Gvn’t ‘No blanket drug price cuts will be made’

MOHW to reduce prices of 4,500 drugs by 40% by 2029... “Saving KRW 1 trillion in drug costs”

Industry: “Invested directly in bioequivalence studies to maintain 53.55% drug prices... We are not making excessive profit”

Joong-kyu Lee, ‘Eliminate public anxiety by actively substituting essential medicines and exit-prevention drugs.”

Yeon-sook Kim (Director of the Pharmaceutical Benefits Division), Joong-kyu Lee (Director-General for Health Insurance Policy), and Gi-heon Bae (Deputy Director, Pharmaceutical Benefits Division) from MOHW explained the details and intent of the drug price reform plan. 

"During the blanket drug price reduction, prices of approximately 6,000 items were cut. Since then, 13 years have passed, and 4,500 items have either not been reduced at all or only reduced to 45% from 53.55%. Starting next year, the price reductions will be made over the next 3 years to these 4,500 items. There is little room for debate about price cuts over these listed generics since they've been generating excessive profits for over a decade. The remaining 15,000+ already-listed generics are not targets for this price reduction. We plan to review the other listed generics only after completing the adjustment process for the initial 4,500 items. ‘Reviewing’ does not mean we intend to cut their prices."

As the government unveiled a plan to lower the generic price rate from 53.55% to the 40% range of the original drug’s price, it confirmed that prices of 4,500 pre-listed generics will be cut first when the reform is implemented in the second half of next year (July). The expected savings in National Health Insurance drug expenditure from this measure amount to KRW 1 trillion.

Based on the 6,000 items subject to the 53.55% blanket generic price reduction applied in 2012, the plan targets 3,000 items whose prices have barely decreased (maintaining 53.55%~50%) since then up to the present (2025), and 1,500 items that saw only a slight decrease (maintaining 50% to 45% range). The plan is to reduce prices to the 40% range over 3 years, targeting only these items.

For the 3,000 generics maintaining prices between 53.55% and 50%, adjustments will begin next year (2026) and will be reduced to the 40% range by 2028. The 1,500 generics in the 50% to 45% range will begin adjustments the year after next (2027) and be reduced to the 40% range by 2029.

The government has clearly stated that it will not reduce the prices of generics listed from April 2012, when the blanket price reduction for generics began, to July next year, when the reform plan takes effect, at least until the price adjustments for 4,500 items are completed.

However, starting in 2030, when the price reduction process for the 4,500 items concludes, the government intends to establish a mechanism to periodically review generics listed between April 2012 and June 2026 to assess the need for price adjustments.

On the 30th, Joong-kyu Lee (Director General for Health Insurance Policy), Yeon-sook Kim (Director of the Pharmaceutical Benefits Division), and Gi-heon Bae (Deputy Director, Pharmaceutical Benefits Division) held a briefing with the MOHW press corp to explain the sequential adjustment plan for pre-listed generics.

• 4,500 drugs to see 40% price cuts by 2029... “KRW 1 trillion in drug cost savings”

The Ministry expects that reducing the prices of 4,500 existing generic drugs by around 40% over the next 3-4 years, starting next year, will yield savings of approximately KRW 1 trillion in National Health Insurance finances.

Lee explained, “These 4,500 generics have kept their prices unchanged for more than 10 years since 2012 and have enjoyed excessive profits. The need for reduction is hardly disputable.”

Simply put, since this generic drug price reduction targets only 4,500 items out of the 6,000 that underwent a blanket price reduction in 2012, it is unlikely to provoke significant backlash from the domestic pharmaceutical industry. It's essentially saying, ‘These generics deserve the cut.’

But the Korean pharmaceutical industry strongly disagrees.

They argue that maintaining the 53.55% price level required real investment efforts, such as conducting their own bioequivalence tests and registering DMFs (Drug Master Files), and meeting various regulatory criteria. Therefore, criticizing the price as excessive profit and cutting it simply because it wasn't reduced amounts to the Ministry of Health and Welfare itself, negating the tiered pricing system it has set standards and requirements for.

