[Desk's View] Regulatory changes disrupt the generic mkt

The strategies of Korean pharmaceutical companies for entering generic markets have significantly changed over the past few years.

 

Pharmaceutical companies made entries and withdrawals indiscriminately because of the government's regulatory changes.

 

According to the Ministry of Food and Drug Safety (MFDS) report, prescriptions with approval declined by 35.6%, with 589 items.

 

Compared to 4,195 counts in 2019, it shrunk by 86.0% over 4 years.

 

The number of prescription drug approvals was 1,618 counts and 1,562 counts in 2017 and 2018, respectively.

 

In 2019, it surged more than two-fold, with 4,195 counts.

 

In 2020, it increased by 67.5% than two years before, with 2,616 counts.

 

In 2021 and 2022, it decreased to 1,600 counts and 1,118 counts, respectively.

 

In 2023 and last year, it was less than 1,000 counts.

 

Although it may seem that pharmaceutical companies' motivation for entering the prescription drug business has decreased, the reality is that government has created regulatory confusion.

 

In 2018, there was a ban on the sale of 175 pharmaceutical products containing the active ingredient valsartan, used to treat high blood pressure, due to excessive impurities.

 

In response, the Ministry of Health and Welfare (MOHW) and the MFDS established the "Committee for Improving of Generic Drugs Policies" to formulate measures to control the excessive production of generics.

 

The revised drug pricing system, implemented in July 2020, is one of the major policies by the government to suppress the overabundance of generic drugs.

 

The revised drug pricing system requires generic products to meet both bioequivalence testing and the use of registered raw materials to maintain a maximum reimbursement price of 53.55% compared to the current patent-expired original drugs.

 

The revised drug pricing system includes a stepwise pricing system, which involves a lower maximum reimbursement price for drugs that are newly listed for reimbursement.

 

Pharmaceutical companies attempted to secure as many generics as possible before the government strengthened its regulations on generic drugs.

 

It has been reported that most generics eligible for approval had already been obtained before implementing the new drug pricing system.

 

However, many indiscriminately introduced generics failed to sell and eventually vanished from the market.

 

In November last year, 1,000 drug items were removed from the National Health reimbursement list due to a lack of production or claims.

 

Health authorities have recently been deleting drugs from the reimbursement list if there have been no insurance claim records in the past two years or if there has been no production or import data for three years.

 

Among these 1,000 removed items, those approved in 2000 and 2019 were the most prevalent, accounting for 334 and 187 items, respectively.

 

In other words, over half of the deleted drugs were new products on the market for less than five years.

 

On May 1, 2023, 322 drug items were removed from the reimbursement list, with those approved in 2019 and 2020 were 221 items, which accounted for 68.6% of the total.

 

The government’s regulatory strengthening encouraged pharmaceutical companies to obtain generic approvals indiscriminately, accelerating market saturation.

 

Ultimately, many of these generics failed to sell, disappearing from the market while only losing unnecessary approval costs.

 

Since 2021, the number of prescription drugs withdrawn from the market has exceeded the number of new approvals.

 

Between 2015 and 2020, the annual approvals of new prescription drugs consistently outnumbered the products withdrawn.

 

In 2015, there were 2,406 newly approved prescription drugs, more than twice the 977 canceled or withdrawn products.

 

In 2016, new approvals were more than three times the number of withdrawals.

 

In 2019, however, canceled or withdrawn products reached 1,283, amounting to only 30.6% of new approvals, and in 2020, new approvals exceeded market withdrawals by 691 products.

 

In 2021, the number of canceled or withdrawn prescription drugs increased to 1,687, surpassing the 1,600 new approvals, and this gap gradually expanded.

 

Last year, market withdrawals increased to 2,432, more than four times the 589 newly approved products.

 

Analysis suggests that pharmaceutical companies indiscriminately secured generics in response to the government’s regulatory strengthening without thinking of countermeasures, disappearing in mass quantity from the market after a certain period, ultimately leading to significant social and economic cost waste.

 

Additionally, critics point out that the government’s frequent regulation changes have exacerbated the abundance of generics and caused strategic confusion among pharmaceutical companies.

 

In 2012, the MOHW abolished the stepwise drug pricing system through a revision.

 

After that, it allowed pharmaceutical companies to actively launch generics, even in markets long past patent expiration, on the premise that they could still receive high prices despite a late market entry.

 

However, due to the ongoing issue of the abundance of generics, the stepwise pricing system was reinstated after 8 years.

 

Moreover, the mandatory production requirements for contract-manufactured generics have been repeatedly reversed.

 

In 2014, the MFDS introduced the 'GMP Compliance Certificate' system, which exempted contract-manufactured generics from the requirement to submit GMP evaluation data for approval purposes.

 

Then, starting in October 2022, the requirement for submitting GMP evaluation data for contract-manufactured generics was reinstated to strengthen quality and safety management.

 

Yet, in October of last year, the requirement for GMP evaluation data covering the manufacturing process for outsourced drugs was waived again under regulatory relaxation.

 

In response to the government's regulatory changes, pharmaceutical companies strategized to maximize profits, further disrupting the market.

 

The government is partially responsible for failing to anticipate the market impact of these regulatory changes.

 

Implementing policies aimed solely at suppressing the overabundance of generics without understanding market dynamics has resulted in unnecessary social costs.

 

Government policies do not always yield favorable market outcomes.

 

We want to ask whether the government has considered reviewing the generic-related policies implemented over the past few years.

 

Their efforts failed to identify any positive outcomes from these regulatory changes.

 

It has been reported that the government is considering a new system to cut generic drug prices.

 

The government reviews the proposal to lower domestic drug prices by comparing them with those in eight major countries (the United States·Japan·Germany, the United Kingdom·France·Switzerland·Italy·Canada).

 

They plan to adjust domestic prices to match the adjusted average price derived from six countries after excluding the highest and lowest figures among the so-called A8 nations.

 

The pharmaceutical industry has strongly opposed this.

 

The rationale is it's reasonable to consider market entry timing when comparing generic drug prices internationally.

 

However, whether the government will hear the industry's concerns remains uncertain.

 

There is a growing fear that, once again, a one-sided policy will be imposed, ignoring the warnings from the pharmaceutical industry.

 

To minimize the failure of the government's policy, the government should at least listen to the voices of the industry.