[Reporter’s View] The sluggish shift in stepped pricing

In June, South Korea’s Ministry of Health and Welfare (MOHW) issued an administrative notice to withdraw the plan to apply the stepped drug pricing reduction on drugs transferred by business restructuring.

 

And it has been three months since the ministry completed collecting the public opinion in August.

 

But the finalized notice has not been disclosed.

 

When the decision was made, the pharmaceutical industry seemed relieved and also complimented the government for swiftly changing the policy to reflect the public opinion.

 

Daily Pharm also praised the MOHW’s action as an example of a ‘Smart healthcare administration.” However, the companies, who were relieved about the change and pushing on with their product transfer along with the business restructuring, are now idling.

 

Some even assumed the final notice was issued and proceeded with the healthcare reimbursement listing procedure, which they ended up withdrawing.

 

Initially, the stepped drug pricing, in effective from August, sets the upper limit pricing of a drug, regardless of qualifying two criteria for top-level pricing, at 85 percent of either the lowest pricing or 38.69 percent of the first-in-class drug, if the number of listed same-substance drugs exceeds 20.

 

However, the Pharmaceutical Decision and Adjustment Criteria amended in last February opened up a room for the stepped pricing to be used on a product that succeeds business status due to corporate restructuring—for example in case of M&A, corporate split or license sell-off.

 

Accordingly, companies like Pfizer Pharmaceutical Korea (Upjohn) and MSD Korea (Organon) preparing for multiple transfer of original products to the respective split off companies, fear of the possible pricing reduction.

 

Takeda Pharmaceuticals Korea that recently sold off an antidiabetic treatment pipeline to Celltrion could not be completely free from the same fear.

 

The controversy seemed to have died out as the ministry decided to set the upper limit price as before, according to the Pharmaceutical Affairs Act Article 89 notified to be enforced in June, when a drug is transferred by inheritance, business transfer or merge; a manufacturing license is switched to an import license or vice versa; and license is dropped and receives license as a same-substance drug due to Pharmaceutical Affairs Act, MFDS notice or the corporate status change.

 

When a government body admits finding an error or side effect in a policy and decides to take a change, speed also becomes an integral part.

 

Surely, the government body has to take time to carefully consider consequences.

 

Taking numerous reconsiderations, even after accepting the public opinion, makes sense for such major policy shift like reviving the stepped drug pricing system.

 

Regardless, the pricing reduction on the transferring original product should be a minor amendment.

 

The speed is crucial for the significant shift in policy.

 

Affected companies are already missing the business schedule.

 

The bigger problem is that they still cannot fathom when it would be finalized.

 

When there are companies waiting and the precious time is ticking away, the companies at least deserve an explanation.