[Reporter’s View] Add a ‘super-innovative’ pharma track

The Ministry of Health and Welfare has begun a full-fledged overhaul of its certification program for innovative pharmaceutical companies. The reform comes over a decade after the program was launched alongside the enactment of the Special Act on Fostering and Support of Pharmaceutical Industry.

The pharmaceutical industry has welcomed the government’s move to replace the existing single-tier certification system with separate ‘leading’ and ‘growth’ tracks, institutionalize tailored incentives for each, and create a new certification track for overseas multinational drugmakers alongside Korean companies. The changes are also expected to help the ministry address longstanding criticism of operating an ‘impractical innovative pharmaceutical company certification program’ that has offered little in the way of meaningful benefits.

However, Korea’s top-tier pharmaceutical companies seeking to take homegrown new drugs to global markets are calling for the ministry to go a step further. They propose creating a new, tentatively named “super-innovative pharmaceutical company” track above the existing innovative-company designation, with permanent preferential drug pricing and exemptions from post-listing price cuts rather than temporary pricing incentives.

The call for another upgrade may appear premature when the government has only just begun selecting companies under the reformed certification system. Yet there are also legitimate concerns that the current framework could dampen leading drugmakers' appetite for new drug development if, even after investing enormous sums in R&D, they remain subject to an extensive array of post-listing price controls, including price-volume linkage and actual transaction price surveys.

The ministry should therefore begin by positively considering a legislative amendment that would strengthen the preferential pricing provision under the current Special Act on Fostering and Support of the Pharmaceutical Industry, changing it from a discretionary provision stating that preferential treatment “may” be granted to a mandatory provision stating that it “shall” be granted. From there, it should begin a broader process of considering industry proposals, including the creation of a super-innovative pharmaceutical company track.

In particular, the creation of a dedicated certification track for multinational drugmakers has undercut the ministry’s previous argument that further reform could trigger trade disputes, including concerns over compliance with the Korea-US Free Trade Agreement. With a framework now in place to address concerns over discriminatory treatment between domestic and foreign companies, that argument has lost much of its force.

With a framework now in place to offer more aggressive incentives to companies that meet objective standards for R&D contribution and innovation, the government should accelerate efforts to identify preferential measures capable of driving faster growth in Korea’s pharmaceutical and biotech industry.

If Korea wants to foster the innovative pharmaceutical companies of the future, the government must also put forward a next-generation policy framework that matches their level of innovation. It is time to give serious consideration to the industry’s proposals for a “super-innovative” track and mandatory preferential treatment, and build a virtuous drug-pricing ecosystem that ensures pharmaceutical and biotech companies investing boldly in innovation are duly rewarded in the market.