Adding AUS as a drug price reference country raise concerns

about the collapse of Korea's positive-listing system

Health authorities move to add ‘Canada and Australia’ as a pricing reference country

Canada and Australia are known for distributing drugs at the lowest price... “use as comparator unfair”

Already oversaturated with G7 reference countries...industry calls for a ‘STOP’ in unilateral downward application of prices

The health authorities are known to be considering including Canada and Australia as reference countries for drug pricing reevaluations.

 

Currently, the Ministry of Health and Welfare, Health Insurance Review and Assessment Service, and the National Health Insurance Service refer to drug prices of G7 countries - US, UK, Germany, Switzerland, Italy, France, and Japan – for evaluations and assessments.

 

Adding the two countries, which are considered to be those with the lowest drug price, is expected to raise some issues.

 

From what has been known so far, the government is planning to include Canada and Australia as reference countries and use the drug prices of the counties as standard, but if their use extends to the pricing of new drugs introduced from abroad and new drugs developed in Korea, this may deprive patients of their right to treatment and drive local pharmaceutical companies into a crisis.

 

In Korea, the price of generic drugs is set at 53.55% of the original version.

 

This is slightly higher than that in other countries, ranking 4th among OECD member countries.

 

However, this relatively higher price is only applied to some original and generic drugs and is interpreted to be a strange phenomenon arising from Korea’s odd brand name-based prescription structure rather than ingredient name.

 

According to a booklet issued by Canada’s new drug pricing review committee that was disclosed at the recent NA Audit, the reimbursement listed price of drugs such as Plavitor, Viread, and Simvastatin is 3 to 14 times higher in Korea compared to those in the US.

 

However, rashly concluding that the generic drug price in Korea is higher than those of reference countries without considering how the higher insurance price set for new drugs from multinational pharmaceutical companies during initial listing affected the generic price, may likely cause distortion of the drug price system.

 

As such, applying such an invasive drug price reduction policy of adding Canada and Australia as reference countries following the unilateral drug price reduction that was applied in 2012 and the satisfaction of ‘self-bioequivalence and DMF registration’ requirement, may severely harm and distort the development of the pharmaceutical and bio industry that is regarded as the new growth engine of the future.

 

According to one research institute, some of the generics sold in Australia are sold at a price 1/5th of that in Korea, therefore, the possibility that adding Australia as a reference country may cause a collapse in Korea’s drug pricing system cannot be ruled out.

 

More importantly, Canada and Australia, the countries that the health authorities are considering adding as drug price reference countries are not even new drug developers.

 

Based on US FDA data, 66 new drugs were developed in the US, 25 in Europe, 6 in Japan, and 2 in China over the past 5 years.

 

Just like Korea, Canada and Australia have been unable to overcome the FDA’s high barrier and receive new drug approvals in the US.

 

An industry official emphasized, “As we have learned overcoming the swine flu and COVID-19, establishing and fostering pharmaceutical and bio sovereignty is essential and must be pursued in the long-term.

 

Therefore, applying the short-sighted measure of reducing generic drug price just to save KRW 1.5 trillion in the short term is not the answer.” Currently, the external size of Korea’s pharmaceutical and bio industry is about KRW 27 trillion, and the proportion of original and generic drugs is about 6:4.

 

However, in the case of original prescription drugs, it is not an exaggeration to say that multinational pharmaceutical companies dominate the market as it accounts for over 90% of the original drugs marketed in Korea.

 

Another industry official said, “With the absence of a preferential pricing policy for domestic new drugs, cutting generic drug prices can only be interpreted as a short-sighted policy on the government's part that will only hand over Korea’s pharmaceutical and bio sovereignty to foreign companies." Meanwhile, health authorities and the pharmaceutical industry have not reached a conclusion and is still discussing adding Canada and Australia to the reference countries, but have made a consensus in calculating the average monthly exchange rate using the average exchange rate of 1 to 36 month prior to the pricing negotiations.