Drug pricing premium to hinge on innovative status

“Innovative / quasi-innovative status is now essential”… companies focus on preparing for certification in the second half of this year

Attention on revised review criteria… R&D ratio requirement to increase by 2 percentage points and affect companies in three years

MOHW to hold briefing today for pharmaceutical companies on certification reform

As interest in innovative pharmaceutical company certification rises following the government’s drug pricing reform, pharmaceutical companies are keeping a close eye on the changed review requirements.

With the required R&D investment ratio set to rise by 2 percentage points in three years, companies are particularly focused on the certification process scheduled for the second half of this year.

According to industry sources on the 9th, whether a company receives the Innovative Pharmaceutical Company certification has become a key factor determining whether a company is a winner or a loser under the revised drug pricing system. Although all companies are subject to the same structural changes, they are effectively being handed very different report cards because of differences in treatment regarding existing price cuts and pricing premiums.

An official from a domestic pharmaceutical company stated, “For Innovative Pharmaceutical Companies, price reductions for existing listings are spread out over 10 years, and there are pricing premiums and reduction clauses, so the impact of the reform plan is likely to be less severe. The extent of the impact will inevitably differ from what non-innovative companies experience.”

The Korea Pharmaceutical and Bio-Pharma Manufacturers Association held two explanatory sessions on the pricing reform, one online on the 3rd and another on the 8th, and many of the questions were reportedly related to innovative and quasi-innovative company certifications.

There was also interest in when and how the price adjustment method would be applied if a non-innovative company’s status were to change to innovative or quasi-innovative.

The introduction of the quasi-innovative category has broadened interest beyond companies that had already been focused on the certification system to a wider range of firms.

However, with the Ministry of Health and Welfare revising the Enforcement Decree and Enforcement Rules of the “Special Act on the Promotion and Support of the Pharmaceutical Industry,” companies now face the need to redesign their certification strategies.

In particular, as the government has signaled a shift toward more microscopic scrutiny, such as the introduction of quantitative evaluations, while simplifying review criteria, more thorough preparation has become necessary.

One of the most significant changes is that four items among the detailed evaluation criteria for certification, which include R&D investment, the number of clinical trials, and export volume, have been converted into quantitative indicators.

Given the high level of interest from the pharmaceutical industry, the Ministry of Health and Welfare is holding a briefing session today (the 9th) for pharmaceutical companies to explain the improvements to the certification system.

Another official from a domestic pharmaceutical company stated, “Although we have avoided an immediate increase in the R&D ratio, since the review criteria have changed, even companies that were already preparing will likely be re-evaluating their plans.”

An official from a pharmaceutical company preparing for certification this year said, “Companies with an R&D ratio in the 5% range are particularly interested in the revised certification system. We have already completed our preparations to a certain extent, but we will still attend the briefing session.”