Pharmaceutical union joins drug price reform battle

Fears of 2012 restructuring trauma resurfacing… “Employment shock for 14,000 workers inevitable”

Unprecedented labor-management cooperation, “Unilateral drug price cuts will destroy industry ecosystem”

Tensions surrounding the government’s drug pricing system reform are increasingly shifting from a policy dispute to a matter of employment security. While opposition had previously been led by pharmaceutical industry associations and emergency response committees, labor unions on the ground that are concerned about potential restructuring have now begun to take direct action, significantly heightening the level of tensions. With even foreign-affiliated pharmaceutical sales unions joining the hardline response, observers predict the conflict could escalate into large-scale protests and coordinated collective action.

According to industry sources on the 30th, the Korea Democratic Pharmaceutical Unions (KDPU) held a placard protest on the 29th in front of the Health Insurance Review and Assessment Service (HIRA) headquarters in Seocho-gu, Seoul, formally declaring its opposition to the government’s proposed drug pricing reform.

The KDPU argued that the policy direction focuses solely on lowering drug prices without sufficiently reflecting the pharmaceutical industry's employment structure and unique characteristics. They also protested, stating that such reforms could lead to job insecurity, a decline in research and development (R&D), and disruptions in the supply of essential medicines.

The KDPU is an industry-wide labor union affiliated with the Federation of Korean Chemical Workers' Unions (FKCU) under the Federation of Korean Trade Unions (FKTU). Its membership is largely composed of sales organization employees at multinational pharmaceutical companies, including Allergan, Takeda, Mundipharma, and AbbVie.  Kolon Pharmaceutical is the only Korean company included.

The KDPU held a picket protest on the 29th in front of the Health Insurance Review and Assessment Service headquarters in Seocho-dong, Seoul, opposing the government's proposed drug pricing system reform plan.

This issue was triggered when the government reported a drug pricing system reform plan to the Health Insurance Policy Deliberation Committee last November. The plan proposes lowering the drug pricing calculation standard for generics and off-patent drugs from the current 53% to around 40%.

The Ministry of Health and Welfare envisions reducing unnecessary drug expenditure by gradually lowering generic drug prices and adjusting the drug pricing calculation method. It plans to reinvest the secured funds into new drugs and innovative medicines to foster a new drug development ecosystem. In response, the pharmaceutical industry has repeatedly voiced opposition, citing concerns over sharp revenue declines, weakened R&D investment, and instability in the supply of essential medicines.

Gi-il Park, chair of the KDPU, whom reporters met at the protest site, cited employment instability as the most critical issue in the government’s proposed reform.

Park said, “The pharmaceutical industry already experienced large-scale restructuring at each company during the forced drug price cuts in 2012. For mid-sized and small pharmaceutical firms with limited profit margins, additional price cuts would render restructuring inevitable.”

Park also strongly questioned the government's argument that drug price cuts would lead to increased research and development (R&D) investment. He pointed out, “Companies can only increase R&D spending if they generate sales and profits. Forcing drug prices down leaves companies with no choice but to cut costs. Ultimately, drugs that become unprofitable will cease production, potentially leading to disruptions in the supply of essential medicines. Actual stakeholders, like pharmaceutical companies and workers, are excluded from drug pricing policy discussions. A consultative body involving labor, management, government, and experts is necessary.”

This marks the first time a pharmaceutical company union has staged a public protest directly targeting the drug pricing system reform.

Previously, opposition to the reform had been led primarily by industry associations and emergency response committees. Since the government unveiled the reform proposal, groups such as the Korea Pharmaceutical and Bio-Pharma Manufacturers Association and the Emergency Countermeasure Committee on Drug Pricing Reform have called for revisions and a postponement of implementation through press conferences and official statements.

More recently, the center of gravity in the debate has shifted toward the industry’s front lines. On the 22nd, a labor–management forum involving pharmaceutical companies and labor representatives was held at the Hyangnam Pharmaceutical Complex in Hwaseong, Gyeonggi Province. Representatives from the FKCU Pharmaceutical and Cosmetics Division and labor–management delegates from tenant companies jointly called for an end to unilateral drug price cuts.

