Reform should drive development of 2 homegrown blockbusters

the innovative drug price reform plan

Need to secure national security by reinforcing the self-sufficiency rate of essential drugs and rationalization of the pharmacoeconomic evaluation system

Chang-Hyun Oh, Director of Pharmaceutical Benefits at MOHW, “Aims to cover 22% of drug costs...Reduce drugs that wrongfully receive selective reimbursement to invest in innovative value"

The government expressed the will to encourage pharmaceutical companies to invest in research and development (R&D) and secure the momentum of developing two homegrown blockbuster drugs through the reform of the drug pricing system to reflect innovative value.

 

Above all, the government has made it clear that it will strengthen the sustainability of national health insurance finances by reducing the proportion of pharmaceutical expenses, and at the same time, investing the funds generated by trimming the insurance drug prices of drugs that violate the purpose of selective benefits into innovative new drugs and essential drugs.

 

In particular, the government said it had devised the reform of the drug pricing system to strengthen the supply chain of essential drugs in terms of health security, which arose as a key issue of concern during the COVID-19 pandemic.

 

On the 22nd, Director Chang-Hyun Oh, Director of Pharmaceutical Benefits at MOHW, said at a meeting with the press corp to explain the implications of the 'Plan to Reflect the Innovation Value of New Drugs and Improve the Drug Price System for Health Security' that was recently passed by the Health Insurance Policy Review Committee.

 

The Ministry of Health and Welfare will revise the drug pricing system to favor the drug prices of domestically developed new drugs made by innovative pharmaceutical companies and support the export of domestic new drugs at the listed price after applying the risk-sharing agreement system homegrown new drugs exported overseas.

 

The government will also ease regulations on drug price reductions based on the Price-Volume Agreement system and establish regulations on preferential drug prices for botanical drugs.

 

New drugs that are recognized as innovative will be exceptionally recognized for cost-effectiveness even if they exceed the ICER threshold during pharmacoeconomic evaluations and will be applied eased evaluation standards when being reviewed for RSS renewals.

 

Also, the government will provide preferential pricing for drugs based on natural products that demonstrate superiority and innovation.

 

To strengthen the national security of pharmaceuticals, a system will be operated to grant a 68% drug pricing premium for up to 10 years (basic 5 years, additional 5 years) for national essential drugs that use domestic APIs.

 

Chang-Hyun Oh, Director of Pharmaceutical Benefits at MOHW explains the background and goals of the reform of the drug pricing system reflecting innovation value

In addition, the evaluation criteria for adjusting the upper limit for national essential drugs will be relaxed, and the cost preservation procedure will be simplified, through measures such as ordering prior drug pricing negotiation, if the cost increase factor of supply and demand insecurity drugs is proven.

 

Oh said he hopes the reforms will lead to stronger investment in new drug R&D by pharmaceutical companies and the development of real blockbuster drugs.

 

"Until now, we have streamlined many procedures to strengthen coverage of serious drugs.

 

However, there were not many cases where we raised the appraisal value of drugs (preferential drug prices).” So this time, we seek to first focus on rewarding innovative value (during drug pricing).

 

This will encourage pharmaceutical companies to invest more in R&D, which will increase jobs and lead to the development of new drugs." Oh continued, "Korea is aiming to develop two blockbuster drugs by 2027, and for that, there needs to be a drive that recognizes innovative value within the national health insurance system.

 

Next, the global supply chain has been severely disrupted by COVID-19.

 

We did a lot of work last year, such as urgently raising the price of acetaminophen, but in the end, we concluded that it is important to increase localization and self-sufficiency of necessary drugs." "We devised a reform plan that emphasizes the need to create an environment for domestic pharmaceutical companies to produce their own drugs, with the belief that this, to a certain extent, would stabilize drug supply during disasters such as the spread of infectious diseases.

 

Adding premium pricing for drugs using APIs from Korea and limiting it to national essential drugs was to build external rationale, as well as conflict with the FTA and WTO trade issues.

 

Also, we were worried that creating a system that favors only our country would violate the law, and prioritize national essential drugs because of their rightful preferential status." Regarding the revision of the Price-Volume Agreement system (PVA), Oh said that a proposal to adjust the price discount imposed on drugs by a certain percentage is likely for drugs that are subject to price reductions more than 3 times in 5 years.

 

However, he said that it is difficult to disclose the exact percentage.

 

For example, when the domestic new drug K-CAB was repeatedly subjected to PVA price cuts, the ministry said that if the developer, HK Inno.

 

N, was designated as an innovative pharmaceutical company, part of the price reduction would be removed.

 

When asked how the government plans to balance drug costs in health insurance finances, Oh said, "Currently, drug costs account for 23.3% of NHI medical expenditures, and I don't know how much it will go down (with the reform), but we are aiming for 21% to 22%.

 

We will continue to narrow down drugs that do not meet the purpose of selective reimbursement.

 

Also, we're going to cut reimbursement of drugs that don't fit the actuarial principle of the system.

 

Naturally, there will be savings, and if we use them for innovation, it may serve as an incentive for pharmaceutical companies to develop new drugs."