Preferential framework ahead of certification?...drug pricing reform

The MOHW has included the preferential framework for Innovative and Semi-Innovative companies in the reform plan, effective AUG

Criteria for Semi-Innovative certification is incomplete…, new designations for Innovative Pharmaceutical Companies are not scheduled until DEC

Price cuts for prior-listed drugs will be implemented in NOV, based on the September drug registry

The Ministry of Health and Welfare (MOHW) is implementing preferential pricing benefits in August. Yet, the criteria for certifying Innovative and Semi-Innovative companies are incomplete. (AI-generated image)

The South Korean government is being called for failing to account for newly certified Innovative·Semi-Innovative Pharmaceutical Companies as it pushes ahead with a reform of drug pricing calculations and price reductions for prior-listed drugs.  

Critics point out that the policy reform is not being processed in an appropriate sequence, given that the preferential pricing benefits are scheduled to take effect as early as next month, even though official applications for this year's Innovative and Semi-Innovative certifications have not yet opened.  

Furthermore, price reductions for baseline-listed drugs are set to begin in November, based on the September drug formulary registry, triggering widespread confusion about how the exemptions for Innovative and Semi-Innovative companies will be applied in practice.  

For the current year, the plan is to cut prices from 53.55% to 51% exclusively for medications listed before 2012, creating an administrative bottleneck in which products eligible for special exemptions must be reclassified retrospectively.  

According to industry sources on the 7th, generic drug pricing calculation and premium mechanisms, including the newly established "Semi-Innovative" company list, are set for an extensive restructuring next month. However, the certification process for Semi-Innovative companies has not even commenced.  

Similarly, new designations for Innovative Pharmaceutical Companies are not scheduled until December, meaning that structural revisions to the pricing and premium systems will precede the actual certifications.  

Consequently, pharmaceutical companies seeking Semi-Innovative status or aiming for new Innovative designations are effectively forced to delay their health insurance reimbursement listings to secure preferential pricing benefits. Because the Semi-Innovative and Innovative tiers receive a 50% and 60% pricing premium, respectively, missing out on these certifications results in a 5% to 15% financial penalty compared to the baseline calculation rate of 45%.  

An official from domestic pharmaceutical company said, "The government seems to force the timeline forward, but they simply need to let go of the rigid notion that it must be launched this year," and added, "From a regulatory coherence standpoint, postponing the implementation by just a few months would resolve everything. We intend to submit our formal feedback during the administrative notice period."  

The Ministry of Health and Welfare (MOHW) is currently collecting public and industry feedback on the partial amendment draft of the 'Criteria for Determination and Adjustment of Drugs' through an administrative notice period ending on the 13th. The pharmaceutical industry strongly maintains that the implementation timeline must be recalibrated to minimize operational confusion on the ground.  

The same structural misalignment applies to price cuts for prior-listed drugs, in which Innovative and Semi-Innovative enterprises are legally entitled to a 3-4 year grace period or a special exemption. The government is reportedly planning to categorize products according to the September Drug Reimbursement List and enforce price reductions in November.  

However, because no company has been certified as Semi-Innovative yet, it is impossible to identify which drugs qualify for exemptions under the prior-listed price cuts. Ultimately, eligibility for these exemptions can only be determined through a retrospective reclassification after the certification applications and evaluations are finalized.

An official from another pharmaceutical company expressed frustration, stating, "This policy reform was originally intended to incentivize R&D innovation through pricing premiums. The logical sequence should be to finalize company certifications before altering the system. It appears the government is simply sticking to its original schedule regardless of the logical workflow."