[Desk View] An odd policy ensuring high-priced biosimilars

If the government's recent decision to cut generic drug prices is aimed at reducing the National Health Insurance (NHI) financial burden, excluding biosimilars from this reform would be contradictory.

As high-priced original biologics place a significant strain on NHI finances, promoting the use of lower-priced biosimilars could yield substantial financial savings. Patients could also significantly reduce their financial burden through affordable biosimilars.

Major countries are implementing policies to increase biosimilar prescribing rates and dramatically reduce medical expenses. Japan has set a biosimilar market share target of 80% and provides financial rewards for prescriptions.

France also encourages biosimilars to account for 70% of outpatient prescriptions and pays physicians a portion of the savings as an incentive.

In contrast, South Korea's biosimilar prescription rate is merely 21% as of 2021.

Unlike other developed nations, Korea has neither specific targets for prescription rates nor supporting policies. Ironically, the prescription rate remains low, despite the presence of two companies, Celltrion and Samsung Bioepis, that are globally competitive in the biosimilar field.

The government attributes the low domestic biosimilar prescription rate to a preference for original drugs. While this is partially correct, it is also partially flawed.

Another reason is that the government initially set biosimilar prices high to increase export competitiveness, resulting in a lack of price competitiveness with originals in the domestic market.

When a biosimilar is listed for reimbursement, its price is set at up to 80% of the original drug's maximum price. After one year, both the original and the biosimilar are lowered to 70% of the maximum price. This means that the identical pricing structure is also applied to biologics.

Consequently, biosimilars sometimes voluntarily lower their prices below the original to gain market competitiveness. However, in a market as small as Korea, the margin for voluntary price reductions by biosimilar manufacturers is limited.

For this reason, biosimilar prices, which are 40% to 50% of the original price in global markets, remain at approximately 90% of the original drug price in Korea.

This situation reinforces the preference for original drugs due to the negligible price difference and creates reverse discrimination, where only domestic patients bear the burden of high-priced biosimilars.

To increase the biosimilar prescription rate, it is necessary to lower the price ratio relative to the original. Under the drug pricing reform, generic drugs will be set at approximately 45% of the original drug's maximum price. However, biosimilars are expected to maintain a guaranteed 70%. It is unrealistic to guarantee a 70% price point while hoping to drive up prescription rates through "low-cost biosimilars" at 40% to 50% of the reference price, as seen in other countries.

Because biosimilar prices are kept above a certain level, the margin for price reductions on original drugs is also limited. This places a heavy burden on NHI finances. Even if the prices of cheap generics are cut, the contribution to fiscal savings will be low if the prices of expensive biologics remain unchanged.

Despite these issues, the government conversely raised the price weighting from 70% to 80% in 2016 to support the competitiveness of the biosimilar industry. However, it must be recognized that the consumption volume of biologics in the domestic market has changed significantly since 2016. Biologics have now taken over major therapeutic markets, led by products like Prolia, which dominates the osteoporosis market thanks to its efficacy and convenience, and by various immune-oncology agents that have revolutionized cancer treatment.

The problem is that these biologics are high-priced compared to synthetic drugs. Despite market growth, competition among biosimilars is also intensifying, and the domestic pricing structure limits the potential for cost savings.

The government should first consider abolishing the identical pricing policy and lowering the price weighting.

Incentive policies for biosimilar prescriptions, like those in other developed nations, may be necessary. In fact, this is needed not only for biosimilars but also for generic drugs. Significant fiscal savings result from replacing high-priced original drugs.

Fundamentally, the government should favor prescribing low-cost generics or biosimilars to encourage companies to lower their prices voluntarily.

However, it is unclear why the government continues to push for maintaining the original-generic (biosimilar) identical pricing mechanism while favoring a collective generic price reduction policy. In particular, the rationale for the government's push for a collective reduction in generic prices while maintaining a high-price guarantee policy for biosimilars remains unclear.