On the 22nd, the Emergency Committee on Drug Pricing Reform for the Development of the Pharmaceutical and Biotech Industry convened a labor–management meeting at the Hyangnam Pharmaceutical Complex in Hwaseong, Gyeonggi Province, urging the suspension of the drug price cut reform.

At the forum, labor representatives from the FKCU Pharmaceutical and Cosmetics Division presented numerical estimates warning of an impending “employment shock.” They estimated that if the reform is implemented, annual revenue losses across the pharmaceutical and biotech sector would total KRW 1.2144 trillion, averaging KRW 23.3 billion per company. Operating profits could decline by an average of 52%, potentially wiping out more than half of industry earnings. Such profitability shocks, they argued, would inevitably push companies to prioritize labor cost reductions, leading to restructuring pressure across production, sales, and R&D functions.

A contraction in R&D and investment is also expected. The division forecasted that if drug price cuts are implemented, pharmaceutical and biotech companies' R&D expenses would decrease by an average of 25%, and facility investments by 32%. For small and medium-sized pharmaceutical companies, the investment reduction could reach as high as 52%. The subcommittee explained that this investment contraction could directly lead to workforce reductions of 1,691 employees (9%) out of the current 39,170 pharmaceutical industry workers, with mid-sized companies facing workforce reductions of up to 12%.

Sang-joon Oh, chair of the Gyeonggi South branch of FKCU, said, “Unstable employment makes it impossible to produce good drugs,” highlighting growing confusion on the ground. Deok-hee Lee, union chair at Ildong Pharmaceutical, warned, “Drug price cuts could ultimately lead to the conversion of regular employees to non-regular status and layoffs, threatening the very survival of the industry.” Given the concentration of small and mid-sized firms in the Hyangnam complex, concerns are mounting that the impact of price cuts could spread to a contraction of the local economy.

On the 27th, the Emergency Committee on Drug Pricing Reform for the Development of the Pharmaceutical and Biotech Industry visited the FKTU and met with its president, Dongmyeong Kim. This meeting further underscored the expansion of a joint labor–management response to the reform.

On the 27th, the Emergency Committee on Drug Pricing Reform for the Development of the Pharmaceutical and Biotech Industry visited the FKTU and met with its president, Dongmyeong Kim to convey the domestic pharmaceutical and bio-pharmaceutical industry's position and concerns regarding the proposed drug pricing system reform.

During the meeting, the emergency committee explained the potential impact of drug pricing reform on industrial competitiveness and employment stability. Both sides agreed that discussions on price cuts should not proceed in isolation from industry and labor considerations, and agreed to maintain close communication and cooperation in future response efforts.

Following these labor–management engagements, the labor movement’s response became more explicit. On the same day the KDPU held its protest, the FKTU released an official statement opposing the reform, marking the union’s first official stance at the central level regarding the reform, and the escalation in its level of response.

In its statement, the FKTU warned that “an approach aimed at short-term fiscal savings through drug price cuts is a dangerous one that could lead to job insecurity and restructuring. The government should take seriously the lessons of past drug pricing policies, which led to confusion on the ground and weakened the industrial base. The basis for reforming the drug pricing system and its fiscal effects must be transparently disclosed, and a social discussion framework where stakeholders' opinions are substantively reflected must be immediately established.”

Observations suggest that if this trend continues, the labor-management conflict surrounding the drug pricing system reform could escalate into a more confrontational phase.

The KDPU stated it is reviewing phased countermeasures, including joint responses with the FKCU Pharmaceutical and Cosmetics Division and the FKTU, or additional protests, depending on the progress of future policy discussions and the schedule of the National Health Insurance Policy Deliberation Committee.

Should demands for a social consensus mechanism go unmet, the possibility of extreme actions such as collective strikes has also been raised.

The FKTU warned, “We will fulfill our responsibility to ensure that the interests of health insurance subscribers and the survival rights of workers are harmoniously reflected in future discussions on drug pricing reform. We will not tolerate any attempt to use this policy as a pretext for deteriorating labor conditions or undermining employment stability.”