[Reporter's View] Let's focus on building 'solid pharmas'

Why does the conflict between the Ministry of Health and Welfare (MOHW) and the pharmaceutical industry over drug pricing reforms repeat the same patterns? The MOHW finalized a reform plan at the Health Insurance Policy Review Committee, held in March, focusing on reducing generic drug prices while providing incentives for innovative pharmaceutical companies and those contributing to the supply of unstable essential medicines. However, the differences in position between the two parties do not seem to be clearly resolved.

The MOHW promised to exchange information and gather opinions to design a reform plan that could also be favorable to the pharmaceutical industry, addressing the National Assembly, the media, and the industry. However, the prevailing assessment is that these efforts remained insufficient and incomplete.

Of course, it is impossible to devise an administration or policy that satisfies everyone 100%. The MOHW's stance during deliberations on this drug-pricing reform was unsatisfactory.

The MOHW's challenge is understandable. Lee Hyung-hoon, the 2nd Vice Minister of Health and Welfare and Chairman of the Health Insurance Policy Review Committee, expressed the hardship during the process of establishing the reform plan. Lee noted that it is not easy to achieve both the conflicting tasks of ensuring health insurance efficiency and fostering the pharmaceutical industry. Lee's sincere statement received positive responses from reporters, offering a chance to experience and empathize with the difficulties of operating executive branch policy.

Despite this, the MOHW must seek better ways to engage the pharmaceutical industry when devising future drug pricing reforms. This is to minimize the aftereffects of exhaustive clashes between the government and industry, while improving the likelihood of a soft policy landing.

Health economists point out that the MOHW has not made sufficient effort to design a drug-pricing system that balances equity between the domestic and multinational, foreign-capital pharmaceutical industries.

Furthermore, they note that it is difficult to discern the MOHW's philosophy and specific direction for managing National Health Insurance finances. They stated that the administrative goals are so blunt and ambiguous that it is difficult to predict them. The criticism is that if the MOHW were to reveal its inner thoughts transparently, proper consultation would be possible.

The MOHW emphasized the "structural improvement toward innovative new drugs" as the justification for this drug pricing reform and as a mechanism to appeal that it is inevitable to cut the prices of already-listed generics.

While the direction might not be wrong, the slope was too steep. South Korea's pharmaceutical industry is still centered on generics. The quality and self-sufficiency rate of generics are high. In reality, hundreds of items are licensed, prescribed, and distributed for a single active ingredient.

On the other hand, only 41 domestically developed new drugs have obtained marketing authorization. The first domestically developed new drug was Sunpla (SK Pharma), authorized in July 1999, and the most recent domestic new drug is Xcopri (Dong-A ST), which received its license in November 2025, making it the 41st. Among these, no new drug has achieved blockbuster-level sales.

To demand that the domestic pharmaceutical industry, which has birthed 41 new drugs over 25 years and is still evaluated as being at a "high school level" or a "twenty-year-old" who has just removed the label of a minor, instantly stop manufacturing and selling generics to produce blockbuster results is an excessively harsh demand.

The reform plan should have reflected more of the industry's concerns about how much new drug Research and Development (R&D) will be revitalized by this drug pricing reform, how negative it will be for the supply of price-stabilized medicines, and the potential causal link to employment stability.

In MOHW data on the direction of drug pricing reform, one word stood out: "solid pharmaceutical companies."

The MOHW expressed its ambition to use this reform as a turning point to cultivate and support robust pharmaceutical companies that are sincere about new drug development and the stable supply of essential medicines, rather than being buried only in generic sales competition.

To achieve this ambition, the MOHW must set transparent, clear standards for what constitutes a "solid pharmaceutical company" and develop evaluation indicators. A process involving a public-private consultative body is necessary. This means that active administration and two-way communication are absolutely required to align the "zero point" regarding "robustness" with pharmaceutical companies.

During the process of establishing drug pricing reform plan, many "solid" pharmaceutical companies that have secured R&D ratios criticized the government, saying, "It is doubtful whether the MOHW or the MFDS has the standards to distinguish innovative pharmaceutical companies that are sincere about industrial development and public health, or if they even have the evaluation data."

The point was that government administration capable of distinguishing "paper companies" that rely on consigned generic production as their core revenue source from "real" pharmaceutical companies has not been properly carried out until now.

In a situation where there is zero trust in whether the government has the criteria to distinguish the wheat from the chaff or the administrative power to do so, the MOHW suddenly pushed a reform plan to cut generic prices by up to 40% while favoring companies that have proven innovation. The industry voiced that they were told to just "sign it," which led to frustration and even fear.

When promoting the reform plan, the MOHW must conduct follow-up oversight to develop a comprehensive report card that clearly distinguishes robust pharmaceutical companies and provides tailored support.

The MOHW now faces the difficult task of communicating closely with the pharmaceutical industry to find and resolve the blind spots in government administration regarding the resolution of the multi-item generic structure, while recognizing that high-quality generics are the heart of K-Pharmaceuticals and the "two legs" that will support the future of industry and employment.

We anticipate MOHW administration that identifies field-level clues to fundamentally shift the policy paradigm away from simply cutting generic prices. This would be catching two birds with one stone: health insurance cost savings and new drug development.