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Press Release

Legislation of the new drug-pricing policy announced

  • Date : 2011-11-03
  • Hit : 4948

Legislation of the new drug-pricing policy announced; it is slated to come into effect in next Jan.

-The drug-pricing policy reform plan has been laid out in detail and MOU to eradicate rebates in the health and medical care area will be established

On 1 Nov. 2001, Ministry of Health and Welfare (Minister Rim, Chae Min) issued an advance notice of the legislation of detailed regulations to reform the drug-pricing system upon wide ranges of opinions received from the pharmaceutical industry, in the follow-up to the measures to reform the drug-pricing policy and develop the pharmaceutical industry announced back in 12 Aug. 2011.

It also announced that the MOU to eradicate illegal rebate practices would be established by the end of this year in order to help the health and medical industry create and develop a fair and clean environment for health and medical care, and in the meantime, a detailed plan to assist the industry to make it globally competitive by providing an environment for fair competition would be set up and implemented.

Major details of the revised drug-pricing policy and the direction of the policy package to be executed are as below.

󰊱 Drug-pricing policy
The drug-pricing policy this time maintains the main framework of the plan announced on 12 Aug., while including measures to ensure stable supply of medicines and promote R&D, thus easing the burden on the public and encouraging development of the pharmaceutical industry.

○ Stable supply
The price reduction does not apply to essential medicines such as exclusively-listed drugs, drugs subject to the shortage prevention program, and basic infusion solutions, of which supply could be disrupted by price cuts.
- Medicines produced by a fewer than three companies will be given a price advantage (original: 70%, generic: 59.5%).

○R&D promotion
In line with the policy direction of R&D-based development of the pharmaceutical industry, newly developed drugs and generic drugs manufactured by innovative pharmaceutical firms and produced by chemical synthesis will also be given a price advantage.

○ Medicines already listed
For medicines listed before 1 Jan. 2012, prices will be re-assessed according to the revised pricing policy to give them an equal footing with newly listed medicines.
- To ensure consistency in policies, the ceiling price of drugs that have the same efficacy will be determined by the prices dated 1 Jan. 07 when the original drug price reduction was first introduced following the listing of generic drugs.
- To ease the burden on pharmacists caused by possible disruption in supply and price cuts, if prices are below the lower 25% in price range (below the relatively low price level) among medicines that have the same efficacy, the concerned drugs will be exempted from the reduction.

○ Estimation of the drug price reduction
Drug price reductions in total affected by the new drug-pricing policy are estimated to be 1.7 trillion KRW* (1.2 trillion KRW from health insurance and 500 billion KRW paid by individuals).
* The reduction fell from the estimation on 12 Aug. in an effort to prevent inconvenience on the public side by actively addressing potential supply instability caused by the drastic price cuts and encourage the pharmaceutical industry to more invest in R&D activities by expanding a range of drugs exempt from the price cuts and subject to the price advantage.

○ Future plan
After announced on 1 Nov. 2011, this policy will be finalized and implemented sometime in Jan. next year after going through a certain period of receiving opinions and comments by 10 Dec. 2011, followed by the notification of the price reduction of already-listed drugs (the revised medicine reimbursement list) in Mar. 2012. The drug prices will be actually reduced starting from April.

󰊲 MOU to eradicate illegal rebate practices
Also, in a bid to get rid of illegal rebate practices at the root, which have been the greatest stumbling block to the growth of the pharmaceutical industry, MOU in the health and medical care community will be established by the end of this year. Specific measures to secure actual effects of the MOU will be prepared by creating a consultative body.

○ The industry itself will make a commitment to eradicate rebate practices and strengthen a voluntary monitoring system,
- The government will also actively support the industry by offering incentives to nursing institutions which improve their payment practices and streamline their nursing fee systems and by reinforcing punitive measures on a case of rebate caught such as elimination from the reimbursement list and disqualification of the giver and the recipient from the industry.

○ Expected benefits
MOU, which will be a commitment by the health and medical industry toward the public, is expected to restore the public trust and bring about enhancement the pharmaceutical business value.

󰊳 Measures to nurture the pharmaceutical industry in detail
This will be taken as an opportunity to more aggressively promote measures to nurture the pharmaceutical industry, thus helping Korea’s pharmaceutical companies develop globally competitive products through R&D investments and become a future growth-engine of the nation.

○ The nurturing plan that will be announced within this year will contain qualification requirements for innovative pharmaceutical firms,* expansion of assistance for R&D and performance-oriented promotion, as well as reinforcement of information and personnel support for globalization of the pharmaceutical industry. Additional tax benefits and financial support will be also included upon consultation with related government departments.
* The ratio of R&D to sales, mid and long-term R&D investment plans as well as international research development and cooperation will be comprehensively considered.

󰊴 Consultative body to design a mid and long-term drug-pricing scheme will be created
Furthermore, after the drug price reduction this time, Ministry of Health and Welfare plans to create a consultative body on drug-pricing scheme together with the pharmaceutical and medical communities in order to offer a fundamental pricing scheme the ensures predictability in drug price fluctuation and prepare related measures by March 2012.

○ The market-based ATP system of which the implementation will be deferred for one year will be revised and refined and a mid and long-term drug-pricing scheme to adjust the ever-increasing weight of drug expenses will be designed.

Health and Welfare Minister Rim, Chae Min said, “By implementing the policy package; to reform the drug pricing policy, to establish the fair trade practice through MOU in the health and medical care area, and to nurture the pharmaceutical industry, we will create an environment where the health and medical care industry can expect mutual growth.”

○ He also added, “We will build a strong foundation for predictable, fair and transparent development of the overall health and medical industry including medical treatment materials and medical equipment, etc.”

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