"The government's released plan to cut generic drug prices by 40% is just a "compromise plan" referencing Japan. Like the United States, Korea should introduce a competitive bidding system to push prices down to the 20% range of the original."
At a forum on securing the sustainability of National Health Insurance finances through drug price system reform held at the National Assembly on the 11th, criticism and calls for reform over Korea's drug price structure continued. The event was co-hosted by Democratic Party of Korea lawmakers Nam In-soon, Lee Soo-jin, Seo Young-seok, Jang Jong-tae, and Kim Yoon and the Headquarters of the Free Medical Care Movement, and organized by the National Health Insurance Labor Union. Experts said, "Reforming the structure of drug expenditures is a matter of survival for subscribers, the public."
◇ Korea ranks No. 3 in OECD for per capita drug spending… "Even with generics, expenditure doesn't fall"
According to Na Young-gyun, a professor in the Department of Health, Medical Care and Welfare at Paichai University, Korea's per capita pharmaceutical expenditure in 2023 was $969 (about 1.5 million won), 47.3% higher than the OECD average ($658). It ranks third in the OECD after the United States and Germany.
The share of drug costs in National Health Insurance medical expenses is also high. In 2024, drug spending was 2.68 trillion won, accounting for 24.15% of the roughly 10 trillion won in total medical expenses. More than one-fifth of medical costs are expended on drugs.
The main factor cited was the increase in drug expenditures due to population aging. Na said, "Older adults account for about 20% of the domestic population, but their drug expenditure reaches 51.7% of the total," and noted, "Annual outpatient visits reach about three times the OECD average (18 visits), and the practice of polypharmacy, in which many older adults in long-term care facilities take several types of drugs daily, continues."
Na said the "paradox of generics" is worsening the problem. In Korea, generics account for 49% of use, but their expenditure share is also high at 41.7%. In other words, expanding the use of generics has not sufficiently translated into lower drug spending. By contrast, in the United States, generics account for 90% of use, but their expenditure share is about 20%.
Na said, "Korean generic prices are at 53.55% of the original, more than twice the OECD average (about 25%)," adding, "Among the 240 ingredients commonly prescribed domestically, generics are lower priced than the original in only 13 cases (5.4%)."
He analyzed that reforming the drug price system could save about 2.7 trillion won, roughly half of drug spending. Specifically, he proposed a three-step plan: ▲ expand the substitution rate to 80% by mandating international nonproprietary name (INN) prescribing (save 1.58 trillion won) ▲ induce price competition by introducing a reference pricing system (save 520 billion won) ▲ cut generic prices to the 20% range through a competitive bidding system led by the National Health Insurance Service (save about 600 billion won).
Na added, "In New Zealand, some items have seen prices drop by as much as 95% through a national bidding system."
◇ "Expanding INN prescribing is key to price competition"
Jeong Hyeong-jun, president of Wonjin Green Hospital (policy director of the Korea Health and Medical Workers' Union), the second presenter, stressed the need to expand INN prescribing. Jeong said, "Korea's pharmaceutical market has an entrenched competition structure centered on sales and promotion," and noted, "If INN prescribing expands, price competition among drugs with the same ingredients can be activated."
Jeong first proposed a pilot project for INN prescribing targeting out-of-stock drugs and drugs protected from delisting. Applying INN-based prescribing would allow substitution with drugs of the same ingredient, improving supply efficiency.
He also raised the need to reform drug price policy governance. He argued that the authority to list new and generic drugs for reimbursement and to set prices should be reorganized to center on the National Health Insurance Service.
Jeong specifically cited the scale of prescriptions for choline alfoscerate (a brain supplement) to point out the lack of effectiveness in the drug re-evaluation system. He said, "Choline alfoscerate is sometimes sold overseas as a health functional food, but domestically about 800 billion won in prescriptions are written annually."
He also mentioned the long-term need to establish a public pharmaceutical company under the National Health Insurance Service. As more private pharmaceutical companies halt production due to profitability issues, he said a public production system is needed to ensure the stable supply of essential medicines.
◇ Pharmaceutical industry: "Differences in interpreting statistics… limited effect from price cuts"
The pharmaceutical industry refuted the claim that domestic generic prices are high, saying it stems from differences in how the statistics are interpreted.
The Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA) said, "Drug price comparisons can yield different results depending on the pricing basis applied, such as ex-factory price, hospital supply price, or pharmacy retail price," adding, "The comparison results for the same item can vary greatly depending on which basis is used."
It also said that the price indices used in international drug price comparison studies (Laspeyres, Paasche, and Fisher indices) can produce different results depending on how each country's drug utilization structure is reflected.
It also emphasized that the prices of some essential medicines are lower than in major countries. According to the association, the antibiotic price index (as of 2022), with Korea as 1, was 3.34 for the United States, 1.73 for Canada, 1.81 for Germany, and 1.55 for the United Kingdom.
The association said the domestic price of a 100 ml normal saline product is about 1,220 won, lower than in the United Kingdom (9,865 won) and Canada (5,559 won), and the 500 ml product is also about 1,293 won, lower than in Australia (7,509 won).
The association also argued that cutting generic prices does not necessarily lead to savings in National Health Insurance finances. It cited research showing that patients' out-of-pocket costs increased after the across-the-board drug price cut in 2012.
The association said, "At the time, among 13,814 items, 6,506 (47.1%) saw average price cuts of about 14%, but patients' out-of-pocket costs increased 13.8%, and higher drug utilization also raised the financial burden on National Health Insurance," adding, "Drug price policy needs to consider not only price controls but also industrial competitiveness and supply stability."