‘Pharmaceutical spending reform should come first’

Experts discuss improving access to new drugs for severe diseases, ways to improve NHI spending efficiency

Competition for off-patent drugs, faster listings and outcome-based reimbursement proposed

Amid the rising national health insurance spending on new drugs for severe diseases, experts have called for the rationalization of budget expenditures by linking reimbursement to treatment outcomes rather than simply containing the prices of new drugs.

With pharmaceutical spending under growing pressure from the introduction of high-priced new drugs and rising patient numbers, the argument is that Korea should create fiscal headroom by promoting competition in the off-patent drug market, while providing patients with faster access to treatments for severe and rare diseases and subsequently reassessing their value based on real-world treatment outcomes.

At a forum held on the 30th at the National Assembly Members' Office Building titled 'Strategies for Expanding Access to Innovative Drugs for Severe Diseases and Optimizing National Health Insurance Finances,' discussions were held on ways to improve access to new treatments for severe diseases and efficiently manage national health insurance finances.

Key topics included Korea’s pharmaceutical expenditure structure, the gap between regulatory approval and reimbursement for cancer drugs, early access to rare disease treatments, and systems for evaluating and post-listing management of new drugs.

A forum on 'Strategies for Expanding Access to Innovative Drugs for Severe Diseases and Optimizing National Health Insurance Finances' was held at the National Assembly Members’ Office Building on Sept. 30.

Promote market competition rather than imposing across-the-board price cuts...new drugs need outcomes-based reimbursement

Although healthcare spending on severe diseases continues to rise in Korea, experts analyzed that the trend cannot be attributed solely to high-cost new drugs.

According to Yong Jin Kwon, a professor at Seoul National University Hospital’s Public Medical Center, national health insurance medical expenditures increased from KRW 95.4 trillion in 2021 to KRW 116.2 trillion in 2024. Total pharmaceutical spending rose from approximately KRW 22 trillion to KRW 27.7 trillion over the same period.

Drug spending for patients covered under the special copayment reduction program increased from KRW 5.6 trillion to KRW 7.5 trillion, while spending on drugs for cancer patients rose from approximately KRW 3.01 trillion to KRW 4.14 trillion.

Kwon said the increase in pharmaceutical spending cannot be solely attributed to high-priced new drugs, as rising patient numbers, expanded treatment opportunities, and increased use of new drugs have all played a part.

Kwon emphasized, “Before trying to curb spending on new drugs, we need to address the structure of the off-patent drug market, which accounts for a large share of total pharmaceutical spending.”

Korea’s market for off-patent originator and generic drugs is worth approximately KRW 19.4 trillion. Kwon argued that unnecessary spending should be reduced by enabling price competition to function properly in this market, with the resulting fiscal headroom redirected toward improving access to new drugs for severe and rare diseases.

Measures discussed to promote price competition included lowest-price generic substitution, reference pricing and tighter controls on rebates. For innovative new drugs, meanwhile, participants proposed maintaining the principle of cost-effectiveness assessment while combining faster reimbursement with post-listing evaluation to prevent excessive delays in patient access.

Kwon said, “Drug pricing policy also needs to move away from uniform price cuts and be redesigned to reflect treatment outcomes and value.”

Barriers persist from approval to reimbursement...improved access needed for cancer, rare disease treatments

Hee-jun Kim, professor of hematology-oncology at Chung-Ang University Hospital

Clinicians noted that substantial barriers remain to getting a new drug to Korean patients, even if it has received regulatory approval or is already in use overseas.

Hee-jun Kim, professor of hematology-oncology at Chung-Ang University Hospital, pointed to the time gap between regulatory approval and reimbursement for cancer drugs as a key issue. Even after a treatment is approved by the Ministry of Food and Drug Safety (MFDS), patients must bear the high treatment cost themselves until national health insurance reimbursement is granted, and detailed reimbursement criteria can further limit treatment options.

To address this, faster reimbursement of cancer drugs with demonstrated clinical utility, risk-sharing agreements, and conditional reimbursement were among the measures proposed.

Kim said, “When treatment efficacy has been demonstrated in early clinical trials, but sufficient long-term data are not yet available, patients could first be given access to treatment, with the price or reimbursement conditions subsequently adjusted based on actual outcomes.”

Kim also argued that assessments of a new drug’s value should look beyond the drug cost itself to include downstream benefits such as fewer hospitalizations and emergency room visits, reduced caregiving burden, and patients’ ability to maintain social and economic activity.

Also, experts noted that issues can arise from the earliest stages of introducing rare disease treatments into Korea.

