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‘Korea should introduce indication-specific drug pricing’
  • By Kim Yun-mi
  • Published 2020.08.31 15:28
  • Updated 2020.08.31 16:29
  • comments 0

“Korea must introduce a system to apply different prices for a drug’s multiple indications, to guarantee patients’ access to additional indications.”

Lee Young-shin, CEO of the Korea Research-based Pharmaceutical Industry Association (KRPIA), said so in an interview with Korea Biomedical Review. KRPIA is a group of multinational pharmaceutical firms operating in Korea.

With the arrival of drugs with astronomical prices that cost millions of won per year, the tug-of-war in drug pricing between the government and multinational pharmaceutical companies is intensifying. The government wants to curb increasing drug costs, while multinationals seek to introduce new expensive drugs to the Korean market.

Lee, who took office in September to manage KRPIA’s dealing with the government, said that the group’s communication with the government has become more important. She also emphasized that the government should expand risk-sharing agreements (RSA) and introduce indication-specific drug pricing. She explained why as follows.

Lee Young-shin, CEO of the Korea Research-based Pharmaceutical Industry Association (KRPIA), speaks during an interview with Korea Biomedical Review.

Question: What is your impression of the industry while working for the past year as CEO of a group of multinational pharmaceutical companies?

Answer: I have learned new things and the current status of the industry in the past year. Each member company has different priorities but the association encouraged them to set down their priorities and discuss common topics. KRPIA has seven committees and 50 meetings including those for task force teams and working groups. Out of various issues, we put the top priority on drug pricing. Drug pricing is one of the agendas that are prioritized not only for KRPIA members but also for many other stakeholders.

Q: Why have multinational drug companies demanded the government revise drug pricing policy persistently?

A: We have to see the Korean pharmaceutical sector not simply as a part of the Korean industries but from a global perspective. If the government makes an environment that does not recognize the value of innovative drugs with illogical reasoning that “drug prices should be low no matter what,” not only multinationals but local companies will find it difficult to develop new drugs. To help pharmaceutical firms continue to make innovative drugs, the government should guarantee adequate drug prices. If a Korean pharmaceutical firm develops a new drug and exports it, Korean people will expect that the Korean company could sell the drug at an adequate price in advanced countries.

Many would have various opinions on what is an appropriate price. In developed countries including Korea, it would be reasonable to use the OECD average price as a standard. KRPIA proposes that we should discuss drug prices considering the average drug prices of OECD. Drug prices are closely related to values for patients. Patients, the government, and pharmaceutical companies all want to make innovative new drugs accessible to patients as soon as possible. KRPIA has tried to find a way for all three of them to win and suggested that “flexible application of the RSA system” would be the answer.

Q: KRPIA and the government may need to narrow down their differences of opinions on “the appropriate drug prices.” Recently, new drugs with unprecedentedly hefty price tags have emerged. What are your thoughts on these drugs?

A: Expensive medicines will continue to come out in the market. This phenomenon occurs as therapeutics evolve from synthetic chemical drugs to biological drugs, cells, and genes. KRPIA also hopes that companies could supply low-priced treatments. However, the pharmaceutical industry has to take lots of risks to make a new drug. It costs about 3 trillion won on average to develop a new medicine. For continuous reinvestment and R&D, companies need recognition for their innovation. Given new drugs’ innovativeness and social needs, the government needs to discuss the flexible application of the incremental cost-effectiveness ratio (ICER) threshold.

What the government, drug companies, and patients can all benefit is to use the RSA system. KRPIA hopes that the RSA system could be used more flexibly. The government will be able to negotiate the prices of expensive medicines within the RSA system. Compared to other countries, Korea does not have many examples of RSAs. According to the government’s analysis of overseas data, there are about 10 to 20 examples of RSAs. As each nation has a different operation method, the government has to look at which example Korea could benchmark and which needs a revision if Korea introduces it.

Q: The government plans to revise the drug pricing policy despite the resistance from domestic pharmaceutical companies. But why does KRPIA remain silent?

A: Local drug companies deal more with generic drugs than new drugs. This is why mentioning a generic drug policy is a sensitive issue. I do not think it is appropriate for KRPIA to touch upon such sensitive matter. But one of the advantages of the local pharma industry is that most companies have their production facilities. From a broader perspective, they need to find an opportunity to export more generic drugs. Amid the Covid-19 situation, Korea’s healthcare system is gaining stronger support. KRPIA and local companies could work together to solidify the nation’s global healthcare power.

Q: Except for RSA, what else in drug pricing policy should the government improve?

A: The indication-specific pricing is a must to guarantee patients’ access to drugs’ additional indications. Many other countries including Australia have already adopted the system. KRPIA has already submitted its opinion on the matter to the Health Insurance Review and Assessment Service (HIRA) and the National Health Insurance Service (NHIS). Under the local system that sets the same price to the same agent, it may be difficult to introduce the multi-indication pricing system. However, KRPIA plans to continuously discuss this with the government to introduce the new system.


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