Generic listings plunge 75% as 45% pricing rate takes effect next month

Affected by the pricing reform that takes effect next month, which includes revisions in the pricing rate, criteria requirements, etc

Monthly average of 74 listings from Q1 to Q3…falls to 18 in October

Sharp contrast with 126 listings in September...Later generics lose momentum for entry

The number of newly listed generics has plunged in October, the first month in which the lower pricing rate under Korea’s revised drug pricing system is applied to the reimbursement list.

An average of 74 drugs subject to formula-based pricing were listed each month during the first three quarters of this year, compared with just 18 in October, marking a sharp slowdown in the entry of later generics.

According to industry sources on the 28th, generic listings are set to decline sharply next month as the impact of the drug pricing reform, including a reduction in the base pricing rate from 53.55% to 45%, begins to be reflected in reimbursement listings.

Although the revised drug pricing rules took effect in August, the time required for reimbursement applications and reviews makes October the first month in which products are listed under the new system. In practice, the revised pricing rules apply to drugs for which reimbursement applications were filed from July.

As a result, new entries have dropped sharply after a rush of products sought reimbursement ahead of the reform to avoid the lower pricing rate.

Generic entries in October have fallen sharply following implementation of the drug pricing reform. AI-generated image.

Only 18 products, including those involving transfers of marketing rights, are set to be listed next month, the lowest monthly figure this year. The number of newly listed drugs was ▲34 in January, ▲53 in February, ▲51 in March, ▲84 in April, ▲84 in May, ▲67 in June, ▲69 in July, ▲98 in August and ▲126 in September.

Compared with the monthly average of 74 listings during the first three quarters, October’s 18 products represent only about 24% of the average. The figure also stands in sharp contrast to the 98 and 126 products listed in August and September, respectively, immediately before the revised pricing system began to affect new listings.

The changes having the most direct impact on later generic entry are the lower base pricing rate and steeper reductions for products that fail to meet the pricing criteria.

The base pricing rate has been lowered to 45%, while the rate applied when one of the criteria is not met has been reduced from 85% to 80%. As a result, prices of generics meeting both criteria can be priced at 45%, those meeting one at 36%, and those meeting neither at as low as 28.8% of the base price. This gives later entrants less incentive to enter the market when they fail to meet the criteria, including in cases involving outsourced bioequivalence studies.

The stepwise price reduction mechanism has also been tightened, with price reductions now applied from the 14th listed product, instead of the 21st. A new rule also requires products listed simultaneously with the product that triggers the 14-product threshold to have their prices reduced to 85% after one year.

In markets where numerous products with the same active ingredient are already listed, the reimbursement price available to later entrants therefore falls progressively, making market entry considerably less attractive.

The sharp decline in October listings appears to reflect the combined effects of the lower pricing rate, tighter stepwise price cuts and measures governing multiple listings.

Industry officials said companies have inevitably taken a more cautious approach amid the broad overhaul of the drug pricing system. They added, however, that the actual impact of the reform will need to be monitored beyond October, as calculations and strategies differ among companies.

An industry official said, “Due to the reform, companies have far less incentive to enter markets that are relatively small or already crowded with competing products. It is difficult to determine the impact of the reform based on a single month, but listings are unlikely to return to their previous levels.”