South Korea takes steps to lower pharma prices

South Korea takes steps to lower pharma prices

Alfred Romann 4 May 2018

New measures put pressure on drug makers, importers and distributors


South Korea’s latest moves to make drugs more affordable are slowing down the growth of the pharma market in the country and maybe hurting sales of new and innovative drugs.

BMI Research predicts South Korean pharmaceutical will grow at 2.4% for the next 10 years, 1% less than expected. Elise Mak wrote about the changes in BioWorld (paywall) on May 4.

A series of  price-volume agreements may create headwinds for drugmakers. Under those agreements, first introduced in 2009, the price of a medicine is reduced once sales exceed a pre-agreed forecast volume by 30% or more.

South Korea provides a compulsory public health insurance system called National Health Insurance Program (NHI), which covers almost the entire population. 

Manufacturers, importers or marketers of drugs have to negotiate prices with the NHI.

To make the marketing process even more complicated, the new drugs have to be evaluated by two bodies – the Health Insurance Review & Assessment Service (HIRA) and the National Health Insurance Service (NHIS). The HIRA first reviews the pharmacoeconomic evidence of the new drug provided by the manufacturer and sets a maximum price. NHIS then tries to negotiate down the maximum price with the manufacturer.

Foreign companies have already complained about the country’s complex price negotiation process.

The 2016 Top Markets Report Pharmaceuticals published by the U.S. Department of Commerce also noted that generic drugs, as opposed to innovative new drugs, make up about 47 percent of the total pharmaceutical market in South Korea. Due to the large domestic generics industry and government policies to encourage their usage, off-patent innovative drugs are priced even lower.

Almost every country in Asia (and around the world) is actively working to lower the prices that health providers and insurance providers pay for drugs.

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