[Reporter’s View] Need rationale to establish a new fund

The Ministry of Health and Welfare has made clear its intention to secure approximately KRW 1 trillion in savings for the National Health Insurance (NHI) system by implementing a drug pricing reform centered on a dramatic reduction in generic drug reimbursement rates (from 53.55% to the low 40% range).

At the same time, the ministry has announced plans to expand reimbursement coverage for innovative new medicines in order to strengthen patient access.

Domestic pharmaceutical companies, whose operations rely heavily on generics as a primary revenue source, are criticizing this move, calling it “health insurance administration that cuts domestic generic drug prices to pay for multinational pharma’s innovative new drugs.”

Their opposition stems from the fact that the announced pricing reform includes virtually no price-reduction mechanism for new drugs, while the government continues to send positive signals toward expanding reimbursement for increasingly expensive high-priced innovative drugs.

Critics argue the policy has failed to strike a balance within the limited health insurance budget between domestically produced generics and innovative drugs largely supplied by multinational pharmaceutical companies.

As a result, it is becoming increasingly clear that expanding reimbursement for new drugs, fostering the domestic generics industry, and maintaining the sustainability of the NHI system are difficult goals to achieve simultaneously under a single insurance budget.

Amid this situation, the proposal by Jung-gu Kang, President of the Health Insurance Review and Assessment Service (HIRA), is drawing renewed attention.

At a policy briefing held on January 12 under Minister of Health and Welfare Eun-Kyoung Jeong, Kang strongly advocated for a new approach to expanding reimbursement for ultra-high-priced drugs such as anticancer drugs and treatments for rare and intractable diseases.

He reiterated the need to establish a separate fund dedicated exclusively to reimbursing ultra-high-priced “one-shot” curative therapies that demonstrate near-complete disease remission after a single administration.

Kang had already raised this idea in his New Year’s address in 2025, proposing a separate fund for ultra-high-priced drugs with limited cost-effectiveness in order to improve patient access.

The intent is to create a separate funding source outside the national health insurance budget to increase the coverage rate for high-cost treatments used for severe diseases.

Discussions on establishing a separate fund for ultra-high-priced new drugs have been raised by multiple lawmakers in the 20th, 21st, and current 22nd National Assemblies, with several lawmakers introducing bills on the matter.

A prime example is the bills to amend the National Health Insurance Act and the Lottery Act to allow the National Health Insurance Service to receive lottery revenue allocations as stipulated by the Lottery Fund Act.

Minister Jeong believes it is necessary to consolidate the Ministry of Health and Welfare's position and rationale based on Kang's proposal and the pending legislative bills in the National Assembly. This would involve creating a separate fund dedicated to covering the reimbursement of ultra-high-priced treatments costing hundreds of millions to billions of won, thereby alleviating the burden on the NHIS budget.

Prior to her appointment as Minister, during her confirmation hearing, Jeong had expressed some skepticism regarding the establishment of a separate fund for rare diseases.

At the time, Jeong stated, “If the required finances exceed the fund's size due to factors like the application of high-cost treatments, flexible management could become difficult. Rather than establishing a separate fund, the priority should be given to continuously expanding reimbursement coverage.”

Now, with domestic pharmaceutical companies strongly opposing the generic price cuts for KRW 1 trillion in NHIS savings, Jeong’s more forward-looking review of a separate fund may be necessary to avoid criticism that the government is simply ‘wringing a dry towel’ through drug price controls.

Just as the ministry is aggressively considering the establishment of a Regional Healthcare Development Fund to strengthen local, essential, and public healthcare, a similar approach should be applied to the dual mission of expanding access to ultra-high-priced medicines and fostering Korea’s pharmaceutical and biotech industry.