The Ministry of Health and Welfare has implemented a new scheme to reduce the drug prices since January, 2012. The new medicine price system is the result of 『A set of measures to reconstruct medicine price schemes and strengthen the pharmaceutical industry』 introduced last August, 2011, which includes the revision of the system to set drug price to reduce the expenses for the purchase of drugs by individuals and measures to support the specialization of pharmaceutical companies focusing on innovation.
Under the plan, the gradual system fixing different prices for the drugs with the same substances according to the order they are listed on health insurance has been abolished since this January. From now on one price cap will be given for the drugs that have the same ingredients so that pharmaceutical companies will give up the current practice to list generic (copy) medicines earlier than others and try to compete to improve the quality.
The price cap will be reduced to 53.55 percent from the previous 68~80 percent of those of the original ones prior to the expiration of their patents and drug manufacturers will be encouraged to compete freely within the range of the price. The range of the price cap will remain between 59.5 percent and 70 percent in order to promote more stable supply of drugs and faster listing of generic medicines for a period of 1 year after the original patent expires.
This scheme will apply to already listed drugs, resulting in cutting the price of most drugs to about 53.55 percent of the original prices. The new drug price system is expected to reduce the expenses for drug purchase by 1.7 billion dollars.
Pharmaceutical industry has strongly opposed the collective drug reduction scheme and continuously proposed a gradual reduction from 2014 to relieve the financial burden of the industry; however, these have not been accepted.
Under the new government policy, drug manufacturers will be forced to adopt measures to restructure their operating system including cutting sales and R&D costs and laying off employees to survive.
In addition, the Korean Pharmaceutical Association is working on establishing a ‘Drug price gap compensate system’ so that the process of compensation among drug-makers, drug wholesalers and pharmacies is carried out as smoothly as possible because there are price differences in the drugs already purchased by pharmacies.