Government to keep generic drug '1+3 rule'

MFDS takes cautious stance despite concerns over generic proliferation and rebate-driven competition

MOHW “MFDS decision to come first… will support more in-house bioequivalence testing”

Industry opposition a factor? Around 80% of shared-test generics still fall under '1+4 or more drug’

The Ministry of Food and Drug Safety (MFDS) has no administrative plans to tighten, abolish or retroactively apply changes to the existing “shared bioequivalence testing 1+3 rule” for generic drugs.

The ministry intends to maintain the current framework, under which one pharmaceutical company conducting a bioequivalence study may share the resulting approval data with up to three other companies, allowing multiple virtually identical generic products (“twin products) to enter the market.

The position is likely to draw criticism that the MFDS is allowing the proliferation of generics to continue, given persistent concerns over the dozens or even hundreds of generic products available for some individual active ingredients in Korea.

The Ministry of Health and Welfare (MOHW), while emphasizing that the shared bioequivalence testing system falls under the MFDS's jurisdiction, said it would cooperate with the regulator to encourage more generic manufacturers to conduct their own studies.

The positions were outlined in responses submitted by the two ministries to the office of People Power Party lawmaker Jong-heon Baek and other National Assembly members on the 12th.

Under Article 31, Paragraphs 12 and 13 of the current Pharmaceutical Affairs Act, a company may consent to the use of bioequivalence data for approval of up to three additional generic products identical to the one for which the data were generated. These provisions form the legal basis of the 1+3 rule, which has been in effect since 2021.

Some pharmaceutical industry participants argue that the rule should be strengthened or abolished to further reduce the number of generic products, citing the continued proliferation of generics despite the restrictions and the introduction of another round of across-the-board generic price cuts, 14 years after the previous reform in 2012.

Others have suggested reviewing whether the shared-testing restrictions should be eased for incrementally modified drugs that require more expensive Phase III clinical trials.

MFDS rules out changes...MOHW “MFDS decision comes first”

Against this backdrop, the MFDS said it has not considered revising or abolishing the 1+3 rule.

The ministry said, “When the legislation was proposed in November 2020, the National Assembly introduced the measure to strengthen the competitiveness of the pharmaceutical industry by limiting the number of products approved using the same bioequivalence data. The MFDS is not currently considering any revision or abolition of the system.”

The MOHW, meanwhile, stated that when calculating generic drug prices, it encourages pharmaceutical companies to conduct their own bioequivalence studies through a differential pricing policy based on compliance with benchmark criteria (submission of in-house bioequivalence test data and use of MFDS-registered active pharmaceutical ingredients), and has tightened the drug price reduction rate for non-compliant companies from the previous 85% to 80% under the revised drug pricing system.

Regarding the possible abolition of the shared bioequivalence testing rule, the MOHW stated that the matter “needs to be reviewed primarily by the MFDS,” emphasizing that the MFDS, rather than the MOHW, is the responsible regulatory authority.

Nevertheless, the MOW said, “We will cooperate with the MFDS to promote independent bioequivalence testing. Also, when we further prepare drug pricing reform plans, we will share the direction with the MFDS and cooperate to expand independently conducted bioequivalence studies. If additional institutional reforms, including abolition of shared bioequivalence testing, are developed in the future, we will also consider drug pricing measures to prevent disruptions to the supply of essential medicines.”

In effect, the MOHW appears unlikely to pursue related pricing reforms unless the MFDS first moves to revise or abolish the shared-testing framework.

Years after implementation, 80% still fall under '1+4 or more'… No retroactive application leaves generic proliferation unchecked.

The problem is that, although roughly six years have passed since the restrictions intended to limit generic proliferation were introduced, contract-manufactured generics based on shared bioequivalence data continue to account for a substantial portion of the market.

The persistent proliferation of generics is particularly concerning because it could encourage aggressive competition through illegal rebates rather than fair pharmaceutical sales and promotion.

In fact, generics manufactured by a single contract manufacturer for more than 11 client pharmaceutical companies account for approximately 47% of all contract-manufactured generics.

At the same time, around 80% of generics using shared bioequivalence data fall into arrangements involving one testing company and at least four other companies, categorized as “1+4 or more.”

This largely reflects the fact that the 1+3 restrictions were not applied retroactively to generic products that had already received approval or completed their approval applications before the amended Pharmaceutical Affairs Act took effect.

One possible reason for the MFDS's reluctance to revise the system is the prospect of conflict with pharmaceutical companies that would oppose its abolition or the retroactive extension of restrictions to previously approved products.

The ruling Democratic Party is understood to have recognized the need to rationalize the shared bioequivalence testing framework following the implementation of drug pricing reform centered on generic price cuts, as part of broader efforts to support Korea's pharmaceutical industry and move away from excessive competition among generic manufacturers.

An official from a Democratic Party lawmaker's office on the National Assembly Health and Welfare Committee said, “Improving the 1+3 shared bioequivalence testing policy is one of the measures that should be considered following the implementation of drug pricing reform. Given the policy's significant impact on the domestic pharmaceutical industry, we will examine whether changes to the system are necessary.”