Bill banning reverse payment agreements passes committee

Bill banning reverse payment agreements, mandating generic substitutions, and addressing drug shortages passes Health and Welfare Committee review

Post-notification to HIRA following generic substitutions specified in the Pharmaceutical Affairs Act

Collusion to not release generic versions will be penalized by drug price cuts of 20% for the first offense, 40% for the second offense, and reimbursement suspension for the third offense.

MOHW also granted chairmanship alongside MFDS on the Council for Stable Supply of National Essential Medicines:

The amendment to the National Health Insurance Act, which regulates "reverse payment agreements" where original drug companies and generic drug companies collude by exchanging money to delay or not release generics, thereby avoiding a price reduction for the original drug, passed the National Assembly Health and Welfare Committee review on the morning of the 27th.

 

The illegal collusion among pharmaceutical companies to withhold generic drug launches has forced patients to pay unfairly high prices for medications.

 

This practice must be eradicated to eliminate such disadvantages and prevent unnecessary leakage of health insurance funds.

 

The bill on revising the Pharmaceutical Affairs Act, which expands the post-notification system for generic substitution at pharmacies to the information system established and operated by the Ministry of Health and Welfare and the Health Insurance Review and Assessment Service, and improves the definition of essential medicines and expands support to include drugs with no substitutes or facing supply instability, has also cleared the Health and Welfare Committee.

 

These bills will take effect according to the implementation date specified in the supplementary provisions once they pass the plenary session after review by the Legislation and Judiciary Committee and are promulgated by the government.

 

Original-Generic Pharma Company Collusion Prohibition…Price cuts or reimbursement suspensions applied for offenses The core provision of the National Health Insurance Act amendment bill proposed by Democratic Party of Korea lawmaker Young-seok Seo stipulates that if the Fair Trade Commission uncovers collusion where a generic drug company agrees not to launch a generic in exchange for exclusive domestic distribution rights from an original drug company, the price of the unfairly traded drug will be reduced or its reimbursement suspended.

 

The bill passed by the Health and Welfare Committee amends Article 41-2 (Reduction of Upper Limit Amount for Reimbursement Costs for Drugs, etc.) of the National Health Insurance Act.

 

Specifically, the bill stipulates that for cases violating Article 40(1) or Article 45(1) of the Monopoly Regulation and Fair Trade Act, where the violation was committed “for the purpose of increasing or maintaining the reimbursement price ceiling for drugs,” the insurance price of the drug can be reduced or reimbursement suspended.

 

The amendment allows for a maximum 20% reduction in drug prices when a reverse payment agreement violation is first detected.

 

If another reverse payment agreement is confirmed within 5 years of the price reduction, the price can be cut by up to 40%.

 

If a second violation of the reverse payment agreement is detected within five years after the second price reduction, the application for reimbursement for the drug can be suspended for up to one year.

 

The effective date for the provisions preventing reverse payment agreements is ‘the day six months after the government's promulgation’.

 

Consequently, collusive reverse payment agreements will now face the same level of penalties as illegal pharmaceutical rebates, including drug price cuts and reimbursement suspensions.

 

The Health and Welfare Committee explained, “This bill enables the reduction of the maximum reimbursement amount for drugs related to unfair joint conduct or unfair trade practices, and the suspension of reimbursement coverage.

 

It will prevent pharmaceutical companies and others from profiting through unfair joint conduct or unfair trade practices and establish a fair drug sales order.” Post generic substitution notification system expanded to HIRA A revision to the Pharmaceutical Affairs Act, proposed by Democratic Party of Korea lawmakers Young-seok Seo, Su-jin Lee, and Byung-duk Min, was passed as an alternative bill by the Health and Welfare Committee.

 

It expands the pharmacists’ post-dispensing notification system to the information system operated by the Health Insurance Review and Assessment Service (HIRA).

 

The bill incorporates the existing regulation requiring pharmacists to inform patients when substituting a drug listed on a prescription with an item recognized by the Ministry of Food and Drug Safety as bioequivalent (generic substitution) and to notify the prescribing physician or dentist within one day (or three days if unavoidable circumstances exist).

 

The key provision approved by the Health and Welfare Committee is the establishment of a new Article 27-2 (Establishment and Operation of a Substitution Dispensing Information System) in the Pharmaceutical Affairs Act, enabling the Minister of Health and Welfare to establish and operate an information system to support post-notification of generic substitution..

 

Notably, the bill allows the Minister of Health and Welfare to delegate this task to the Health Insurance Review and Assessment Service (HIRA), with the necessary details to be stipulated under the Ministry of Health and Welfare ordinance.

 

The effective date for the simplified generic substitution regulations is set for five months after the government's promulgation.

 

This establishes the legal basis for the Ministry of Health and Welfare and HIRA to build and operate a generic substitution information system to support post-notification of generic substitution under the Pharmaceutical Affairs Act.

 

It is expected that this will enable more efficient communication of generic substitutions while clarifying the accuracy of such notifications, thereby enhancing information sharing between physicians and pharmacists.

 

Expansion of the Definition of Essential Medicines & Legal Basis for the National Essential Medicines Stable Supply Council The Committee also passed a revision to the Pharmaceutical Affairs Act that improves and expands the definition of essential medicines to include those without substitutes or facing supply instability, and elevates the legal basis for the National Essential Medicines Stable Supply Council from a presidential decree to a law.

 

The bill provides a detailed definition of essential medicines.

 

These include medicines essential for maintaining the national health system, such as disease control and radiation disaster prevention (Item a), and medicines that are essential for healthcare but lack substitutes or face supply instability despite market mechanisms (Item b).

 

Furthermore, a new Article 83-5 (National Essential Medicines Stable Supply Council) was added to the Pharmaceutical Affairs Act.

 

This mandates the establishment of a National Essential Medicines Stable Supply Council within the Ministry of Food and Drug Safety (MFDS) to develop countermeasures for both national essential medicines and medicines that, while not designated as such, require stable supply due to temporary increases in demand.

 

Notably, the composition of the National Essential Medicines Supply Council, previously chaired solely by the MFDS Vice Minister, was expanded to include ‘one senior official from the Ministry of Health and Welfare designated by the Minister of Health and Welfare,’ bringing the total to two chairs.

 

This appears aimed at strengthening national management capabilities by adding the Ministry of Health and Welfare to the MFDS as a government ministry with authority over national essential medicines.

 

Furthermore, the legal basis for the composition of the council members was clarified.

 

The effective date of the bill was set as one year after its promulgation.

 

While the definition of essential medicines is being expanded, the government's basis for supporting medicines without substitutes and medicines with unstable supply requiring stable supply due to temporary increases in demand is expected to be strengthened.