PVA discount for innovative companies to increase to 50%

Price-volume discount rate raised from 30% to 50%

Eligibility condition of 3 price cuts within 5 years not yet finalized

With the reduction rate for price cuts under the price-volume agreement (PVA) for innovative pharmaceutical companies raised to 50%, the outlook for pharmaceutical companies is expected to diverge depending on whether the existing conditions related to repeated cuts remain in place.

This is because the number of beneficiaries would decrease significantly if an additional condition requiring 3 price cuts within 5 years were imposed. This is expected to be a major point of contention during discussions over detailed requirements.

According to the industry and relevant institutions on the 10th, while the increase in the PVA reduction rate for innovative companies has been decided, the detailed conditions have not yet been finalized.

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In March, the Health Insurance Policy Deliberation Committee approved strengthened post-listing management preferential treatment for innovative companies by increasing the reduction rate for PVA-driven price cuts. The plan involves raising the reduction rate for price cuts from 30% to 50% when price reductions occur due to increased usage volume.

For example, if usage increases and the drug price reduction rate is set at 4%, the cut rate for innovative companies would be lowered to 2%.

Under current guidelines for PVA negotiations, a condition is attached for drugs that have undergone repeated cuts. To qualify for the reduction, a drug must have reached an agreement in negotiations at least twice over a five-year period, and the manufacturer must be either an innovative pharmaceutical company or a company recognized by the Health Insurance Review and Assessment Service (HIRA) as having R&D expenses accounting for 10% or more of its revenue.

If a drug currently under negotiation has received a third negotiation order within 5 years prior to the end of the analysis period, the pharmaceutical company may submit documents to receive a 30% reduction.

The key issue is whether these additional conditions will also apply under the new 50% reduction rate scheme. If eligibility is limited to products whose usage has increased enough to warrant 3 rounds of negotiations, the number of eligible items will decrease significantly.

According to the NHIS, 17 items received a 30% reduction in the negotiations 2 years ago because they had been subject to price reductions 3 or more times within 5 years.

The industry is hopeful that the specific conditions may change, as the Health Insurance Policy Deliberation Committee approved the 50% increase in the reduction rate without specifying any concrete conditions.

In particular, the industry maintains that a 50% reduction should be granted without additional conditions to incentivize innovative companies and R&D investment.

An official from a domestic pharmaceutical company expressed concern, stating, “If this does not apply to the third round of negotiations, specific implementation methods must be determined, such as whether it applies only to the first round or whether reductions will also apply to the second and third rounds. However, limiting it to the third round would significantly reduce the number of eligible items.”