HIRA “Low-price drug incentive brings ₩2.7 savings'

HIRA defends “low-price drug purchase incentive” system, claims it has brought KRW 2.7 trillion savings over the past 10 years

“Need countermeasures for incentive bias toward general hospitals and above”

Rep. Joo-young Lee criticizes the program's effectiveness and potential decline in drug quality

The Health Insurance Review and Assessment Service (HIRA) defended its position regarding the argument against the ‘low-price drug purchase incentive’ payment system, stating that the system has consistently contributed to national health insurance cost savings.

 

However, it acknowledged that improvements are needed regarding the unresolved issue of incentives being disproportionately concentrated on medical institutions at the general hospital and tertiary hospitals.

 

HIRA's policy is to expand the cost-saving effect on the health insurance budget by devising a plan to allow hospital-level medical institutions and primary care clinics to participate in the low-price drug purchase incentive system.

 

On the 26th, HIRA disclosed this plan regarding the low-price purchase incentive to the office of Representative Joo-young Lee of the Reform Party, Rep Lee raised concerns about the systemic contradictions and low effectiveness of the low-price drug purchase incentive policy.

 

The low drug price purchase incentive system provides incentives to medical institutions based on the difference between the actual purchase price of drugs and the upper limit set for drug costs.

 

Ultimately, this policy incentivizes lowering the actual transaction price of drugs in the market relative to the NHI drug price ceiling.

 

This directly leads to reductions in the actual transaction prices of drugs, affecting pharmaceutical companies' cash cows.

 

Rep Lee believes this incentive system hinders the development of the domestic pharmaceutical industry and diminishes the cost-saving effects of the national health insurance program because it focuses on price rather than drug quality.

 

The pharmaceutical industry and drug wholesalers also argue that the low-price purchase incentive system is inherently flawed because it is linked to reductions in the actual transaction price of drugs.

 

Critics argue that the lower the actual transaction drug price becomes for low-price purchase incentives, the more directly it leads to subsequent reductions in actual transaction drug prices, discouraging all from voluntarily lowering drug prices.

 

Medical institutions have long pointed out that for small and medium-sized hospitals, neighborhood clinics, and pharmacies—not tertiary hospitals—the actual volume of low-price purchases is small, resulting in a low perceived incentive effect.

 

In response to Rep.

 

Lee's criticism that the low-price purchase incentive system is ineffective and undermines drug quality, HIRA stated, “It has the effect of reducing national health insurance finances.” HIRA explained that the low-price purchase incentive program was introduced to motivate healthcare institutions to purchase low-priced drugs and manage drug costs appropriately.

 

It further elaborated, “The financial savings effect through this system is being sustained, as evidenced by the steady influx of new institutions participating in each round.” In fact, new institutions accounted for an average of 31.5% of all institutions receiving low-price purchase incentives recently.

 

The low-price purchase incentive program has reduced national medical expenses by KRW 2.7012 trillion over the past decade, yielding annual savings of approximately KRW 200 to 300 billion.

 

While recognizing the financial benefits, HIRA also admitted that the incentives are concentrated on medical institutions at the general hospital level or above, noting that improvement is needed to ensure fairer participation.

 

HIRA concluded, “Since institutions with strong purchasing power, such as general hospitals, receive most of the incentives, we will seek ways to encourage participation from smaller hospitals and clinics, thereby contributing to the appropriate management of drug costs in Korea.”