Moreover, while the price reduction mechanism for multinational pharmaceutical companies focused on original products converges to zero, the Ministry announced it would accept systems favored by multinationals—such as the flexible pricing contract system that allows different listed and actual transaction prices, and the differential pricing system by indication. This has led to cynical reactions within the pharmaceutical industry, including “a reform plan that cuts domestic generic drug prices while further bolstering prices for imported originals.”

• Lee Jung-kyu: “The focus of the reform plan is on rewarding innovative R&D, not restructuring generics.”

Director-General Lee emphasized that the reform plan's significance lies in encouraging innovative new drug R&D (research and development) rather than restructuring domestic pharmaceutical companies or domestic generics. He stressed that it aims to overhaul the drug pricing system into one that “favors as hard as possible” the drug prices for companies developing and producing medicines with unstable supply, namely essential medicines and market exit prevention drugs.

He specifically clarified that at the current phase, the government is not considering price reduction mechanisms for generics listed between April 2012 and June 2026. This does not mean the prices of these existing generics won't be cut, but rather that after reducing prices for the initial 4,500 drugs, the necessity for further reductions will be discussed and considered with the pharmaceutical industry.

The implication is that plans for handling the prices of these existing generics, which were not touched this time, will be determined gradually going forward.

Domestic pharmaceutical companies maintain that retroactively applying the 40% generic drug price reduction reform to listed generics is unreasonable. Should the Ministry of Health and Welfare proceed with adjusting prices for generics listed since 2012, industry backlash is expected to be even stronger than it is now.

Lee stated, “Currently, generics approved in 2012 are the target for price reductions. The 15,000 generics listed afterward will be reviewed later. This does not mean we intend to reduce prices periodically. It means we will thoroughly review the status of all generics listed in Korea.”

He further emphasized, “The fact that 4,500 generics either maintained their prices at the 53.55% level or saw reductions of only up to 45% might warrant an audit from the perspective of the Ministry of Health and Welfare's National Health Insurance Policy Bureau and Pharmaceutical Benefits Division. We will regulate generics that have not seen price reductions for over a decade and have generated excessive profits.”

Lee stated, “In 2012, the specific goal was to unilaterally reduce generic drug prices across the board. Yet, the amount of reduction made was not significant. This reform is not about restructuring generics; the policy direction is to properly support pharmaceutical companies excelling in new drug R&D and stable supply. It is an administrative measure to naturally reduce the prices of simple generics and incentivize their elimination from the market.”

• Preferential pricing for essential drugs, exit-prevention drugs, and domestic raw materials is also being discussed… “Active substitution to relieve public anxiety”

To incentivize R&D, the reform links pricing with the “Korea Innovative Pharmaceutical Company” certification—the top 30% of certified companies by R&D-to-sales ratio will receive additional benefits. MoHW also emphasized support for companies producing essential medicines and exit-prevention medicines.

Lee, Kim, and Bae all explained that efforts were also made to include measures to revive the struggling domestic raw material industry within the drug pricing system reform plan. 

Lee stated, “We hope it will be effective, but it is difficult to predict whether the essential drugs, withdrawal prevention drugs, and domestic raw materials sectors will function properly once the actual reform plan is implemented. We deliberated on creating a drug pricing system that benefits domestic raw material pharmaceutical companies, though some already consider it too late. For now, we will establish a system to protect the domestic industry from a public health security perspective.”

Lee specifically outlined a vision to support the smooth prescription and dispensing of unstable-supply drugs on-site, alongside the drug pricing system reform.

Specifically, the Ministry of Health and Welfare plans to use prescription-related systems to notify about supply instability and guide substitution with equivalent drugs within the list.

Furthermore, the Ministry will establish the legal basis for building and operating a public information system to support post-prescription information sharing between pharmacists and physicians for smooth substitution dispensing, and will also build the information system itself.

Lee stated, "When drugs with unstable supply are monitored, we will take administrative action to ensure substitution dispensing occurs actively. Doctors only prescribe the specific drug they intend, and when that drug runs out, they tell the media there's no medicine available. This creates a problem where the public feels anxious even when substitute drugs exist. We have focused significant effort on preventing such situations, ensuring a stable supply of essential medicines, and establishing a supply safety net to avoid triggering public anxiety."