[Desk’s View] Compensate for the value of novel drugs

that were developed in Korea by raising its price

The Ministry of Health of Welfare plans to soon announce an appropriate compensation plan for the innovative value of new drugs, including novel homegrown drugs.

 

The health authorities’ plan is to deliberate its plan by the Health Insurance Policy Review Committee within the month and release the results to the public soon.

 

The domestic pharmaceutical industry is hoping that this measure will provide additional points to non-inferior new drugs.

 

Non-inferior new drugs contain new active ingredients and have proven to be non-inferior to existing drugs.

 

Most new drugs developed in the domestic pharmaceutical industry fall into this category.

 

The novel homegrown drugs, No.

 

36 'Envlo Tab,' No.

 

34 'Fexuclue Tab,' and No.

 

30 'K-CAB' have all demonstrated their noninferiority to existing drugs in clinical trials.

 

However, the insurance price ceiling for these drugs had been set below the weighted average price of their alternatives because they were unable to demonstrate superiority over existing drugs.

 

As a result, the price of Envlo Tab was set below 90% of previously released SGLT-2 inhibitors in the same class, and Fexuclue Tab was priced below the weighted average price of previously released P-CAB class drugs and PPI class drugs.

 

K-CAB, which was listed with reimbursement in March 2019, was able to receive a relatively high price as it had benefitted from the ‘global innovative new drug pricing premium’ that was applied at the time.

 

However, the preferential pricing plan for global innovative new drugs arose as a discriminatory element during the Korea-US FTA negotiations and was nearly non-existent at the time.

 

The pharmaceutical industry has been criticizing how the current price calculation method for domestically produced new drugs is not sufficient to compensate for the industry’s new drug development efforts.

 

The MOHW’s compensation plan for the innovative value of new drugs under review this time is the result of the continuous efforts of the domestic industry that has continuously raised the need to provide preferential pricing for domestically produced new drugs.

 

In 2013, the MOHW reported to the National Assembly that the development of a domestic new drug costs an average of KRW 22.2 billion and takes 9 years and 8 months.

 

As these results were from 10 years ago, the average cost of new drug development would have only increased further since then.

 

In Korea, where drugs are covered by health insurance, companies need to receive a high insurance drug price to make up for the enormous costs of developing new drugs.

 

The companies can determine when they could retrieve their investment according to drug price.

 

Moreover, as the companies that developed the homegrown new drugs seek to expand overseas after initial release into the domestic market, it is beneficial for the companies to receive a high insurance price for their drugs in Korea, as it will serve as a future reference price for their price abroad as well.

 

Above all, if the government wants to foster and improve the competitiveness of Korea’s pharmaceutical industry, it has to provide preferential treatment to these homegrown new drugs.

 

The profit margins of the domestic pharmaceutical industry have been dropping significantly as generic drugs, which had been the main driver of the industry until now, are not making enough profit as they are constantly subject to price cuts to ensure the financial soundness of the National Health Insurance.

 

The losses arising from the price ceiling reevaluations that were conducted this time are expected to amount to KRW 300 billion.

 

In this environment, who would want to develop a new drug and suffer the huge amount of costs incurred?

 

If lowering the price of generic drugs, which companies depend on to fund new drug development, is inevitable, the value of new drugs must be recognized to create a virtuous cycle that encourages new drug development.

 

In addition to providing preferential drug pricing at the time of initial listing, the government should fully compensate for the value of homegrown new drugs by ensuring that the prices are not later reduced through post-marketing control measures such as price-volume agreements.

 

We need new drugs to raise the competitiveness of the Korean pharmaceutical industry in overseas markets.

 

If the government has set its sights on fostering homegrown new drugs, it should focus on what it needs to support and stop being indecisive.