Need for an "ultra-innovative pharmaceutical company" track

Pharmaceutical companies call for a permanent preferential drug pricing system and an exemption from the post-management drug price reduction syste

Call for strengthening the support system ahead of the Ministry of Health and Welfare (MOHW)'s reform of the innovative pharmaceutical company certification system리

As the government announced a reform plan for the innovative pharmaceutical company certification system, dividing the certification into a "leading type" and a "leap forward type," the pharmaceutical industry is calling for the creation of an "ultra-innovative pharmaceutical company" with stronger incentives.

Offering preferential treatment, such as permanent drug price discounts and exemptions from post-market price reductions, can encourage pharmaceutical companies to invest in research and development. This support goes beyond the existing temporary price incentives and helps ensure the survival of companies focused on developing new drugs.

Recently, the Ministry of Health and Welfare (MOHW) pre-announced a reform plan that provides customized support by dividing innovative pharmaceutical companies into a "leading type" and a "leap forward type" based on their R&D scale and capabilities.

The goal is to adjust the certification criteria to suit the scale and characteristics of companies, such as large pharmaceutical companies and biotech ventures, by categorizing them into the leading type for evaluation scores of 65 or higher and the leap-forward type for those below, based on criteria such as the ratio of new drug R&D to sales revenue.

While the industry supports the MOHW's reform to address the pharmaceutical industry's dissatisfaction with the inadequacies of the current innovative pharmaceutical company certification system, demands are also emerging for greater preferential treatment for top-tier pharmaceutical companies.

The argument is that the R&D tax benefits, government project bonus points, and some temporary drug price preferences provided by the current system are insufficient to offset the risks of developing blockbuster new drugs, which require massive capital and more than 10 years.

In particular, in a situation where the traditional cash cows of domestic pharmaceutical companies have sharply contracted due to the government's recent continuous stance on generic drug price reductions and the expansion of post-management drug price reduction mechanisms, concerns are growing that it is difficult to expand investment in new drug development with only the existing level of support measures.

"Permanent drug price preferential treatment and post-management reduction exemption"… calls for the need for an 'ultra-innovative type'

Accordingly, voices are growing within the industry that an 'ultra-innovative pharmaceutical company' designation track must be newly established for companies that have proven the highest level of innovation capabilities and R&D investment proportion, going beyond the leading and leap-forward type systems.

The core of the ultra-innovative pharmaceutical company support demanded by the pharmaceutical industry is 'substantial and sustainable drug price compensation.' Specifically, top-tier pharmaceutical companies want the introduction of a permanent drug price preferential treatment system and an exemption from the post-management drug price reduction system.

This means guaranteeing permanent and perpetual drug price preferential treatment that fully preserves the value of new drugs, instead of a temporary drug price premium that ends after a certain period, and excluding or significantly easing overlapping drug price reduction mechanisms caused by actual transaction price investigations, the price-volume agreement (PVA), and the expansion of the scope of use.

In such a scenario, revenue obtainable upon successful development would be higher, creating an environment where pharmaceutical companies can more actively and aggressively jump into new drug R&D projects.

An official from a top-tier domestic pharmaceutical company said, "When R&D financial resources based on domestic demand have decreased due to generic drug price reductions, the new drug development risk that companies must bear has grown much larger than in the past," and added, "There is a need to structure unprecedented economic incentives beyond merely relaxing a few regulations by adding criteria for ultra-innovative pharmaceutical companies."

Another official also stated, "For the innovative pharmaceutical company certification system to be a tool for fostering the national biohealth industry, there is a need for a government-level 'selection and concentration' administration that intensively fosters top-tier innovative companies leading global clinical trials and open innovation," and added, "In addition to dividing innovative and semi-innovative criteria, we hope that support measures for top-tier pharmaceutical companies reflecting the realistic demands of the industry will be reviewed."