Lipitor and Vytorin to be priced lower than generic?

Korean government notifies applying stepped pricing system on transferred original

Pfizer and MSD’s off-patent drug division spin-offs affected

An odd phenomenon of the original’s pricing dipping down to 85 percent of the lowest generic pricing may actually happen in Korea.

 

The stepped drug pricing system coming in effect from July prices same-substance drugs under differentiated pricing depending on drugs meeting two qualifying standards.

 

But from 21st same-substance drug, the pricing is fixed at 85 percent of the lower price between the lowest price of the drugs or 38.69 percent of the original’s price.

 

However, a controversy sparked when the Ministry of Health and Welfare (MOHW) explained the stepped drug pricing system would be applied on ownership-transferred drugs.

 

Pharmaceutical companies splitting recently like Pfizer and MSD are currently in process of transferring multiple original products to their spin-offs.

 

And these companies may get impacted critically by the government’s interpretation.

 

◆"Transferred original?

 

To the back of the line!” The controversy over the reduced original pricing started from the ‘Pharmaceutical Decision and Adjustment Standards’ revised in last February.

 

The Section Ma (마) of the revised drug pricing notice stipulates a drug applying for pricing decision, listed previously but removed, would be priced at its latest maximum price, if it is either a transferred drug by inheritance, business transfer or merge as stated by the Pharmaceutical Affairs Act Paragraph 1 of Article 89, or a transferred drug by importer’s inheritance, business transfer or merge as stated by the Pharmaceutical Affairs Act Paragraph 2 of Article 42.

 

In other words, the manufacturer (usually a Korean company) or the importer (multinational company) transferring a drug with a business license would not be subject to pricing reduction.

 

Nevertheless, the Section Ba (바) of the notice stipulates a drug applying for pricing decision, listed previously but removed, would be priced at a lower price between its latest maximum price or newly calculated price, if it is a transferred drug by the manufacturer’s business transfer as stated by the Pharmaceutical Affairs Act Paragraph 2 of Article 89.

 

This could mean the drug reapplying for pricing could face pricing reduction depending on the number of listed generics and standard qualification stated by the drug pricing notice.

 

For example, the first-in-class pharmaceutical reimbursement on Lipitor (atorvastatin) is removed in the process of Upjohn splitting off from Pfizer and taking over the drug.

 

But Lipitor’s price would fall at 85 percent of same-substance drugs as it would be treated as a generic when reapplying for the listing with more than 20 generic already listed.

 

MOHW official commented, “The Pharmaceutical Decision and Adjustment Standards do not distinguish original or generic, but it manages listing of ‘drugs.’ We see no reason for us to exempt first-in-class drug (usually an original) from the newly revised pricing calculation standards.” ◆"Inconsistent with the policy’s objective, exempt the original from pricing reduction” Basically, the industry is a turmoil.

 

Some of them are considering on taking legal actions to protect their originals getting a price lower than generics.

 

Nevertheless, there is a chance for pharmaceutical companies to protect the original’s pricing even with imminent business and product transfer issues.

 

MOHW has decided to apply the existing standards on products applying for listed pricing by May 2020, unless the products have special condition or need to submit additional data.

 

Therefore, if Upjohn and Organon splitting off from Pfizer and MSD, respectively, were to process the transfer fast enough, they would be able to avoid the pricing reduction.

 

Upjohn would take over Lipitor, Norvasc and Celebrex, whereas Organon is planning to take over Vytorin, Singulair and Zetia.

 

But the window is opened to those two companies only.

 

Multinational companies splitting off-patent drug specializing division in the future would take a heavy blow.

 

In fact, many of global companies are either planning to or considering on a spin-off.

 

Increasing number of Korean companies is also shooting for transferring originals.

 

Because of the situation, Pfizer and MSD may request for rapid approval from their respective headquarters to finalize the transfer earlier.

 

The pharmaceutical industry is infuriated at the Korean government.

 

Considering the generic pricing system revision started from the safety issue of valsartan, the companies cannot accept the Pharmaceutical Decision and Adjustment Standards working against the original and reducing its price.

 

Korean Research-based Pharmaceutical Industry Association (KRPIA) insider noted, “Although the generic pricing calculation has been modified, the contradicting factor in the existing regulation has not been touched up and created a loophole.

 

The association has delivered the industry’s opinion, but we did not get the answer we wanted.

 

The government would have to promptly set down correct interpretation of the regulation coinciding with the original objective of the revision and prevent any confusion in the market.” Regarding the issue, Attorney Lee Hyeong Gun and Song Hyun Ah at Lee & Ko commented, “The new generic pricing system affecting the original’s price when transferring seems to contradict the initial objective of the policy.

 

Not only should the government thoroughly review the interpretation from legalistic point of view, but also it should take into account the possible impact on the original and patient’s options.”