Industry asks NHIS to defer February vote on drug price cuts

“Inadequate consultation by MOHW with industry… forced implementation violates duty of trust”

The pharmaceutical industry is voicing concerns that the government's plan to push through a drug pricing system, which includes price cuts for domestically produced generic medicines, for approval by the Health Insurance Policy Deliberation Committee (HIPDC) next month (February), represents overly hasty administration.

Industry consensus is that because the government failed to adequately collect industry opinions when it announced the reform plan late last November—lowering the pricing benchmark for generics from 53.55% of the originator price to the “40% range”—it is necessary to resume consultations in the new year before obtaining the approval of the Health Insurance Policy Deliberation Committee, and then set a new implementation date for the drug pricing system reform plan.

The demand is that postponing or deferring the timing of the generic drug price reduction from July this year to next year or later is necessary to ensure domestic pharmaceutical companies' management predictability and the normal execution of their business plans.

Some members of the National Assembly’s Health and Welfare Committee are also paying close attention to these concerns, raising questions over whether changes will occur in the government’s administrative timetable.

According to domestic pharmaceutical industry sources on the 5th, the Ministry of Health and Welfare (MOHW), the government agency responsible for the drug pricing system reform plan, has not yet initiated a formal process to gather opinions from pharmaceutical companies regarding the reform plan, including generic drug price cuts and pricing incentives.

On November 28 last year, the MOHW reported the reform plan to the HIPDC, publicly announcing its intention to reduce the generic pricing benchmark from 53.55% of the original drug’s price to the 40% range.

At the same time, the ministry disclosed plans to finalize the reform through a HIPDC vote in February this year and to fully implement the revised pricing system and price reductions starting in July.

At the time, domestic pharmaceutical companies reacted strongly, criticizing the ministry for abruptly announcing the plan without providing sufficient prior explanation regarding the specific pricing rate, the scope of generics subject to price cuts, or the targets and methods for pricing incentives.

Pharmaceutical companies are criticizing the Ministry for failing to show any signs of reviewing or partially reflecting the industry's demands even now, over a month after the Health Insurance Review and Assessment Service report and into the new year.

Industry stakeholders complain that the ministry has not retreated even marginally from its unilaterally disclosed proposal, instead adhering strictly to the government plan—creating an environment in which meaningful dialogue between the MOHW and the pharmaceutical industry cannot take place.

In fact, Jeong-Kee Hong, Executive Director of the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), strongly appealed for a deferral of implementation during a National Assembly policy forum on the drug pricing reform held last December, pointing out how the proposed timeline was excessively tight, undermining predictability, and that insufficient analysis had been conducted on the reform’s negative impact on the pharmaceutical industry.

At the time, Executive Director Hong stated, “When pursuing drug price reductions, prior evaluation and analysis of the long-term impact on the pharmaceutical industry must be conducted first, and the effects on employment, production bases, and supply chains must also be examined. Notifying the industry of price reductions just 7 months before the system implementation makes it difficult for pharmaceutical companies to establish business plans and ensures no predictability.”

Despite these industry appeals, the MOHW has shown little indication of establishing a consultation channel until now, prompting growing skepticism within the pharmaceutical sector regarding the plan to finalize the reform at the February HIPDC meeting.

Against a backdrop of mounting uncertainty in the pharmaceutical industry—driven by the COVID-19 pandemic and rising trade barriers imposed by major economies such as the United States—industry voices warn that the MOHW’s focus on cutting health insurance expenditures, rather than regulatory innovation to support domestic new drug R&D, could ultimately threaten national security and pharmaceutical sovereignty.

Accordingly, the pharmaceutical industry is expected to intensify calls for the MOHW to moderate the pace of its drug price cut measures.

Mr. A, a drug pricing manager at a top domestic pharmaceutical company, stated, “We need to critically assess whether cutting generic drug prices to save KRW 1 trillion in health insurance funds is truly the top administrative priority the Ministry should pursue, given Korea's current situation. Throughout the prolonged COVID-19 pandemic, conflicts over medical policies and healthcare gaps, pharmaceutical companies have dedicated their management efforts to new drug R&D amid significant uncertainty. At this point, reducing generic prices to the 40% range is difficult to understand in terms of urgency or appropriateness.”

Mr. B, another executive from a top pharmaceutical company, also stated, “While the Minister of Health and Welfare and the Vice Minister in charge of the pharmaceutical industry have consecutively published opinion pieces in media outlets expressing strong strong commitment to generic drug price reduction and strengthening the sustainability of the national health insurance finances, there has been no visible effort to establish a discussion table for collecting industry feedback on their strong opposition. Rather than repeating and reinforcing the government's drug pricing system reform plan already reported to the HIPDC, what is needed now is a consultative approach that proactively accommodates industry demands and promises the possibility of revising the reform plan.”

As industry opposition persists, the National Assembly is closely monitoring the MOHW’s handling of the pricing reform.

Some members of the Health and Welfare Committee are questioning the rationality of rushing implementation without sufficiently accommodating industry concerns, and there is a growing sense that legislative mediation may be necessary if government–industry tensions escalate.

An official from a ruling-party lawmaker’s office on the committee remarked, “There is concern that the policy of applying differential pricing to generics for domestic pharmaceutical companies that have expanded investment in new drug R&D was not sufficiently reflected in this drug pricing system, and we partially share that view. We are currently communicating with the pharmaceutical industry to determine whether the MOHW’s drug pricing system reform truly sends a policy signal encouraging competition based on innovation rather than rebates.”

The official continued, “It's difficult for the National Assembly to hastily take on the legislative branch's mediation role before conflicts even arise. The domestic pharmaceutical industry has sufficiently voiced its opposition to the policy, and since the consultation process with the government is still ongoing, we need to observe the situation a bit longer. If the government implements the drug price reduction reform plan quickly and the resulting shock to the pharmaceutical industry is significant, then some level of incentive measures should follow to offset it to a certain extent."