not actually repeating information they have, but repeating heresay. Most western news outlets don't have any sort of direct sources or connections to Asia and thus rely on third-party sources for news there. This often leads to them citing tabloids, false news and straight up satire as legitimate news articles because they don't know.

Anyways, thanks for sharing the story. I do believe that there's some sick fuckers out there eating babies. Whether or not they are trafficking the dead baby powder in capsules across customs in South Korea, though, I am doubtful.