No cap set for semi-innovative pharma company designations

Generic pricing incentives available to companies investing 3–7% of sales in R&D

Absolute assessment to be used to encourage R&D investment

The Ministry of Health and Welfare plans to designate an unlimited number of semi-innovative pharmaceutical companies, provided they meet the required ratio of research and development investment and are not subject to any disqualifying conditions.

Like innovative pharmaceutical companies, semi-innovative companies will be designated through an absolute assessment rather than ranked against other applicants.

Some pharmaceutical companies had questioned whether the ministry might impose an overall cap—such as 60 companies—on the combined number of innovative and semi-innovative pharmaceutical companies, given that 47 companies currently hold innovative pharmaceutical company certification. Such questions were resolved, as the ministry has formally confirmed that applicants will be assessed against fixed criteria with no numerical cap on designations.

“A ministry official told Dailypharm by phone, ‘As with innovative pharmaceutical companies, there will be no cap on the number of semi-innovative companies certified, provided they meet the R&D investment thresholds and have no grounds for disqualification, such as illegal rebates.’”

MOHW held the inaugural meeting of the Public-Private Council for Pharmaceutical Industry Innovation on the 2nd to discuss how the semi-innovative pharmaceutical company certification program will be established and operated.

The ministry aims to create a growth ladder under which pharmaceutical startups can receive government support as they progress through semi-innovative and innovative status and ultimately grow into globally competitive pharmaceutical companies.

It plans to establish the necessary legal basis by November and begin accepting applications for the new designation in December.

To qualify as a semi-innovative pharmaceutical company, an applicant must meet the ministry’s required ratio of R&D expenditure to pharmaceutical sales.

Companies with average annual sales of less than KRW 100 billion over the preceding three years must maintain an R&D-to-sales ratio of at least 7% and invest at least KRW 5 billion in R&D.

The required ratio is at least 5% for companies with sales of KRW 100 billion or more and at least 3% for companies meeting cGMP or EU GMP standards.

Each threshold is 2 percentage points lower than the corresponding requirement for innovative pharmaceutical company certification. To qualify for an innovative status, companies with sales below KRW 100 billion must invest at least 9% of sales and a minimum of KRW 7 billion in R&D. The required ratios are 7% for companies with sales of KRW 100 billion or more and 5% for companies meeting cGMP or EU GMP standards.

In addition to meeting the R&D requirements, applicants must also be free of disqualifying conditions such as illegal pharmaceutical rebates and unethical conduct by executives or employees.

A company will be disqualified over rebates if it has received two or more administrative sanctions or if the amount provided was at least KRW 5 million. However, violations that occurred more than five years before the assessment will be excluded. Also, cases in which a director or auditor receives a criminal fine or a more severe penalty for offenses such as embezzlement, breach of trust, stock price manipulation, assault, or sexual crimes will be disqualified.

Like innovative pharmaceutical companies, semi-innovative companies will receive preferential pricing for both newly listed and already-listed generics. Specifically, new generics will be eligible for a price level of 50% for an initial one-year period plus an additional three years. Already-listed drugs will be allowed to retain a price level of 47% for three years when they undergo reassessment.

The ministry categorizes innovative pharmaceutical companies as “leading” companies and semi-innovative pharmaceutical companies as “growth” companies. Under the detailed certification assessment, companies scoring at least 65 points, which is the minimum passing score set in the ministry’s public notice, will receive leading-company certification, while those scoring below 65 will be certified as growth companies. Because quasi-innovative companies will be assessed only on basic eligibility requirements, including their R&D investment ratio and the absence of disqualifying conditions, they will not be required to submit documentation for a separate detailed assessment.

The ministry does not plan to limit the number of innovative or semi-innovative pharmaceutical companies certified, to encourage greater R&D investment across the industry. In effect, drug pricing incentives will be awarded through an absolute assessment rather than a competitive ranking.

Pharmaceutical companies seeking either innovative or semi-innovative status will therefore need to prepare sufficient evidence to fully satisfy the ministry’s documentation requirements.