New PVA operation system will be implemented from May

Price reduction rate will be differentiated according to the claims amount

Products with annual claims of less than KRW 3 billion will be excluded... Discount rate of products that have undergone 3 or more price cuts will be reduced by 30%

The detailed operation standards for the Price-Volume Agreement negotiations will change drastically from May.

 

The reduction rate will be applied differently depending on the amount of each drug’s insurance claims, and products with annual claims of less than KRWk 3 billion will be excluded.

 

In addition, the discount rate of drugs that have been subject to negotiations more than 3 times will be reduced.

 

The National Health Insurance Service (NHIS) announced on April 29 that it will completely reorganize the 'Detailed Operating Guidelines for Price-Volume Agreement Negotiations’ from May.

 

The PVA system adjusts drug prices through negotiation for drugs whose costs increased by a certain level and is a major post-marketing drug price management system used to manage drugs with a large financial impact.

 

Recently, the need to improve the system has emerged in order to prepare for the structural issue of drug costs continuously increasing due to the increase in high-priced drugs such as 'one-shot treatment drugs' and rapidly aging society.

 

To address the issue, the NHIS prepared the ground for improvement based on internal and external research and then organized a PVA system improvement council in 2023 with the MOHW and the pharmaceutical industry to come up with an effective and acceptable PVA system improvement plan.

 

In the revised guidelines, the reference formula is linked to the amount of insurance claims filed for each drug so that drugs with higher claims amounts would receive a higher reduction rate and drugs with lower claims amount would receive a lower reduction rate, compensating for the limitations in Korea’s current reference formula that only focuses on the increased usage rate.

 

In addition, the exclusion criteria that had been set at 'less than KRW 2 billion in claims’ was raised to 'less than KRW 3 billion in claims’ when conducting PVA negotiations to improve the efficiency of the system.

 

In addition, in order to create a sustainable and innovative pharmaceutical and bio-industry ecosystem and foster an environment that ensures a stable supply and demand of drugs, the government decided to reduce the reference formula reduction rate by 30% on the third round of negotiations if the same drug is subject to PVA negotiations 3 times within 5 years and is an innovative pharmaceutical company or a company with an R&D ratio of 10% or higher.

 

In addition, for drugs whose usage has temporarily increased due to unavoidable reasons such as the COVID-19 pandemic, the government introduced a 'one-time reimbursement agreement system' that refunds claims based on another reference formula reduction rate that is different from the existing price adjustment formula, expanding the pharmaceutical companies' options.

 

Director Hae Min Jung of the Department of Drug Management at NHIS said, "The NHIS has been overseeing the overall PVA system, from target selection through usage monitoring to drug price reduction, and saved an average of about KRW 40 billion of health insurance finances per year.

 

I expect the reform to result in additional financial savings of approximately KRW 10 billion per year.” He added, “We would like to express our gratitude to the relevant organizations, pharmaceutical industry, and related experts for their cooperation in coming up with the system improvement plan, and we hope that the organic cooperation between stakeholders will continue for our mutual benefit." The revised 'Detailed Operating Guidelines for Price-Volume Agreement Negotiations’ will take effect on May 1, 2024, and the revised guidelines will be applied to drugs that are being monitored or negotiated as of the effective date.