Gvn’t ‘Drug reform benefits Korean companies’

Director Kim, "Benefits of individual companies, regardless of nationality, is not the goal of the generic drug pricing reform"

Ki-hyun Bae (Deputy Director) and Yeon-sook Kim (Director) of the Ministry of Health and Welfare’s Pharmaceutical Benefits Division explain the intent behind the new generic drug pricing reform. The ministry’s position is that the focus should be on significantly expanding price incentives for innovative pharmaceutical companies, firms with strong R&D, and manufacturers that ensure a stable supply of essential or exit-prevention medicines, and on advancing the post-listing price-reduction management system.

The Ministry of Health and Welfare has emphasized that the purpose of this reform of the generic drug pricing system is to encourage domestic pharmaceutical companies' new drug research and development (R&D) and ensure the stable supply of essential medicines. It also stated that the advancement of the post-listing price-reduction management system reflects efforts to minimize unnecessary confusion or administrative burdens for pharmaceutical companies and establish a predictable environment for drug price reductions.

This is a follow-up measure to the domestic pharmaceutical industry's strong resistance to the reform, which includes a substantial reduction in the generic drug pricing calculation rate from 53.55% to the 40% range.

The Ministry of Health and Welfare stated that it intends to send a clear signal through this drug pricing system reform: both domestic and international pharmaceutical companies should strengthen their commitment to obtaining Korea Innovative Pharmaceutical Company certification, and even non-innovative pharmaceutical companies can receive preferential drug pricing if they invest in R&D or contribute to the production of essential medicines and drugs, preventing market withdrawal.

On December 3, Director Yeon-sook Kim and Deputy Director Ki-hyun Bae met with the press corp and explained that the new pricing structure aims to reinforce the environment for new drug R&D and comprehensively overhaul the post-listing pricing evaluation and reassessment system.

Kim stated, “The core of this reform is enhancing access to new drugs and establishing a clinical evidence-based reevaluation system. It's regrettable that this aspect seems largely unknown to the domestic pharmaceutical industry.”

The drug pricing system improvement plan reported by the Ministry of Health and Welfare to the Health Insurance Policy Deliberation Committee last month includes applying preferential price increases of up to 68%, 60%, and 55% to innovative pharmaceutical companies and companies with high R&D investment ratios, respectively, and extending the existing one-year price premium period to three years or more.

In particular, the ministry plans to overhaul post-listing reassessment into a unified, evidence-driven system focused on clinical utility, and to establish a fixed biannual schedule (April and October) for post-management.

The Ministry of Health and Welfare states that this aligns the timing of drug price adjustments for frequently occurring reasons like ‘expanded usage scope’ and ‘price-volume linkage pricing’, enhancing predictability. This fully reflects the domestic pharmaceutical industry's demands.

Kim stated, “The most important direction of this reform is not prioritizing health insurance savings, but minimizing policy judgment factors and shifting to an evidence-based approach. We will strengthen predictability by uniformly standardizing the post-approval management cycle, procedures, and evaluation items.”

Furthermore, the Ministry clarified that the adjustment lowering the generic drug ceiling price to the 40% range in 2012 is a phased approach, starting sequentially with items already on the reimbursement list that have maintained a calculation rate of 50% or higher for over 13 years.

While interpretations vary within the pharmaceutical industry regarding whether this applies only to drugs listed in the 2012 reimbursement list, Kim emphasized, “The approximately 3,000 items that are priced between the 53.55% and 50% level, and the approximately 4,500 items between 50% and 45% level are based on the 2012 reimbursement list criteria.”

According to the government roadmap, approximately 3,000 items will be adjusted over 3 years starting in the second half of next year (2026). From the second half of 2027, the 1,500 items that maintained a rate of 45% or higher will be sequentially adjusted (reduced).

Regarding the industry’s biggest concern—whether generics listed after April 2012 will also face price cuts—Kim explained, “We will gather industry feedback, and as outlined in the reform plan, we intend to establish a periodic reassessment framework, which may be discussed in connection with this issue. No immediate reduction or specific schedule has been finalized.”

Kim further stated, “This restructuring should be viewed not as a policy differentiating global and domestic companies, but as a structural reorganization to ensure a stable supply of new drugs and essential medicines. Measures such as raising the designation criteria for exit-prevention drugs, adjusting the cost-compensation method, and providing incentives for using domestically produced raw materials are actions that broadly incorporate the pharmaceutical industry's research service results. Savings generated from the price cuts will ultimately return to benefit the domestic pharmaceutical industry.”

Kim concluded, “For areas not yet finalized, we will make decisions after collecting further opinions. For this, we will continue communication and consultation with pharmaceutical associations and experts.”