Biannual post-listing price cuts to be made

Starting in 2027, the implementation cycle will be revised, including PVA drugs

Actual transaction price–based mandatory cuts removed → Expanded incentives to induce price competition

Uniform markup for generic drugs to be abolished in the second half of next year... Generics likely to focus registrations in the first half of the year

Price reductions under the post-listing management system, including price-volume agreements, will be consolidated into twice-yearly adjustments, significantly reducing uncertainty over price fluctuations.

However, with the reduced frequency, large-scale price adjustments in both the first and second halves of the year have become inevitable.

While the practice of lowering drug prices after actual transaction price investigations—a longstanding industry grievance—will be abolished, the incentive for low-price purchases will increase 2.5-fold, potentially triggering cutthroat bidding competition in large hospital tenders.

The Ministry of Health and Welfare (MoHW) announced its drug-pricing reform plan on the 28th and will collect opinions through Q1 next year before implementing changes in July. Dailypharm reviewed how the reform, especially the post-listing management restructuring, will affect the field.

Post-management overhaul: Drug price cuts in April & October... will reduce uncertainty but bring larger-scale adjustments

Frequent drug price reductions under various post-management systems caused confusion in the field.

Going forward, the timing for post-management price adjustments will be fixed annually in April and October, making it easier for the field to prepare for price changes.

Even within the PVA system, reductions previously occurred at different times depending on the category (A/B/C), leading to complaints about constant adjustments. Price cuts driven by increased utilization after indication expansion or reimbursement expansion were also applied on a rolling basis throughout the year.

Starting in 2027, the consolidation to twice-yearly adjustments is expected to eliminate these complaints. However, since drug price adjustments will be reduced to once per half-year (first and second half), large-scale reductions will be unavoidable each time.

From the pharmacy's perspective, while the confusion caused by the unpredictable timing of price reductions will be resolved, the workload is expected to increase with adjustments occurring only once per half-year.

The actual transaction price cut will be eliminated because the government views the administrative burden as excessive relative to the benefit. Instead, the incentive for low-price purchasing will increase from 20% to 50%, with the intent of inducing price competition that naturally lowers transaction prices.

While the industry welcomes the abolition of actual transaction price reductions, it expresses concern over the incentive expansion policy. This is because, considering the de facto dominant-subordinate relationship between large hospitals and pharmaceutical/distribution companies, adverse effects are anticipated.

If the incentives received by medical institutions increase by approximately 2.5 times, the demand for lower prices will grow, and the industry fears an increase in cutthroat competition where losses must be absorbed.

The industry's primary demand is for supplementary measures, such as minimum price floors and eligibility review systems.

Preemptive measures for 2012 adjusted drug price reductions... Companies with post-2013 listings express anxiety

The government will take preemptive action on products that have maintained the 53.55% price level for 13 years since the 2012 blanket reduction.

If the reform is finalized as is, HIRA will select eligible products among the 6,500 that were reduced in 2012, review them, and begin applying new price cuts.

The following are excluded from the price reduction targets: ▲ Drugs receiving premium pricing ▲Exit-prevention drugs, low-cost drugs, and orphan drugs ▲ Drugs listed exclusively ▲ Drugs whose prices have increased in the last 5 years due to supply instability ▲ Basic infusion solutions and radiopharmaceuticals ▲ Oxygen and nitrous oxide.

Pharmaceutical companies holding items listed since 2013 are also excluded from immediate measures, but they worry the government might expand the scope of price reductions.

Furthermore, in the second half of next year, the uniform surcharge for generic drug listings will be abolished, replaced by a differential surcharge based on innovation and contribution to supply stability. As the first half of the year represents the last opportunity for listing, applications are expected to flood in during the first and second quarters.

Moving forward, the R&D-to-sales ratio will become crucial for receiving drug price premiums. Differential premiums will be applied based on criteria such as the top 30% and bottom 70% of innovative pharmaceutical companies. Companies hovering ambiguously near the cutoff line are likely to engage in a game of brinkmanship over the extent of their R&D investment expansion.

As no absolute numerical threshold is set, the government appears to anticipate a competitive surge in R&D investment.

Stepped price reductions for generics will also be strengthened. Currently, the price of the 21st generic is set at 85% of the lowest price. This will be applied starting from the 11th generic. The intent is to reduce prices by 5% each step from the first generic's calculated price to prevent indiscriminate proliferation of generics.

This reform is particularly painful for small and medium-sized pharmaceutical companies, as the government's clear goal is to induce new drug development through strict generic drug price management and to transform the industry ecosystem, which is overly reliant on copy drugs.

If companies conclude that obtaining add-on pricing will be difficult and that the benefit of listing is reduced, they may shift more aggressively toward non-reimbursed products.