Talking points on ‘Korea Passing’ in pharma industry

[Special Report by DP pt1] More countries adding Korea as external reference pricing

Need to clearly judge individual cases, not all are ‘reasonable’

The well-known expression ‘Korea Passing’, recently used to describe a phenomenon related to foreign affair discrepancies, does not mean the same in pharmaceutical industry.

 

When it comes down to the Korean pharmaceutical industry, the expression does not indicate the U.S.

 

and North Korea neglecting South Korea during the Korean peninsula nuclear talks.

 

Rather, it indicates multinational pharmaceutical companies neglecting Korean market to protect certain level of pricing in other countries.

 

This is why the South Korean health authority is offended by the industry using the expression, ‘Korea Passing’.

 

However, there have been some clear signs of the phenomenon and a number of alarming cases has been reported.

 

And the issue is around ‘drug’, a product that directly affects people’s health.

 

Increasing number of ‘available but inaccessible drug’ is certainly an issue we need to be concerned of.

 

◆ The cause and irony of Korea Passing: ‘Drug price in Korea is low’.

 

It’s agreeable to deduce the theory under a number of circumstances, but it cannot be defined as ‘truth’ at the moment.

 

Despite the grievance, the industry also cannot exactly explain it.

 

Countries around the world have different drug pricing systems according to respective calculation model.

 

Tax, actual transaction price, retail price and many other factors play a part.

 

As we are now in the day and age of high-cost drug, growing number of countries are adopting the dual pricing system.

 

A research was criticized by the public because of it, as the research concluded ‘drug price in Korea is at around 45 percent of other OECD member countries’’.

 

Of course, if a specific drug’s insurance listing in Korea has been delayed or withdrawn, then the reason is not because ‘the drug price was too high’.

 

At least there is no doubt the drug price in Korea that more countries would refer to, is the black sheep multinational pharmaceutical companies want to keep it hidden.

 

Multinational drug manufacturers point their fingers at Middle Eastern countries, Japan and even recently China as the biggest reason why Korea Passing is a relevant issue, because those countries take up significant pie in the overall international sales, but also refer to pricing in Korea.

 

Then why are those countries peaking at drug pricing in Korea?

 

It would be truer to say ‘because pricing is transparent’ instead of simply saying ‘pricing is low’.

 

Under the single-payer health insurance system, or the National Health Insurance (NHI), Korean drug pricing system compares drug price with other alternative options, and conducts pharmacoeconomic analysis before a price for drug is set when listing the item on NHI.

 

The system is surely convenient for other countries to use as a reference.

 

Although the risk sharing agreement (RSA) system has been introduced, the ratio of dual pricing in Korea is comparatively lower.

 

However, the actual volume of Korean pharmaceutical market is about 1.5 to 1.7 percent of the entire global market.

 

Because of the transparent pricing system, multinational drug companies ironically started to neglect Korean market.

 

And hence, the industry argues drug prices should be kepts undisclosed.

 

In the same sense, some are demanding ratio of dual pricing should be increased with RSA subject expansion.

 

A market access (MA) expert from a multinational pharmaceutical company stated “Each drug has different circumstances, but the Korean office is feeling the strain as increasing number of foreign countries are referring to drug pricing in Korea.

 

Korea Passing is an issue that the Korean industry and government should talk and seek for solutions”.

 

◆ Not all Korea Passings are the same: Definitely, Korea should be concerned of and counteract to the Korea Passing phenomenon.

 

But justification for each case should be thoroughly reviewed.

 

The government cannot shrug shoulders every time when multinational companies pull out reimbursement application or give up on their reimbursement listing.

 

For instance, Novartis’ allergic asthma treatment Xolair (omalizumab) is a typical example of Korea Passing the industry is complaining about.

 

In December last year, Novartis pulled out Xolair from drug pricing negotiation with National Health Insurance Service (NHIS) when it was finally passed by Drug Reimbursement Evaluation Committee (DREC) under Health Insurance Review and Assessment Service (HIRA) after being approved in Korea for 11 long years.

 

It was actually China triggering the company’s action.

 

Right around then, China added Korea as one of external reference pricing countries.

 

Novartis headquarters decided to avoid risk of lowering drug price in a market potentially 20 times bigger than Korean market.

 

Some of the Korean industry people named the incident as ‘China Shock’.

 

It wasn’t to say what was a righteous or justifiable.

 

It was simply a good example of what the industry fears—a global company giving up on Korea for a bigger market.

 

Within the business logic, it would be considered as a reasonable case of Korea Passing.

 

However, another case with Mitsubishi Tanabe’s amyotrophic lateral sclerosis (ALS) treatment Radicut (edaravone) was different.

 

The company suddenly withdrew application for refund type RSA on Radicut in last June.

 

It was Canada this time.

 

The refund type RSA was considered Korean industry’s solution to Korea Passing.

 

Some are even arguing the refund type should be excluded from RSA types and shift it as a type of general insurance listing.

 

Mitsubishi Tanabe gave up on listing the drug in Korea, because it was afraid drug price in Canada would be affected by labeled price and not by the actual transaction price.

 

Labeled price is usually proposed by pharmaceutical company.

 

In fact, many multinational companies have their Korean office to go through a process of conducting its own internal and external feasibility evaluation on the labeled price set with DREC, and reporting the result to the headquarters for their confirmation.

 

During the process, the company also keeps track of drug listing schedule in other countries and the foreign country’s external reference pricing system as well.

 

In May 2017, Canada announced it would add Korea on to their list of countries of external reference pricing, and enforced it from the beginning of this year.

 

It was well-known news ever since the global company initiated a talk on RSA in Korea.

 

And actually, Canada dropped Korea from its list recently.

 

The case of Ono Pharmaceutical’s cancer immunotherapy Opdivo (nivolumab) was even worse.

 

The item was listed as both refund and expenditure cap type RSA in August 2017, but the company technically gave up on the Korean market after the pre-negotiation on expanding reimbursed indication for lung cancer second-line therapy fell apart.

 

The negotiation started from last year but it broke down in the first quarter of this year.

 

The Korean health authority proposed for a renegotiation, but Ono Pharmaceutical refused.

 

“The headquarters has made up their mind”, was their answer.

 

A drug, listed with RSA and initially engaged in an indication expansion talk, refused to even negotiate.

 

It was certainly not because of external reference pricing.

 

Xolair, Raicut and Obdivo are all cases of Korea Passing.

 

But they are all different.

 

Xolair was a concerning case, but Radicut and Obdivo were not.

 

They should rather be reprehended.

 

“Without company’s will, there isn’t anything the government can do.

 

The government is also internally reviewing various means to improve new drug accessibility.

 

But a company unilaterally announcing withdrawal of listing and blaming everything on the government is unacceptable”, said Ministry of Health and Welfare official.