[Reporter’s View] Paradox of Korea's drug pricing reform

As Korea prepares for a sweeping overhaul of its drug pricing system, pharmaceutical and biotech companies are increasingly seeking advice not in Sejong, the nation's administrative capital, but at major law firms in Seocho-dong and Gwanghwamun in Seoul. Domestic pharmaceutical companies are assessing whether they qualify as Innovative or Quasi-Innovative companies under the new pricing framework in an effort to minimize financial losses. Meanwhile, Korean affiliates of multinational drugmakers are busy identifying legal gray areas surrounding the Flexible Pricing Agreement system and post-listing management rules.

Given the scale of the reforms, many companies say it is virtually impossible to respond adequately relying solely on internal capabilities. The industry broadly agrees on the need for mid- to long-term improvements to the drug pricing system. However, reforms introduced at a pace the market struggles to absorb are also producing unintended consequences. Ironically, large law firms are the only ones reaping the benefits between the government, which sets the policies, and the pharmaceutical and biotech companies, which are subject to them.

Over the past several years, law firms have evolved beyond simply providing legal advice to become key players in the pharmaceutical industry. As regulations grow more complex and policy predictability declines, their influence has expanded accordingly. They help develop legal arguments to ensure industry perspectives are reflected during legislative and regulatory revisions, interpret increasingly complicated regulations, and formulate compliance strategies. They also design defense strategies against administrative actions such as drug price cuts or marketing authorization revocations. In areas where regulation and administrative enforcement intersect, it has become difficult to find issues in which law firms are not involved.

In this context, it is somewhat disheartening to see major law firms aggressively recruiting former officials from the Ministry of Health and Welfare and other government agencies.

From the industry's perspective, there is an undeniable need for experts who understand the rationale behind complicated regulatory changes and can provide response measures. Likewise, it is only natural for law firms to recruit professionals with the expertise demanded by the market. Nor should individuals be criticized simply for pursuing post-retirement careers that make use of their professional experience. If they have passed the required government ethics reviews, there is no legal issue.

However, looking beyond legal formalities reveals a troubling contradiction. Officials who only recently designed the framework of these policies, emphasized the public interest of the pharmaceutical industry, and tightened regulatory standards are now, after retirement, standing on the opposite side and advising companies on how to circumvent or defend against those very same regulations.

The government announces new policies, and individuals who directly or indirectly helped design those policies later develop legal defense strategies at private law firms. Companies then pay substantial fees to purchase that expertise. As policy changes become more frequent, this unusual ecosystem only becomes more firmly entrenched.

An even greater concern is how companies allocate their resources. Money and manpower that should be invested in research and development or productivity are repeatedly diverted to regulatory compliance and legal reviews. This is hardly beneficial for strengthening the competitiveness of Korea’s pharmaceutical and biotech industry. If government policy encourages companies to compete over regulatory strategy rather than innovation, then the fundamental design of those policies also deserves renewed scrutiny.

The ultimate goal of drug pricing reform is to ensure the long-term sustainability of Korea's National Health Insurance system while fostering a healthy pharmaceutical and biotech ecosystem. However, if the greatest beneficiaries of these reforms are not pharmaceutical companies' R&D organizations but large law firms, it is worth asking once again whether both the design of the reform and the manner in which it has been implemented are truly appropriate.