Multi-listing rule hits non-innovative companies harder

Innovative and quasi-innovative companies receive a 3-year grace period before 38.25% reduction

General companies cut immediately to 38.25%… falls to 30.6% without bioequivalence testing

The ‘multi-product listing management’ rule, introduced to prevent excessive proliferation of generics, will operate far more harshly against non-innovative companies.

While innovative and quasi-innovative companies will receive a three-year grace period, general companies will face immediate price cuts to 30.6%-38.5%, depending on whether they pass bioequivalence testing, leading to a significant widening of the price gap.

According to industry sources on the 18th, the impact of the multi-product listing penalty system, newly introduced starting this August, will differ dramatically depending on a company’s innovation classification.

Impact of the multi-product listing penalty system

The Ministry of Health and Welfare recently issued an administrative notice revising the “Standards for Drug Price Determination and Adjustment,” newly introducing a provision applying 85% of the calculated price once the total number of identical formulations reaches 14 or more. Drugs eligible for additional premiums will also be subject to the 85% rule once the premium period ends.

For innovative and quasi-innovative companies, the drug price premium period is 1+3 years if domestic manufacturing conditions are met. In other words, a 3-year grace period applies to the multi-product listing penalty as well.

In contrast, general companies face an immediate reduction from the standard calculation rate of 45% to 38.25% once the number of listed products exceeds 14. If they failed to conduct their own bioequivalence testing, the price is reduced by an additional 20%, falling to 30.6%.

For example, if a generic drug with an original product price of KRW 1,000 reaches 14 or more listed generics, an innovative company would maintain a price of KRW 600 won, reflecting a 60% premium, for four years before eventually dropping to KRW 382.5. A quasi-innovative company would maintain KRW 500 under a 50% premium for four years before dropping to KRW 382.5.

However, the generic drug of a general company would sell at KRW 450 for only one year under the standard calculation rate before falling to KRW 382.5.

This means that while innovative and quasi-innovative companies maintain prices of KRW 500–600 for three years by meeting domestic manufacturing requirements, general companies immediately face deteriorating profitability at KRW 382.5.

If an ordinary company additionally failed to meet the bioequivalence testing requirement, the price would fall to KRw 306, creating nearly a twofold price gap compared with innovative companies.

Ultimately, this structure ensures that the penalty for listing multiple products is applied more strictly to general companies, and a sales gap with innovative and quasi-innovative companies is inevitable during the grace period for the price adjustment.

In effect, general companies effectively lose the advantage of product listing after the 14th generic entrant, subject to the multi-product pricing rule, enters the list.