Price cuts on existing drugs divided into two phases

Government-pharma industry would need to conduct discussions on detailed criteria

Not addressed in the April consultative body…sales impact to vary depending on detailed standards.

As the government proceeds with planned pharmaceutical pricing system reforms, follow-up discussions are expected regarding specific classification criteria for price reductions of pre-listed drugs.

Key issues include how to distinguish between first-phase and second-phase price reductions for two- and three-drug combination products, as well as how and when later bioequivalence testing should be reflected in drug price reductions.

According to industry sources on the 15th, specific criteria for price reductions on pre-listed drugs have not yet been finalized. Discussions on price reductions for pre-listed drugs were not properly addressed during the working-level consultative body meeting between the government and the pharmaceutical industry held in late April.

Previously, the Health Insurance Review and Assessment Service (HIRA) decided to divide drugs into two groups based on their listing date in 2012. Price reductions for ingredients listed before 2012 will begin immediately within this year, while reductions for Phase 2 drugs, listed after 2012, will begin in 2030.

The timing of implementation differs depending on whether a product is classified into the first or second phase of existing drug price cuts

However, opinions remain divided regarding the classification of combination products. If the individual ingredients making up a combination drug belong to both Phase 1 and Phase 2 groups, authorities must determine at which timing the combination product itself will face price reductions.

The government has stated that if even one ingredient in a combination product was listed before 2012, the combination drug would be classified as a Phase 1 drug.

However, there are many issues that require consultation with the industry, such as how to handle cases where even a single ingredient retains a patent or has PMS remaining.

Another key issue is how to reduce prices for drugs that failed to meet required standards due to a lack of bioequivalence testing. The reduction rate under the differentiated standards system has been increased from 15% to 20%.

For example, if a product price was lowered to 45% and bioequivalence testing was not conducted, it would fall further to 36%. If a rate of 49% is applied, being a product from an innovative pharmaceutical company, it would become 39.2%, while applying a quasi-innovative rate of 47% would drop the price to 37.6%.

Since price reductions for pre-listed drugs are implemented over a 10-year period, including a grace period, it is also important to determine how to reflect the results if bioequivalence testing is conducted during that period.

In particular, since Phase 2 drugs will only begin facing reductions in 2030, some pharmaceutical companies may attempt to protect reduction rates by conducting bioequivalence studies.

Accordingly, industry players are expected to argue that satisfying bioequivalence requirements by the final year converging toward the calculation rate should still qualify as meeting standard requirements.