Patient & Consumer Alliance says "Structural reform needed for drug pricing reform"

Pointed out issues related to bogus pharmaceutical companies and rebate structures…argued that government support is necessary

Patient & Consumer Alliance for Healthcare Rights (PCA) provided both positive evaluations and concerns over structural limitations regarding the recent drug pricing system reform. The drug price cut is a significant change; However, they argue that a breakthrough reform remains difficult as long as the market remains centered on rebate-driven structures.

On the 27th, the PCA stated as such after the Health Insurance Policy Review Committee approved the "Measures to Improve the National Health Insurance Drug Pricing System" the previous day.

The Patient & Consumer Alliance for Healthcare Rights (PCA) was officially launched on the 24th joined by four public citizens and patient organizations, including the Consumers Union of Korea, the Korea Alliance of Patient Organizations, Citizens' Movement for Consumers, and the Korean Organization for Rare Diseases, with the goal of shifting the current "government-led and provider-centric" medical structure toward a patient- and consumer-centered one (photo= Korean Organization for Rare Diseases).

Previously, the Ministry of Health and Welfare (MOHW) finalized a plan to lower the drug price calculation rate for generics and off-patent drugs from the current 53.55% to 45%. The PCA evaluated this measure as "meaningful progress, marking the first reform of the generic drug pricing structure in 14 years."

However, the PCA stated that price reductions alone are insufficient to eradicate the practice of rebates.

The PCA stated, "Drug prices are not commensurate with rebates and that rebate practices will persist as long as the unfair competitive structure across licensing and distribution remains intact."

They also raised concerns about the tiered price adjustment structure and the newly introduced "New Innovative Pharmaceutical Company" system included in the reform.

According to the PCA, "The grace period of up to 10 years delays market restructuring," adding, "New Innovative Pharmaceutical Company" system lacks clear criteria and evaluation methods, potentially allowing companies without innovative capabilities to be incorporated into the support system.

Furthermore, the PCA identified potential issues with the government's policies supporting the pharmaceutical and biotech industries. They argued that if this continues, with savings from price cuts being reinvested in industrial support, it could result in using taxpayer money to sustain companies with uncertain competitiveness.

The PCA further stated, "The scale and performance of investments into pharmaceutical R&D over the 26 years since the separation of prescribing and dispensing have never been fully disclosed to the public," adding, "Discussions on additional support should be provided only after independent performance evaluations are made public."

Issues were raised regarding the sales structures of certain companies within the Korean pharmaceutical market.

The PCA pointed out, "There may be so-called bogus pharmaceutical companies that maintain market presence through rebate-driven sales via Contract Sales Organizations (CSOs) without possessing production facilities or research capabilities," and argued that "These companies undermine the competitive foundation for legitimate companies."

The PCA stated, "​If this structure persists even after lowering drug prices, companies relying on rebates, rather than those with true competitiveness, will maintain their market status," and adding, "The key is the normalization of the competitive order rather than just price reduction."

The PCA stressed that government support is necessary to improve the pharmaceutical market structure. They called for the immediate launch of a 'Pharmaceutical Market Fair Trade Task Force (TF)' involving the Ministry of Health and Welfare, the Ministry of Food and Drug Safety, and the Fair Trade Commission to promote: ​▲Eradicating rebates and strengthening CSO management ▲​Establishing exit criteria for pharmaceutical companies without production capabilities ▲​Disclosing performance results of financial support for pharmaceutical R&D.

The PCA stated, "Drug price reduction is only the beginning, and as long as the rebate structure remains, patients may not receive benefits," adding, "The government must prioritize creating a foundation for fair competition before returning financial savings to the industry."

The PCA concluded, "We hope this pricing reform serves as a starting point for reform leading to a fair pharmaceutical market," and stated, "The alliance would continuously monitor the implementation process." The PCA emphasized that government support is necessary to improve the pharmaceutical market structure.