Gov't-Pharma meet for drug pricing system reform

The Ministry of Health and Welfare (MOHW) visited the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KBPMA) Board of Directors meeting and shared its direction and objective for the system reform

A proposal for drug pricing system reform is likely to be reported to the Health Insurance Policy Review Committee as early as this month

Detailed items, such as the generic drug pricing calculation, will likely be discussed at the end of the year

The Ministry of Health and Welfare (MOHW) and the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KBPMA) Board of Directors have shared the direction for the upcoming reform of the drug pricing system.

 

This initial meeting between the government and the pharmaceutical industry is expected to accelerate future discussions regarding the reform.

 

According to the pharmaceutical industry on November 19, MOHW officials, including Lee Joong-kyu, Director-General of the Health Insurance Policy Bureau, attended the KBPMA Board of Directors meeting on the afternoon of November 18.

 

It was the first meeting discussing the drug pricing system reform.

 

During the meeting, the fundamental objectives and broad direction of the reform were shared.

 

The government explained its policy to actively incentivize R&D investment by pharmaceutical and biotech companies and enhance access to new drugs.

 

It was also mentioned that an adjustment to the generic drug price criteria must be made.

 

Additionally, details on measures to stabilize the supply of essential medicines and to reorganize the post-market management system were shared.

 

With the reform's general direction now shared with the industry, there is anticipation that discussions regarding the drug pricing system overhaul will gain momentum.

 

The MOHW plans to finalize the draft reform plan based on the content shared at the meeting.

 

The relevant agenda is expected to be reported to the Health Insurance Policy Review Committee scheduled for November 28.

 

The discussions are expected to proceed after the Health Insurance Policy Review Committee report.

 

While the report will outline the overall direction of the reform, subsequent discussions regarding detailed aspects, such as the generic drug pricing calculation rate, are expected to continue with the pharmaceutical industry's working-level consultative body.

 

Considering the necessary procedures, a concrete outline of the drug pricing system reform is anticipated to emerge by the end of this year or early next year.

 

The government is reportedly contemplating several changes, including adjusting the generic drug pricing calculation rate, reforming the tiered drug pricing system, merging post-market management systems, expanding the Risk-Sharing Agreement (RSA) and Dual Pricing systems, and implementing drug price bonuses linked to R&D investment ratios.

 

First, there is a review to lower the generic drug calculation rate from the current 53.55% to below 50%.

 

Under the current system, the price of a generic drug is set at 59.5% of the original drug's maximum price for the first year of listing, and this price is lowered to 53.55% thereafter.

 

To receive the 53.55% rate, companies must meet both conditions: conduct their own 'bioequivalence test' and use a 'registered Active Pharmaceutical Ingredient (DMF)'.

 

If only one condition is met, the price is reduced by an additional 15% (to 45.52% of the original price).

 

If neither condition is met, it is reduced by another 15% (to 38.69% of the original).

 

The government judges that the current 53.55% calculation rate is too high.

 

Although the specific adjustment range has not been disclosed, industry forecasts suggest the rate could drop to around 40%.

 

The tiered drug pricing structure is also an item for reform.

 

Currently, the 53.55% rate applies to the first 20 generics listed, after which the price is reduced by 15% sequentially.

 

Regarding this, there is discussion about narrowing the listing bracket from the current 20th generic to around the 10th, while simultaneously easing the drug price reduction rate to below 15%.

 

The post-market management systems are expected to be merged and reorganized.

 

This addresses criticism that various systems, such as the Actual Transaction Price-Based Drug Price Reduction, the Drug Reimbursement Appropriateness Re-evaluation, and the Price-Volume Agreement, operate in a complicated manner, reducing predictability.

 

Discussions about integrated systems are expected to begin soon after the 'Research on a Integrated Mechanism for Post-market Drug Price Management' results are released.

 

The drug price incentive system is likely to be reorganized to link preferential treatment to each pharmaceutical and biotech company's R&D investment ratio.

 

An official from the pharmaceutical industry stated, "The government is clearly communicating that the market centered solely on generics has limitations for growth," and added, "I understand that discussions are proceeding toward simplifying the system and ensuring compensation for corporate innovation."