Korean Pharma ‘Desperate’ For Improved Pricing System
This article was originally published in PharmAsia News
Executive Summary
In their efforts to catch up with Hanmi Pharmaceutical, which has clinched a series of record licensing out deals this year, other pharma companies in South Korea are looking for government support to create a more industry-friendly drug pricing environment. During a recent meeting with the new health minister, industry associations urged the government to improve the system to better reward R&D investments.
SEOUL – South Korean pharma firms have urged the government to improve the country's drug reimbursement pricing system, which they believe is a core factor in boosting R&D and drug exports by the industry.
During the first official meeting with South Korea’s new Minister of Health and Welfare Chung Chin-youb, five pharma associations, including the Korea Pharmaceutical Manufacturers Association (KPMA) and the Korea Research-based Pharma Industry Association (KRPIA), which represents foreign drug makers in the country, said the industry “desperately” needs a drug pricing system that can fully reflect pharma firms' R&D investments, said officials from several of the associations.
The groups have asked the government to change the interval between regular price revision under the actual transaction price (ATP)-based system to three years from one year, to curb overlapping price cuts by adjusting and integrating post-price control regulations, and to improve medical institutions’ medicine tender methods.
They stressed that the drug pricing system under the country’s national health insurance scheme has to properly reflect the value of novel drugs, adding that the current process doesn’t reflect the costs of future clinical trials and future facilities investments.
R&D Incentives
Pharma firms have been saying for some time that South Korea needs to adopt a drug pricing system that enables them to redeem what they have invested in the R&D of new products, include the costs of failure. They have been calling for the government to change the system to one that is fundamentally friendly to R&D investments, on top of providing tax incentives and financial support to promising R&D projects.
During a workshop to discuss drug pricing regulations last month, the KPMA said the country, which aims to become a major global pharma player in the coming years, needs a pricing system that takes into account the economic and social contribution of the pharma industry, rather than focusing on drug price cuts to enhance the fiscal soundness of the national health insurance system, as the pharma industry should be considered a future economic growth engine.
The domestic pharma industry has been suffering from sluggish domestic demand since 2010, while the share of the South Korean pharma industry in the global pharma market has been declining over the same period.
Separately, the pharma industry is also seeking to hike the base price of biosimilars in South Korea to 80% of reference drug prices from the current 70%, saying low domestic biosimilar prices are an obstacle to local pharma firms' entry into overseas markets.
“The mood seems to be positive this time” – KRPIA on the prospect for pricing reforms
The health ministry said it will “sufficiently discuss” this matter with the biopharma industry and review the need to revise the base price of biosimilars.
Positive Mood?
The pharma industry is hopeful the government may actually make changes this time as the new health minister, who began his term in August, has met with industry associations early on and as the domestic pharma industry has come under a bright spotlight due to Hanmi Pharmaceutical Co. Ltd.'s success in reaching a series of record licensing out agreements with multinational partners this year.
"The mood seems to be positive this time," said an official at the KRPIA.
An official at the health ministry said that the government is seeking to operate the drug pricing system "rationally" and it largely agrees with the pharma industry view that the system can't focus only on the fiscal soundness of the health insurance system. But the issue will need further discussions going forward as the government can't only take into account the industry's point of view.
As for the ATP-based drug price cut intervals, the government and pharma industry have agreed to form a consultative body in the first half of next year to discuss the issue further, the ministry official said.
The pharma industry will face its next regular ATP-based drug price cut in March next year. Despite strong objections from the pharma industry and after reviewing the pharma industry's call to postpone the cut by one year, the health ministry has decided to push ahead with the price cut (Also see "Korean Govt Rejects Industry Call For Price Cut Delay" - Scrip, 24 Sep, 2015.).
The proposed revision is designed to bring reimbursement prices under the national health insurance system more into line with actual prevailing market levels, as determined through a comprehensive survey of real world prices.