Gastritis treatments developed by domestic drugmakers with mugwort (Artemisia princeps) leaf extract have avoided being pulled from the market.
However, because the benefit will be maintained on the condition of a drug price cut, observers say profitability will decline and restructuring in the natural product drugs and generic (copy drug) markets is inevitable.
The Ministry of Health and Welfare decided at the Health Insurance Policy Deliberation Committee on the 29th to keep coverage for 74 Artemisia leaf–based drugs on the condition of an average 14.3% cut to their insurance ceiling prices. Artemisia leaf is the leaf of mugwort and is used as a medicinal ingredient in traditional medicine.
According to the Health Insurance Review & Assessment Service (HIRA), the average claimed amount over the past three years for gastritis treatments containing Artemisia leaf extract is about 121.5 billion won.
The flagship product is Stilen, developed with in-house technology by Dong-A ST and launched in 2002. Under the latest price-cut decision, the price of Stilen will be reduced from 111 won to 95 won per pill. This is the fifth time Stilen's price has been lowered. Stilen's patent expired in 2015, and a wave of generics has since been launched.
But since being listed under the national health insurance in 2005, debate has persisted for 20 years over insufficient evidence of clinical efficacy. Disputes between regulators and drugmakers have continued over evidence of clinical usefulness, and the drug has ultimately remained in the reimbursed market on the premise of a price cut.
HIRA said, "With the drugmakers voluntarily applying for price reductions, we evaluated the drugs to be cost-effective compared with alternatives and decided to maintain reimbursement at the reduced prices."
With this decision, not only Dong-A ST's Stilen but also 52 other drugmakers, including Daewon Pharmaceutical, Mothers Pharmaceutical, Ahngook Pharmaceutical, Yooyoung Pharmaceutical, JEIL PHARMACEUTICAL, and Chong Kun Dang pharmaceutical, will simultaneously cut prices on their respective products.
For corporations, a decline in profitability is unavoidable. Combined annual sales of Dong-A ST's Artemisia leaf extract tablet Stilen and Stilen 2X, a product that reduces dosing frequency by applying patented technology to Stilen, are around 20 billion won. Combined sales were 20.4 billion won in 2022, 19.8 billion won in 2023, and 17.1 billion won in 2024.
Dong-A ST is aiming to launch the improved new drug DA-5219, developed to enhance dosing convenience and differentiate it from the existing Stilen. DA-5219 is an extended-release formulation that reduces Stilen's dosing from three times a day to once a day. It proved efficacy and safety in phase 3 trials in July last year.
However, some say the price cut for Artemisia-based drugs could make it difficult to set a premium price for the improved new drug. The company said, "We plan to move strategically by fleshing out plans after DA-5219 is approved."
Industry watchers say restructuring in the natural product drug and generic drug markets could speed up. Earlier, the Ministery of Food and Drug Safety ordered drugmakers with 135 Artemisia-based items to conduct clinical trials to prove equivalence. The intent is to allow and maintain approvals if equivalence with the original drug is demonstrated.
With the decision to cut the price of Artemisia leaf extract, clinical trials for equivalence re-evaluation that drugmakers are pursuing are bound to lose momentum. Some corporations have already pulled products from the market, raising the white flag under the burden of clinical trial expense.
Moreover, starting in the second half of this year, the government is pushing to overhaul the drug pricing system, including lowering the calculation rate for generics and patent-expired originals from the current 53.55% to the 40% range.
The plan seeks to improve efficiency in the national health insurance finances and normalize the drug pricing structure, but the industry is strongly pushing back, saying it could cause large-scale sales losses and stifle R&D.
An industry official said, "Under pressure to restructure the generic market, development of natural product drugs is likely to shrink further." The official explained, "Back when natural product new drug development was supported by policy, several corporations moved into development, but enthusiasm waned as the policy stance shifted and during the COVID-19 pandemic."
The official added, "Because a hit to generic sales is inevitable, it is even harder for natural product new drug development to gain traction without policy support," and predicted, "Small and midsize companies focused on generics will see profitability deteriorate further."