Pace of expanding low-priced purchase incentive has been adjusted

Dropped from 50%→35%

Government considers offering incentive, instead of ‘actual transaction price reduction’

The government appears to have lowered the planned increase rate in response to concerns about competition and legal rebates

The government is expected to adjust the schedule of its implementation policy, considering the potential side effects of expanding low-priced purchase incentives for medical institutions.

While the original plan was to increase the incentive for low-priced purchases from 20% to 50%, officials are now reviewing a plan to lower the target to 35%.

According to industry sources on the 16th, the government's fundamental policy direction of transitioning market price reductions into a 'market-linked, transaction-based price system' remains unchanged.

However, given the potential negative consequences of a rapid expansion of incentives, the Health Insurance Policy Deliberation Committee is expected to lower the planned increase rate at its meeting this month.

The low-price purchase incentive is a system that provides a portion of the savings as a grant to medical institutions when they purchase medicines at a transaction price below the maximum reimbursement limit. Under the current standards notified by the Ministry of Health and Welfare (MOHW), approximately 20% to 30% of the price difference is paid to these institutions.

The reform plan released last November included a proposal to expand the incentive payout rate to a maximum of 50%. It is intended to lower actual transaction prices through market competition without relying on government-mandated price cuts.

Since the announcement, there have been persistent concerns about overheated price competition and chaos in the distribution order. Critics have pointed out that the side effects of damaging the industry ecosystem could outweigh the benefits of reduced pharmaceutical expenditures.

During a recent National Assembly debate on the drug pricing system, specific concerns were raised regarding the potential for rebates following the expansion of these incentives.

Hong Seok-hwan, the Policy Director of the Korean Confederation of Trade Unions, criticized the move by stating that rather than the government directly removing the price bubble, the policy induces pharmaceutical companies and hospitals to enter into side agreements at prices lower than the officially notified price, effectively legalizing rebates by guaranteeing the price difference as profit.

The government is adjusting the rate of increase in incentives downward to address these concerns. The proposed 35% rate is currently under discussion, and the final payout rate will be decided at this month's Health Insurance Policy Deliberation Committee meeting.

Meanwhile, this expansion of low-price purchase incentives applies only to private tertiary general hospitals, general hospitals, clinics, and pharmacies. National and public hospitals are expected to maintain the current 20% rate.