[Reporter’s View] Rapid support for essential medicines put to the test

As the supply of essential medicines, such as basic IV solutions, is being affected by the aftermath of the Middle East war, attention is focusing on the government’s flexible drug price support measures.

Since the outbreak of the Middle East situation, the government has been pouring out multifaceted measures such as priority supply of naphtha, strengthened monitoring of pharmaceutical supply and demand, and prohibition of hoarding.

While the immediate focus is on supply management, follow-up support measures are also needed. This is because the burden on pharmaceutical companies producing essential drugs is gradually increasing and could potentially lead to supply instability.

In particular, intravenous solutions, where raw materials account for a large portion of production costs, are bearing the brunt of the impact. According to industry sources, the prices of raw materials, which make up about 30–40% of costs, are rising sharply due to naphtha supply instability.

Because it is impossible to know when the Middle East situation will stabilize, pharmaceutical companies producing IV solutions are concerned about mounting losses.

While this varies by product type, basic IV solutions already have low drug prices. This means that the losses pharmaceutical companies must absorb due to rising costs could become an even greater burden.

The government is not sitting idly by. The Ministry of Health and Welfare is strengthening supply and demand monitoring in collaboration with the Health Insurance Review and Assessment Service (HIRA) and the National Health Insurance Service (NHIS). Based on this, it appears they will also review the necessity of raising drug prices.

However, the Ministry appears to be exercising caution regarding how much of the situation is truly attributable to the Middle East war. This is because it is necessary to distinguish between cost increases caused by force majeure supply chain shocks and routine price increases caused by other factors.

While it is positive that the government is considering supporting production through drug price hikes, the issues lie in implementation speed and flexibility.

If the process proceeds via the existing drug price adjustment mechanism, there could be a delay of up to several months between review and actual implementation. This has the limitation of being too slow to defend against cost shocks occurring in real time.

Because the government is monitoring price and supply fluctuations of petrochemical raw materials such as naphtha, it could also use this as a basis for drug price support.

For example, if price increases and supply instability are expected for the next three months, a flexible support mechanism could be implemented that applies price increases only during that specific period. The rate of increase could be determined according to the degree to which subsidiary raw material prices have affected costs.

On the 14th, the Ministry of Economy and Finance and the Ministry of Trade, Industry, and Energy Free Trade Zones announced the “Regulation on Prohibition of Hoarding and Emergency Supply-Demand Adjustment of Petrochemical Raw Materials,” which allows the government to issue supply adjustment orders and provides for compensation for losses incurred in such cases. This reflects the judgment that active government intervention is necessary depending on the severity of the situation.

The Ministry of Health and Welfare recently finalized a reform plan containing measures for “operating a supply-friendly drug pricing system for essential medicines.” The main thrust of the plan is to strengthen proactive support to ensure a stable supply.

The current situation in the Middle East serves as a test bed for applying such a government policy direction. Along with strengthening supply and demand monitoring, there is a need to consider flexible drug pricing support measures to ensure the stable production of essential medicines.