'Rebate points deduction system' has been stalled

MOHW delays its plan to implement the revision of Innovative Pharmaceutical Company Certification System, initially scheduled for JAN

Concerns over condoning illegal activities and easing the regulatory system…views for strengthening the criteria for penalty period·deduction

Minister of Health and Welfare Jeong Eun Kyeong says, "MOHW is reviewing the drug pricing system revision proposal as well as the Innovative Pharmaceutical Company Certification System revision"

The revision of South Korea's Innovative Pharmaceutical Company Certification System, which the Ministry of Health and Welfare (MOHW) is pursuing to foster the Korean pharmaceutical industry, is stalling.

 

This is likely due to arguments for and against 'conversion to a rebate scoring system.' Following agreement with the pharmaceutical industry, the MOHW had tentatively finalized a revision to switch the 'one-strike-out' rule for innovative pharmaceutical companies caught giving illegal pharmaceutical rebates to a 'points deduction system.' However, due to recent concerns about revising the scoring system, the MOHW has yet to decide.

 

The MOHW is criticized by opponents who argue that the current one-strike-out rule is a "poison clause" and an excessive·dual regulatory burden for companies penalized for past rebate incidents.

 

In contrast, the counter-argument is that it is illogical to grant the Innovative Pharmaceutical Company designation, along with tax and drug price benefits, to unethical and unlawful pharmaceutical companies.

 

Some in the pharmaceutical industry even express concern that the conversion of the rebate penalty rule from a penalty to a points system, which had been discussed positively by the Yoon Suk Yeol administration until the inauguration of the Lee Jae Myung administration, might not be pursued.

 

The MOHW is internally reviewing the final proposal and the timing for the administrative pre-announcement of the certification system on November 2.

 

MOHW delays the administrative pre-announcement for revision from October The MOHW had planned to complete the administrative pre-announcement procedure for the certification system revision last month (October), aiming for implementation in January of next year.

 

Specifically, this involved amending the 'Regulations on the Certification of Innovative Pharmaceutical Companies (Notice)'.

 

However, the ministry failed to proceed with the notice revision because it could not reach an internal conclusion on provisions such as converting the penalty for revision-violating pharmaceutical companies to a points deduction system.

 

Consequently, the administrative pre-announcement of the revision was delayed, making the planned January implementation of the revision impossible.

 

Pharmaceutical companies caught giving rebates, dispute over certification The point of the argument is a regulatory proposal that would ease penalties for innovative pharmaceutical companies that previously provided illegal drug rebates.

 

This involves differentiating and converting the current standard, which immediately revokes the designation, to a lesser penalty, such as a '10-point deduction'.

 

Pharmaceutical companies have long maintained that the Innovative Pharmaceutical Companies system, intended to encourage domestic new drug R&D and increase the potential for new drug creation, is burdened by excessive regulation that allows the certification to be revoked instantly for a debate violation.

 

The MOHW had tentatively decided to partially reflect the pharmaceutical industry's views by abolishing the one-strike-out rule and changing the disqualification criteria to a scoring system that would deduct points from companies' scores for rebates.

 

A 10-point deduction during the certification review for a company found to have provided rebates was highly likely.

 

This decision by the MOHW was made during the Yoon administration, and according to the original plan, the reform, which included converting the rebate penalty to a points system, should have been finalized and revised during the first quarter of this year.

 

However, the situation surrounding the revision changed with the transition of government.

 

The argument gained traction that the conversion to a points system could have a negative effect, softening vigilance against illegal drug rebates or hindering the deterrent effect against unlawful activities.

 

Accordingly, Vice Minister of Health and Welfare Lee Hyung-hoon and others were reportedly instructed to review and reconsider the detailed proposal for the rebate points deduction system.

 

Will the scoring system be abandoned? The conversion of the rebate penalty to a points deduction system is an administrative reform strongly requested by domestic and international industry stakeholders.

 

With news emerging that the MOHW is struggling with the transition to the points system, some parts of the pharmaceutical industry are even speculating that the conversion of the rebate penalty might be abandoned entirely.

 

The pharmaceutical industry is considering the possibility that the MOHW may set more specific, stringent criteria for the 10-point deduction proposal.

 

For instance, some in the pharmaceutical industry anticipate that the current regulation will be further refined into a cumulative strike-out system, where the deduction points would be increased based on the number of violations and the amount of rebates: a 10-point deduction for the first violation, 15 points for the second, and certification revocation for the third.

 

Another side of the pharmaceutical industry predicts that the transition to a points deduction system will be abandoned.

 

This is due to prevailing social opposition, which argues that implementing the reform could grant re-certification opportunities to pharmaceutical companies whose certification was previously canceled due to rebates (despite the penalty period), which would be socially unacceptable.

 

In fact, during this year's parliamentary inspection, Democratic Party Rep.

 

Kim Yoon had planned to question the CEO of a domestic pharmaceutical company as a witness regarding the appropriateness of granting re-certification opportunities and associated benefits to companies involved in rebates, but the subpoena for the witness was later withdrawn.

 

There is also an argument for implementing the rebate deduction system, but applying the one-strike-out rule (revocation of certification) only to pharmaceutical companies that provide rebates after the new system's introduction date.

 

This logic attempts to reflect the claim that revoking certification based on old illegal rebate incidents is overly archaic and excessive regulation, while still securing a deterrent effect against future rebate activities.

 

The certification system revision, which appeared to be progressing smoothly, has encountered an unexpected barrier, drawing the attention of both the pharmaceutical and healthcare sectors toward the MOHW's administration.

 

An official from a mid-sized domestic pharmaceutical company said, "It's true that there were strong complaints that the rebate revocation rule contradicted the purpose of the Innovative Pharmaceutical Company Certification System, which is to expand benefits for R&D-focused pharmaceutical companies." He added, "I understand that the MOHW accepted this, decided to switch to a points system, and even went through the deliberation of the MOHW.

 

However, the administrative delay, coupled with the change in administration and the appointment of new ministers, altered the atmosphere." The official added, "The MOHW is reconsidering because of the growing perception that the conversion to a rebate deduction system could be viewed externally as regulatory easing that partially condones illegal activities by pharmaceutical companies." He said, "We cannot rule out the possibility that the points system transition will be abandoned.

 

Even if the conversion proceeds, we hear that the direction will likely be to clarify the disqualification criteria for companies whose certification has already been revoked or to increase the severity of the deduction penalties." Minister of Health and Welfare Jeong Eun Kyeong stated during this parliamentary inspection regarding the revision, "The MOHW is internally reviewing the comprehensive drug pricing system revision proposal as well as the Innovative Pharmaceutical Company Certification System improvement plan."