Dire need for a rational pricing system for new drugs

Need to establish a rational pricing system that recognizes the proper value of new drugs

Global pricing standard = ‘Cost of production + α’… need to raise the companies' will for R&D

Japan and Taiwan provide 10% pricing premium for companies that conduct Phase III trials in their country…good ‘role model’

Can review reducing scope of alternative drugs, refund system, price discount accumulation system, etc.

Improving the drug pricing system through social consensus has been proposed as a prerequisite for the government to achieve the 60 trillion won export and 300,000 job creation in the biohealth industry as one of its 3 new growth engine industries.

 

In addition to the primary purpose of fostering the biopharmaceutical industry to create national wealth, there is no disagreement on the fact that the localization of vaccines and treatments as the nation’s key industry is essential to address the national need and respect and realize the right to life of the citizens in Korea in the COVID-19 pandemic.

 

In particular, the emphasis Yong-Ik Kim, the President of the National Health Insurance Service, made at special lectures, in raising the will for R&D among biopharmaceutical companies through appropriate pricing of new drugs and the joint growth of the nation and its companies, has been interpreted as an exemplary blueprint for the soft landing of Mooncare.

 

Seong-min Park, a lawyer from HnL law firm said, " An irrational pricing system for new drugs may infringe the Korean patients’ access to treatment as well as adversely affect the fostering of a health drug ecosystem with fair competition.” Essentially, 4 rational drug pricing measures were considered eligible for review/introduction through communication with the Ministry of Health and Welfare, as well as the Korea Pharmaceutical and Bio-Pharma Manufacturers Association and other industry pricing managers: ▲ reducing the scope of alternative drugs ▲flexible application of negotiations(diversifying types of pricing negotiations allowed to include refund system, etc) ▲price discount accumulation system ▲pricing premium for new drugs that have conducted Phase III trials on Koreans First, the system to reduce the scope of alternative drugs was proposed to improve the standards for selecting alternative drugs so that new drugs can be compared with each other.

 

According to the industry, one issue in setting prices for new drugs is that the price of originals and generic drugs that have been discounted 53.55% due to patent expiry are all included in the standard used to set new drug prices and are continuing to be discounted due to post-marketing measures.

 

If this intensifies, the price of new drugs could be set at a lower level than alternative generics, reducing the will for companies to research or develop new drugs and also inducing voluntary withdrawal of licenses due to loss of cost.

 

In other words, Korea will not be able to leap forward and become a pharmaceutical powerhouse if the virtuous cycle of ‘R&D-new drug discovery- national wealth creation’ is broken.

 

On this, Park said, “Special measures such as excluding patent-expired products from alternative drugs is necessary.

 

Global competitiveness can be secured only when practical standards are established for the selection of alternative drugs such as those with therapeutic equivalence and the price set at 80-120% of the price in foreign countries.” Under the price discount accumulation system, pricing discounts that are accumulated during a new drug’s patent period after term expiry, effectively preserving the R&D value of a new drug to allow faster recovery of R&D expenses and induce reinvestment.

 

The system does not provide preferential treatment by exempting drug price discounts but defers it, therefore retaining the effect of reducing insurance finances.

 

The irrationality of lowering drug prices of new drugs that are more cost-effective than its alternatives with the price-volume linkage system and the discount applied when a drugs attempts to add indications that are within the scope held by its alternatives, has been constantly raised.

 

For example, compared to other drugs of the same class, Zemiglo had been subject to numerous more price-volume linkage discounts than its number of sales since it was released in 2012.

 

Its price had been discounted a total of 6 times.

 

The pricing premium system for new drugs that have provided Phase III trials on Koreans allows the price of new drugs that conducted Phase III trials on local patients to be set at 95-100% of the market price of substitute drugs rather than at 90% when omitting pricing negotiations.

 

The system does not conflict with international trade as it allows new drugs from multinational pharmaceutical companies that conduct multinational clinical trials to receive benefits while local new drugs that did not conduct Phase III trials of a certain size in Korea to become ineligible for such benefits.

 

The system is already being applied and operated abroad.

 

For example, in Taiwan, a 10% premium is provided for new drugs that conducted clinical trials over a certain size to demonstrate safety and efficacy.

 

In Japan, a new drug that was first-ever to be approved in Japan receives a premium of 10-20% for early introduction (new drugs that explicitly include dosage regimens for pediatric patients area are applied a 5-20% premium, however, the premium is not applied if the clinical trial conducted in Japan do not include pediatric patients).

 

The greatest advantage of the 'pricing premium system for new drugs that have conducted Korean Phase III trials’ is that it provides base data on the safety, efficacy, clinical utility of a drug in Koreans.

 

It is also easy to track and manage, improves R&D ability by the full step of the trial being conducted domestically, provides a performance upgrade for domestic clinical trial institutions, creates jobs, and contributes to new drug development fit to match the condition and diseases of Koreans.