Beom-hee Lee, professor of pediatrics at Asan Medical Center, noted that because rare diseases involve small patient populations and limited treatment alternatives, therapies developed overseas must pass through multiple steps before securing Korean approval, supply, and reimbursement.

Pharmaceutical companies may have relatively little incentive to seek Korean approval and reimbursement, making it difficult for individual physicians or patients to resolve access issues on their own.

Lee said, “We need to expand early access programs so patients can access treatments that are already used overseas but have yet to receive formal approval or reimbursement in Korea, while strengthening the governance role of the government and relevant agencies.”

Industry calls for flexible fast-track listing, post-listing evaluation...MFN another variable

During the panel discussion, participants called for managing the initial uncertainty surrounding new drugs through post-listing evaluation while also taking changes in the global drug pricing environment into account.

A view of the forum on Strategies for Expanding Access to Innovative Drugs for Severe Diseases and Optimizing National Health Insurance Finances held at the National Assembly Members’ Office Building on Sept. 30.

Inhwa Choi, Executive Director of the Korean Research-based Pharmaceutical Industry Association (KRPIA), said the characteristics of treatments for severe and rare diseases—including small patient populations and difficulty obtaining sufficient long-term data—should be taken into account. Rather than delaying reimbursement solely because of uncertainty in the initial evidence, she believed Korea should make more flexible use of fast-track listing, risk-sharing arrangements and outcomes-based agreements.

In other words, Choi believes providing patients with treatment first and subsequently reassessing effectiveness and financial impact using data accumulated in real-world clinical practice could improve access while managing uncertainty.

Participants also pointed to changes in global drug pricing policies as a factor that could make introducing new drugs into Korea more difficult.

At the forum, Dailypharm reporter Yun-ho Eo relayed how the impact of policies such as the US most-favored-nation (MFN) drug pricing policy has led to cases where companies halt reimbursement at the global headquarters or regional headquarters level even after receiving Korean regulatory approval.

Companies are abandoning reimbursement efforts even when their Korean affiliates want to proceed because of concerns that prices set in Korea could affect pricing in other countries.

Eo explained, “There are more and more drugs for which local teams want to pursue reimbursement but are prevented from doing so at the headquarters level. Ultimately, this shows that access to new drugs in the Korean market is deteriorating.”

Government agrees on need to improve access...‘Must consider the total patient population’

At the forum, assessment authorities and the government agreed on the need to improve access to new drugs for severe diseases, while emphasizing that the overall pharmaceutical spending structure and the drugs’ impact on national health insurance finances must also be considered.

So-young Lee, Director of HIRA’s Pharmaceutical Benefits Division, said delays caused by repeated requests for supplementary materials stemming from differences between industry and HIRA in interpreting evaluation criteria should be reduced.

While agreeing that greater price competition in the off-patent drug market could improve spending efficiency, Lee said new drugs and generics cannot be viewed entirely separately. Prices and market shares of existing treatments affect the comparators and pharmacoeconomic evaluation used for new drugs, making it necessary to examine the overall pharmaceutical spending structure.

Lee also supported the use of post-listing evaluation based on real-world data, while noting that cooperation from stakeholders, including pharmaceutical companies’ submission of data and assumption of related costs, would be necessary.

Lee said, “HIRA has a role and responsibility when reviews are delayed by unnecessary requests for additional materials. We will work at the operational level to make meaningful improvements.”

Min-jung Kim, an official with the Ministry of Health and Welfare’s Pharmaceutical Benefits Division, said the government is improving coverage for treatments for severe and rare diseases through measures including a pilot fast-track reimbursement program for rare disease drugs, flexible drug pricing agreements, risk-sharing agreements and exemptions from pharmacoeconomic evaluation.

National health insurance spending on rare disease and cancer drugs has increased by an annual average of approximately KRW 410 billion over the past 5 years. The government also sees reimbursement coverage in these areas as having expanded rapidly over the same period.

However, some high-priced therapies can place a substantial burden on national health insurance finances, making it necessary to determine how far the system should go in recognizing clinically effective treatments as cost-effective.

The use of selective reimbursement as an intermediate option between full reimbursement and non-reimbursement was also discussed. The approach would provide an additional access pathway for drugs with recognized treatment needs that are difficult to cover fully, balancing patient costs against their financial impact on the insurance system.

Kim said, “We need to achieve both faster reimbursement and appropriate recognition of the value of innovation. At the same time, we need to consider how to define a high-cost drug and how far we can go in recognizing cost-effectiveness.”