Referencing lowest A8 price will result in a supply crisis

Canada still on the list of reference countries...should be excluded because it is not a new drug development country

Price of generic drugs in Korea is at mid-level among A7 countries...research report "difficult to say that Korea’s drug price is high"

Health authorities stick to the lowest listed price vs. industry requests average of the highest listed price

Health authorities and the pharma-bio industry are at an impasse over the implementation of 'A8 external reference pricing reassessments.’ Engaged in a tug-of-war, the two parties have difficulty finding common grounds.

 

The Ministry of Health and Welfare, the Health Insurance Review and Assessment Service, the Korea Pharmaceutical and Bio-Pharma Manufacturers Association, and the Korea Research-based Pharmaceutical Industry Association, have been meeting since the end of 2022 and have completed the 5th round of negotiations as of this month, but they have been unable to reach a consensus, with each being busy making mutual claims.

 

The ‘reassessment for the A8 external reference pricing system’ was proposed to add Canada to the existing list of A7 countries (U.S., U.K., Germany, Switzerland, Italy, France, and Japan) as a detailed reference point for drug price reevaluations.

 

During initial discussions, there was talk of expanding the number of countries to A9, to include Australia and Canada, but Australia was removed due to strong public opinion that the 2 countries with the lowest drug prices were selected to cut prices.

 

The issue that remains in the restructured external reference pricing system is that health authorities are sticking to using the lowest listed prices among A8 countries, while the industry believes using the average of the highest listed price is best.

 

The average and median values, excluding the upper and lower extremes and U.S.

 

drug price, are also considered options but are not on the table.

 

Following a comprehensive discussion process scheduled for the end of next month, health authorities are now looking to implement the program as soon as 2025 after an appeal process in the middle of this year.

 

Initially, the A8 external reference pricing system was planned to be applied only to diabetes, hypertension, and hyperlipidemia drugs, but there always remains a possibility that it could be extended to virtually all drugs, including anticancer drugs.

 

If the health authorities adhere to their original proposal, the ramifications of its megatonne drug price cut are self-evident.

 

Moreover, it is likely to add fuel to the fire of essential drug supply disruptions that arose due to the unstable price of drug substances due to the aftermath of the COVID-19 pandemic and the Ukraine-Russia war.

 

In addition, the A8 drug price reference countries do not have a large number of data submission drugs or salt-modified drugs compared to Korea, therefore major price cuts for these drugs are also expected.

 

An industry insider said, "Following the bulk drug price reduction in 2012 and the linkage of drug prices upon fulfillment of the ‘self-bioequivalence tests-DMF registration' requirement in 2019, there is a lack of objective basis for conducting drug price cuts using reference countries overseas that is currently being planned by the health authorities.

 

Imposing such a policy is nothing short of an invasive act against domestic medicines and could lead to a serious industry contraction." As it is common for drug prices to be determined by taking into account all the specificities of the country's economy, society, and culture, therefore, it is not common sense to use the low drug prices set in one or two countries as a reference or standard.

 

In addition, according to some research service data, Korea's generic price is 53.55% of the original price, ranking fourth among OECD countries, so it is difficult to say that Korea has a high drug price structure.

 

The drug price reevaluation using the A8 external reference pricing system had been sparked by a booklet that had been published by Canada’s Patented Medicine Price Review Board, which was released at the 2022 National Assembly Audit, but the booklet seems to be an intuitive interpretation that is far from a precise report, as it lacks the correction values of domestic new drug and generic drug prices at that time and now.

 

In other words, concluding that domestic generic drug prices are higher than those of external reference countries is highly likely to cause distortions in the drug pricing system, as it does not consider how the generic drug prices were set to the high insurance drug prices the multinational pharmaceutical companies received at the time of initial listing.

 

Another industry insider said, "There is a strong sentiment that we should expand the drug price referencing to Canada and use it as a reference point for reevaluation.

 

If the application of the system is expanded to include new drugs introduced from abroad and homegrown new drugs, this may not only discourage R&D efforts but also deprive patients of the right to treatment."