Korea’s Innovative Pharmaceutical Company certification overhaul

Director Kang-seop Lim: “Legislative notice for the Korea Innovative Pharmaceutical Company certification to come in early February… points system undecided”

Importance rises as scheme links to drug pricing reform… industry on high alert

Director Kang-seop Lim

Attention is focused on how much the domestic pharmaceutical industry's request for rationalization of the ‘one-strike-out’ rebate regulation will be reflected in the reform plan for the Korea Innovative Pharmaceutical Company certification system, for which a legislative notice is being prepared by the Ministry of Health and Welfare within February.

The MOHW has gathered extensive industry feedback on the current rule mandating the immediate revocation of innovative certification for companies found guilty of illegal rebates. Based on this input, the ministry plans to partially modernize regulations that could excessively hinder innovation in the pharmaceutical industry.

However, regarding the previously discussed proposal to shift from immediate revocation to a points-based penalty system for rebate violations, the MOHW said it remains cautious and has not yet reached a decision.

On the 1st, Director Kang-seop Lim of the Pharmaceutical and Bio-Industry Division met with the Ministry of Health and Welfare's press corps and explained, “We will announce the legislative notice for the enforcement decrees, enforcement rules, and notices related to innovative pharmaceutical companies by February at the latest.”

The overhaul of the Korea Innovative Pharmaceutical Company certification system has emerged as a key issue for the industry, as it will operate in line with the drug pricing reform scheduled for implementation this year.

Under the proposed drug pricing reform, price premiums would be applied depending on whether a company is certified as an innovative pharmaceutical company and the proportion of R&D investment in new drugs within such companies.

Regarding the industry’s primary demand of converting the immediate revocation of innovative certification for rebate violations to a points-based system, Lim said, “This is still under discussion, and no decision has been made.”

However, Lim explained that the ministry is preparing the reform plan in full consideration of the industry's persistent demand that the current penalty, where innovative certification is immediately revoked upon confirmation of a rebate incident, is excessively harsh for pharmaceutical companies dedicated to innovation, including new drug development.

As the importance of the certification system has grown significantly with the upcoming drug pricing system reform, Lim explained that the ministry is particularly examining the feasibility of introducing several of the improvement measures requested by pharmaceutical companies.

Overall, the MOHW is expected to pursue an administrative approach that maintains a certain level of penalties for unfair pharmaceutical trade resulting from illegal rebates, while improving regulations that excessively revoke or withdraw innovative certification based on overly stringent standards.

According to industry sources, discussions are underway on rationalizing elements such as the period of application for penalties imposed on companies involved in rebate violations within the legislative and administrative notice.

Lim said, “Pharmaceutical companies have repeatedly requested that the criteria for revoking innovative certification due to rebate violations be made more reasonable than they are now. We are internally reviewing measures that can both partially accommodate industry demands while continuing to regulate illegal rebates.”

He added, “The decision on whether to adopt a points-based system is still under discussion. Currently, a rebate violation immediately renders a company ineligible as an innovative pharmaceutical company, leading to automatic revocation of certification. We are considering various options to improve this framework in a more rational way. By early February, we must simultaneously announce draft amendments to the enforcement decree, enforcement rules, and public notices. We will prepare a revised innovative certification scheme that enhances predictability for pharmaceutical companies.