Government sticks to low-40% pricing for generic drugs

Industry proposed a 48% range, but government reaffirms existing position

The government has reportedly decided to maintain its plan to apply a generic drug pricing ratio in the “low to mid-40% range” compared to original drugs. This position remains significantly different from the compromise proposal of about 48% suggested by the pharmaceutical industry, which had already represented a 10% reduction from the current level. Criticism is expected that the government is not demonstrating sufficient willingness to communicate with the pharmaceutical industry regarding drug pricing policy, despite industry objections.

According to industry sources on the 11th, the MOHW held a subcommittee meeting of the Health Insurance Policy Deliberation Committee that day to discuss the drug pricing system reform plan. In the closed-door meeting, the MOHW reportedly presented a generic drug pricing calculation rate in the low to mid-40% range.

This level is largely consistent with the direction the government presented during last month's HIPDC discussions. Last November, the MOHW reported a drug pricing system reform plan to the HIPDC. This plan included lowering the drug pricing ratio for generics and off-patent drugs from 53.55% to the 40% range.

At that time, the ministry indicated that the new generic pricing calculation standard would likely be set between 40% and below 45%. When presenting the reform proposal, the ministry also outlined a schedule for adjusting the prices of already listed drugs. It stated that products currently priced at 45-50% would begin price adjustments in 2027, with reductions to the 40% range by 2029.

This still shows a considerable gap from the 48% compromise level proposed by the pharmaceutical industry. The pharmaceutical industry has presented its bottom line for an acceptable calculation rate, signaling its willingness to negotiate with the government.

On the 10th, the Emergency Response Committee for Drug Pricing Reform for Pharmaceutical Industry Development held a press conference and proposed joint research with the government, including analysis of price reduction impacts.

At the press conference held by the ‘Emergency Response Committee for Drug Pricing Reform for Pharmaceutical Industry Development’ at the Korea Pharmaceutical and Bio-Pharma Manufacturers Association on the 10th, the committee proposed that “considering the profitability of listed pharmaceutical companies and industry conditions, the acceptable price for generic drugs would be about 48.2% of the original drug price.”

The specific pricing ratio is expected to be confirmed at the full committee meeting scheduled for the 26th. However, the key question is whether there will be a re-discussion process before the agenda is submitted to the full committee meeting.

In this regard, concerns have been raised in the National Assembly that the drug pricing reform plan is being pushed forward without sufficient discussion.

Representative Sunmin Kim of the Rebuilding Korea Party pointed out during the National Assembly Health and Welfare Committee plenary meeting on the 10th that the Ministry of Health and Welfare had attempted to ‘pass NA’ by proceeding with the HIPDC subcommittee and plenary meeting schedules in March without including the drug pricing reform plan in its annual report to the National Assembly.

Representative Joo-min Park of the Democratic Party of Korea, who chairs the Health and Welfare Committee, agreed that a separate briefing on the reform plan is necessary. He told Health and Welfare Minister Eun-Kyoung Jeong, “Since this is an extremely important matter, it would be appropriate to provide an additional report at the plenary session after discussions on the reform plan are completed.”

As a result, the ministry is increasingly likely to provide a separate briefing on the direction of the drug pricing reform plan to the National Assembly before the HIPDC plenary vote.

Currently, the MOHW plans to vote on the drug pricing system reform plan at the HIPDC plenary meeting on the 26th. This plan includes lowering the pricing ratio for already-listed generic drugs from the current 53.55% to the 40% range.

The generic pricing ratio is the key issue in the current drug pricing reform debate. Currently, domestic generic drug prices are set at 53.55% of the original drug price. The government is pushing to reduce this ratio to the 40% range.

In response, the pharmaceutical industry has raised concerns that an excessive price reduction could lead to deteriorating corporate profitability, reduced investment in research and development, and employment instability. As an alternative, the industry proposed a moderated reduction with a pricing ratio of around 48%.