"The government's released plan to cut generic drug prices by around 40% is just a "compromise plan" referencing Japan. Like the United States, we should introduce a competitive bidding system and bring prices down to the 20% range of the original."
At a forum on the 11th at the National Assembly titled "Securing the sustainability of National Health Insurance finances through drug price system reform," criticism and calls for reform over Korea's drug price structure mounted. The event was co-hosted by Democratic Party of Korea lawmakers Nam In-soon, Lee Su-jin, Seo Young-seok, Jang Jong-tae, and Kim Yoon and by the Headquarters of the Movement for Free Medical Care, and organized by the National Health Insurance Labor Union. Participants stressed, "Reforming the structure of drug spending is a matter of survival for subscribers and the public."
◇ Korea ranks No. 3 in OECD for per-capita drug spending… "Spending doesn't fall even with generics"
According to the Ministry of Health and Welfare, as of 2023 Korea's per-capita drug spending converted by PPP (purchasing power parity) was $969 (about 1.5 million won), 47.3% higher than the OECD average of $658. It ranks third in the OECD after the United States and Germany.
The share of drug spending in National Health Insurance medical costs is also high. It is 20.5% of the total, about 6 percentage points higher than the OECD average of 14.4%. The United States has higher per-capita drug spending ($1,432), but its share of medical costs is 11.5%, about half of Korea's.
Drug costs are similar. According to the Health Insurance Review & Assessment Service (HIRA), drug costs in 2024 were 2.68 trillion won, accounting for 24.15% of the total medical costs of about 100 trillion won.
Professor Na Young-gyun of the Department of Health and Welfare at Paichai University, who delivered the first presentation, assessed that drug spending will continue to rise due to population aging. Na said, "Older adults in Korea currently account for about 20% of the total population, but their drug expenditure reaches 51.7% of the total," adding, "As the practice of polypharmacy—many older adults taking multiple medications daily—continues, the older adult population is projected to reach 40% of the total by 2050."
Na pointed to the "paradox of generics" as the core of the problem. Na said, "In Korea, generics account for 49% of use, but their share of expenditure is also high at 41.7%," adding, "This means that expanding the use of generics does not sufficiently translate into reductions in drug spending." In the United States, generics account for 90% of use, but their share of expenditure is about 20%.
The explanation is that generic prices are expensive. Na said, "In Korea, generic prices are at 53.55% of the original, more than double the OECD average (about 25%)," adding, "Among the 240 ingredients that are frequently prescribed domestically, only 13 (5.4%) have generics priced lower than the original."
Na said, "In fact, prices should be lowered further than the previously released cut plan (around 40%) by the ministry, but it seems a phased approach was taken considering industry conditions."
Na analyzed that about 13.5 trillion won could be saved through drug price system reform, including cuts to generic prices. Specifically, Na proposed a three-step plan: ▲ Mandate International Nonproprietary Name (INN) prescribing to raise the current substitution rate of under 1% to 80% (save 7.9 trillion won) ▲ Introduce a reference pricing system to spur price competition (save 2.6 trillion won) ▲ Cut generic prices to the 20% range through a competitive bidding system led by the National Health Insurance Service (save 3 trillion won).
Na added, "In New Zealand, there are items whose prices have fallen by up to 95% through the national bidding system."
◇ "Clinical confusion from excessive distribution of generics… The drug pricing decision structure must change"
The second presenter, Jeong Hyeong-jun, president and CEO of Wonjin Green Hospital (policy director of the Korean Federation of Medical Activist Groups for Health Rights), argued that the amount of generics circulating in the current market is excessively high. Jeong said, "This reduces efficiency in clinical settings," adding, "There are many products where brand names are similar but ingredients differ, so a mistake can be serious."
Jeong added, "This is an issue that should be reconsidered from the standpoint of patients' right to know," adding, "Patients in our country are not properly accessing information about the drugs they are prescribed. If they go abroad and need to get medicine, they have to look up the ingredient names themselves."
Jeong also raised the need to reform drug price policy governance. The claim is that the authority to list drugs for reimbursement and set prices should be adjusted to a structure centered on the National Health Insurance Service. Jeong said, "Currently, evaluation bodies, re-evaluation bodies, and evaluation entities are proliferating," adding, "For drug price negotiations, pharmacoeconomic evaluations, drug benefit adjustments, and decisions by the Health Insurance Policy Deliberation Committee, the lines of responsibility are unclear."
Jeong said, "As a result, in particular, the effectiveness of the drug re-evaluation system is weak," adding, "Choline alfoscerate, known as a brain nutrient, is sold as a health supplement in some overseas countries, while domestically about 800 billion won in prescriptions are written annually." Most drugs subject to re-evaluation are generics.
Jeong said, "Even if HIRA conducts utilization evaluations for existing procedures and medical materials, it is advantageous for the National Health Insurance Service to exclusively handle reimbursement evaluations for pharmaceutical products," adding, "If, like Taiwan, we are to set a cap on total drug spending relative to health insurance benefits and coordinate it at scale, the National Health Insurance Service has to play that role."
◇ Pharmaceutical industry says "differences in interpreting statistics… The effect of price cuts is limited"
The pharmaceutical industry countered the claim that domestic generic prices are high, saying it is a "difference in how statistics are interpreted."
The Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA) said, "Drug price comparisons can vary depending on the price basis applied, such as ex-factory price, hospital supply price, and pharmacy retail price," adding, "Even for the same item, results can differ greatly depending on the basis used."
It also said that the price indices used in international drug price comparison studies (Laspeyres, Paasche, and Fisher indices) can yield different results depending on how they reflect each country's drug use structure.
The association also argued that lowering generic prices does not necessarily lead to savings in National Health Insurance finances. It cited research showing that patients' out-of-pocket costs rose after the across-the-board drug price cut policy in 2012. The study is "The impact of the 2012 across-the-board drug price cut policy," authored by Professor Kang Chang-hee of Chung-Ang University's Department of Economics and others, and published in the journal "Economic Studies."
The association said, "According to the study, among 13,814 items at the time, the prices of 6,506 items (47.1%) fell by an average of about 14%, but patients' out-of-pocket costs instead rose 13.8%, and the fiscal burden on National Health Insurance also increased due to higher drug utilization," adding, "Drug price policy needs to consider not only price regulation but also industrial competitiveness and supply stability."