Calculation rate for generic drug prices set at 45%

Innovative companies, semi-innovative companies, drug shortage stabilization, and preferential drug pricing

The Ministry of Health and Welfare (MOHW) announces a drug pricing reform plan set to take effect…narrowed down to August 1

Tiered drug pricing, tighter restrictions, from 20 to 13

Prevention of back-door drug pricing reduction through transfers and acquisitions

The government has announced that a drug pricing reform plan, which cuts the drug price calculation rate for currently listed generics from 53.55% to 45%, will take effect on August 1st.

The reform plan also includes improvements regarding the management of multiple-listed items, drug price calculations for transfers and acquisitions, support criteria for drugs subjected to market withdrawal, and criteria for semi-innovative pharmaceutical companies.

On the 14th, the Ministry of Health and Welfare (MOHW, Minister Jung Eun-kyeong) issued a public notice for the partial amendment to the "Criteria for determination and adjustment of drugs." The ministry plans to finalize the amendment after gathering public feedback by July 13th.

The implementation date for the drug pricing reform specified in the amendment notice is August 1st. The government announced that it will gather opinions until July 13th.

Generic drug price calculation rate 45%....products failing to meet requirements will be priced below 36%

First, the drug price calculation rate for currently listed generics will be reduced from 53.55% to 45%. The calculation rate applied to generics that fail to meet the baseline requirements will also be reduced from 85% to 80%.

The baseline requirements for the drug price include whether the company conducted an independent bioequivalence test and whether it used registered drug master file (DMF) ingredients.

Generics that meet all baseline requirements will be priced at 45%, those meeting some requirements will be priced at 36%, and products failing to meet any requirements will be priced at 29%.

In the case of tiered pricing, the price will be cut once the number of listed items with the same formulation exceeds 13. This is a tighter restriction compared to the current threshold of 20 or more items.

If the sum of the newly applied product and the number of currently listed items with the same formulation exceeds 14, the upper limit price will be fixed at 85% of the calculated amount once the price premium period ends.

Innovative pharmaceutical companies, semi-innovative pharmaceutical companies, and supply-stabilizing leading pharmaceutical firms will receive preferential drug pricing. Among drugs that meet all baseline requirements, items from innovative pharmaceutical companies will receive a 60% price premium. The premium rate for items from semi-innovative pharmaceutical companies or supply-stabilizing leading pharmaceutical companies will be 50%.

Definitions for semi-innovative pharmaceutical companies and supply-stabilizing leading pharmaceutical companies were also established. A supply-stabilizing leading pharmaceutical company is defined as a firm whose ratio of low-profit prevention support drugs, or the ratio of billing amounts among its listed drugs, is 20% or higher.

Regarding transfers and acquisitions, the government decided to restrict the succession of existing upper limit prices for items involving a change in a manufacturer's status, excluding inheritance or mergers. Even if a generic item that maintains a high drug price is acquired, the recalculated drug price will be applied from the time of the transfer and acquisition.

This regulation is designed to block back-door strategies to evade drug price cuts by purchasing items that maintain high prices.

Support for drugs facing production discontinuation will be strengthened. The designation criteria for these drugs are KRW 578 for oral medications, KRW 44 per minimum unit for oral liquids, KRW 3,080 for external preparations, and KRW 5,783 for injections.

A new premium clause was also created for pharmaceutical companies that have contributed to supply stabilization. The premium evaluation items include the track record of stable supply fulfillment, national essential medicines, single-listed medicines, low-priced medicines, the use of domestically produced raw ingredients, an annual billing amount of less than KRW 500 million in the previous year, treatments for statutory infectious diseases, and infectious disease crises or urgent supply shortage situations.

Price-volume linkage system officiated…implemented on April 1st and October 1st of each year

The timing of drug price cuts resulting from the price-volume linkage system and the expansion of the scope of use has been unified. The amendment specified that the ex officio adjustment of the upper limit price of drugs will be implemented on April 1st and October 1st of each year, unless there are special circumstances.

In addition, a basis was established for pharmaceutical companies to refund the increased expenditure on health insurance incurred during the implementation grace period to the National Health Insurance Service if a drug price adjustment is issued at a time other than the regular implementation date.

Meanwhile, the MOHW plans to implement the announced reform plan on August 1st. Regulations related to the regularization of the price-volume linkage will apply starting in January of next year (2027). The first regular drug price adjustment will take effect on April 1st, 2027.