[Reporter's View] Multi-branded generics...1+3 regulation outcomes

Five years have passed since the South Korean government implemented the "1 (contract manufacturer) + 3 (consignment company) generic restriction regulation" to overhaul the proliferation of generic drugs and improve the domestic pharmaceutical industry's research and development (R&D) structure for novel drugs.

​By limiting the number of generic items that can be approved based on a single bioequivalence (BE) study dataset to one original contract manufacturer plus three consignment pharmaceutical companies, totaling four per dataset, the regulation created significant shockwaves across the pharmaceutical industry when first announced. At present, however, examining the domestic pharmaceutical market raises fundamental doubts about whether the structural proliferation of generic drugs has actually been resolved.  

​The primary cause is that previously listed generics approved before the implementation of the regulation were not subject to retroactive application, leaving the reality intact. Generics under '1+4 or more' co-development structures still account for nearly 80% of the market.  

Multi-branded generics under 1+4 or more that had already secured authorization and market entry before the policy's implementation continue to maintain their market shares undiminished.  

​As the Ministry of Health and Welfare (MOHW) implements its first generic drug price reduction policy in 14 years, price cuts are expected to apply across dozens of bundled generics, which is likely to alleviate the phenomenon of unrestricted market competition among multi-brand generics sharing the same active ingredient.  

​Now, political leaders and the government must focus their legislative and administrative efforts on reasonably shifting the 1+3 joint bioequivalence regulation to the modern standard.  

​This means considering the legislative need to tighten the 1+3 joint bioequivalence restriction to 1 or 1+1, while gathering feedback from the pharmaceutical industry on whether to partially relax the 1+3 rule for incrementally modified drugs (IMDs) and data-submission pharmaceuticals rather than simple generics.  

​One-dimensional regulatory enhancement aimed solely at reducing the sheer number of generics risks creating side effects that could sever the entry ladder for small and medium-sized enterprises (SME) or venture drugmakers, companies that may lack full in-house development capabilities yet possess proprietary formulation technologies or potential for incremental improvements to pursue novel drugs or IMDs.

​Regulation must evolve beyond simple headcount slashing into a "detailed and nuanced structural reform."  

​First, a categorized regulatory overhaul clearly distinguishing IMDs from simple generics is urgent. Subjecting IMDs, which demonstrate meaningful clinical improvements through fixed-dose combinations or formulation modifications, to the same joint bioequivalence and clinical trial criteria as standard generics undermines pharmaceutical R&D.  

A practical restructuring mechanism for previously listed generics must be established. Rather than stopping at simple caps on authorization counts, regulators must further refine differential drug pricing systems tied to Good Manufacturing Practice (GMP) compliance evaluations and self-conducted bioequivalence validation in connection with drug pricing system reforms.

​An economic incentive structure must be designed to encourage previously listed products that rely entirely on contract manufacturing with zero internal R&D investment to exit the market voluntarily.  

​As the generic drug price reduction policy goes into effect this month (August), the vast majority of domestic pharmaceutical companies are not exempt from the financial impact of across-the-board price cuts, which are dropping baseline rates from 53.55% to 45%.  

​To shift a distorted market environment where hundreds of generics are authorized per active ingredient and improve toward becoming a global novel drug powerhouse, detailed, surgical regulation that penetrates the domestic pharmaceutical landscape to separate genuine innovation from simple replication is essential. The MOHW and the Ministry of Food and Drug Safety (MFDS) must engage. They must build a well-balanced, multi-faceted administrative and policy roadmap capable of shaking the roots of the multi-brand generic structure.