Aftermath of Januvia's price cut…MSD-CKD compensation fight

Regarding price difference compensation, the two companies still differ in stance after the price cut in September 2023

MSD Korea says, "Marketing·revenue rights were already transferred" vs CKD says, "MSD is the MAH"

Pharmaceutical distributors are inevitably affected by this situation…negotiations between the two companies continue

Chon Kun Dang

Regarding transaction for price difference compensation following the drug price reduction for the diabetes treatment Januvia, Chong Kun Dang and MSD Korea have not reached agreement during negotiation for nearly two years.

 

While the distribution industry continues to demand compensation for losses incurred due to the drug price cut, the lack of clarity on who is responsible for the settlement is exacerbating confusion and burden in the field.

 

According to industry sources on July 14, Chong Kun Dang recently sent an official letter to the Korea Pharmaceutical Distributors Association (KPDA), officially announcing its stance on the distribution industry's request for price difference compensation related to the drug price reduction of 'Januvia Family' products, including Januvia·Janumet.

 

The distribution industry has been requesting price difference compensation from pharmaceutical companies for price differences on inventory since the sequential drug price reductions of Januvia (sitagliptin) on September 2, 2023, Janumet XR (sitagliptin·metformin) on the same date, and Janumet (sitagliptin·metformin) on October 1, 2023.

 

The maximum price drops by dosage for each product indicate that Januvia 100mg was reduced from KRW 846 to KRW 592, Janumet XR 100/1000 mg from KRW 831 to KRW 572, and Janumet 50/1000 mg from KRW 520 to KRW 420.

 

The maximum price difference per tablet amounted to KRW 259.

 

However, as no compensation has been made to date, complains are growing within the industry.

 

In response, Chong Kun Dang recently sent an official letter to the KPDA, stating that discussions regarding the responsible party have not yet concluded.

 

According to the official letter, Chong Kun Dang acknowledges that the drug price reductions for Januvia and Janumet, due to patent expirations, were implemented sequentially between September and October 2023, and that distributors have been consistently requesting compensation.

 

Chong Kun Dang explained that the reason no proper compensation has been made yet is a complex situation where Chong Kun Dang demanded price difference compensation from MSD Korea, the marketing authorization holder (MAH) at the time of the drug price reduction, but MSD Korea refused.

 

Januvia is a DPP-4 inhibitor, containing sitagliptin, used to treat diabetes and is developed by MSD.

 

Following Januvia's launch, MSD and Chong Kun Dang have been jointly promoting these products since 2016.

 

However, in 2023, MSD Korea reorganized its chronic disease business unit to focus on its oncology and vaccine businesses, transferring the rights for the Januvia Family to Chong Kun Dang.

 

Chong Kun Dang has been exclusively handling the domestic sales of Januvia as of July 15, 2023.

 

MSD Korea's position is that since the marketing and revenue rights were already transferred at that time, they bear no responsibility for compensation related to the drug price reduction after September 2023, when the price cut occurred.

 

An MSD Korea official stated, "We transferred all domestic rights, including marketing and manufacturing rights, for Januvia products to Chong Kun Dang in July 2023, transferring exclusive sales and marketing authority," and added, "Accordingly, Chong Kun Dang is responsible for price difference compensation due to drug price reductions that occurred after that point." The official added, "We are willing to compensate for inventory that we sold before July 2023, before Chong Kun Dang acquired the marketing rights." The official further explained, "It is true that the transfer of MAH was delayed until July 2024, but this was because time was needed for actual transfer preparations, such as changing product labels," and added, "At the time of the drug price reduction in September 2023, we were not engaged in actual revenue-generating activities, and all related rights had been transferred to Chong Kun Dang.

 

The company was only the MAH on paper." Negotiations ongoing due to discrepancy between marketing rights and MAH...Distribution industry "we're troubled" The key issue is related to the division of roles and accountability between the MAH and the actual operating entity at the time of the drug price reduction.

 

MSD Korea maintains that since it transferred domestic marketing and revenue rights for Januvia to Chong Kun Dang as of July 2023, Chong Kun Dang is responsible for price difference compensation arising from subsequent drug price reductions.

 

Conversely, Chong Kun Dang stresses that MSD Korea still held the marketing authorization at the time of the drug price reduction.

 

Januvia's marketing authorization was indeed transferred to Chong Kun Dang on July 23, 2024, after which the business transitioned to a global direct import structure.

 

Chong Kun Dang believes that "Shifting the responsibility for compensation without the official change of the marketing authorization holder is unfair." However, given the sensitivity of the issue, they are taking a reserved stance by stating that it's difficult to issue an official statement and that discussions with MSD Korea are still ongoing.

 

In 2016, MSD Korea and Chong Kun Dang have signed an agreement to jointly promote treatments for diabetes and dyslipidemia, including Januvia.

However, as negotiations delay, the burden of price difference compensation due to the drug price reduction is ultimately being passed on to pharmaceutical distributors.

 

The pharmaceutical distribution industry has consistently demanded compensation for the drug price difference of Januvia family products since the second half of 2023.

 

However, settlement has been delayed due to the ambiguity of accountability between the two companies.

 

The recent official letter sent by Chong Kun Dang to the KPDA directly mentioned this dissatisfaction from the distribution industry.

 

The letter stated, "Discussions between the two companies are ongoing, but as the compensation discussion has not been finalized, distributors are facing difficulties," adding, "We will proactively work towards a swift resolution with responsibility." An official from a pharmaceutical distribution company pointed out, "The pharmaceutical companies that should be responsible for settling the price difference due to the government's drug price reduction are pushing responsibility onto each other," and added, "Distributors compensate pharmacies for the price difference but receive no compensation from the pharmaceutical companies, thus bearing the entire burden in the middle." The industry widely expects the transfer of Janumet XR's marketing authorization in November, raising concerns that the same problem could recur.

 

If the discussion over responsibility drags on while the drug prices of major sitagliptin-based diabetes treatments like Januvia, Janumet, and Janumet XR are sequentially reduced.

 

In that case, distributors will inevitably continue to bear the settlement burden.

 

Ultimately, this discussion goes beyond individual products and extends to the industry-wide challenge of how to resolve systemic blind spots that can arise from the separate structures of marketing rights and marketing authorization.