As the government pushes ahead with a policy to cut prices of generics, discontent in the pharmaceutical industry is peaking. The government is sending a message to break away from dependence on generics and focus on new drug development, but critics say it is fixated on tightening finances through price cuts while neglecting support for early-stage clinical trials, the seed of development.
In particular, critics say confusion is worsening as authorities have not clearly presented a specific rate of price reduction and are sticking to an opaque process. With the cut expected to be decided at the full meeting of the Health Insurance Policy Deliberation Committee on the 26th, attention is on whether last-minute intervention by the National Assembly will emerge as a variable and reverse the course.
◇ "No basic fitness, but only late-stage trials?"… A "phase 3 fund" that fails to grasp the industry
The Ministry of Health and Welfare plans to invite bids next month for an asset manager to establish a "phase 3 clinical trial-focused fund" worth 150 billion won. The fund is expected to match 60 billion won in government budget, 30 billion won from state-run banks, and 60 billion won in private capital. Through this, the ministry aims to create global success cases for domestic new drugs by 2030.
Industry response is chilly. That is because few domestic corporations have the stamina to single-handedly complete a global phase 3 trial that requires several trillion won. In fact, while Yuhan's Leclaza became the first Korean anticancer drug to enter the U.S. market in 2024, the large-scale global phase 3 trial was handled by its partner, Johnson & Johnson.
An industry official said, "Most domestic new drug development remains in early stages such as preclinical or phase 1, and many of those efforts end in failure," adding, "In this situation, saying the government will support only late-stage trials is proof it does not properly understand the industry structure."
Some also note the market structure in which technology transfer occurs before phase 3 if a candidate is competitive. Another industry official said, "From an industry perspective, expanding support for phases 1 and 2 to induce technology exports is a far more realistic approach."
Questions are also being raised about the fund's size. According to the industry, the average expense to develop a single new drug in the United States is about 2 trillion won, of which 30% to 50% is投入 into phase 3.
An industry official said, "It is questionable how many trials a 150 billion won fund can support," adding, "Even if a substance succeeds in phase 3 through this fund, technology transfer becomes virtually difficult at that stage, increasing the likelihood that the corporations will have to shoulder commercialization themselves."
◇ Price cut rate opaque, with 43% seen as likely… Decision expected at the committee meeting on the 26th
Amid this, the government is accelerating price cuts for generics. But it has yet to present a specific reduction rate. According to the industry, at the subcommittee meeting of the Health Insurance Policy Deliberation Committee on the 11th, the Ministry of Health and Welfare merely reaffirmed the policy direction and avoided mentioning the rate.
In November last year, the ministry announced a plan to lower generic prices from the current 53.55% of original drug prices to the 40% range and signaled implementation in July this year. An industry official said, "During the hours-long subcommittee, the ministry barely mentioned the rate," adding, "It is questionable whether there is any intention to gather industry input."
Inside the ministry, a plan to lower prices to 43% of the original is reportedly under strong consideration. That figure is far below the industry's red line of 48.2%. Another industry official said, "We understand the ministry initially planned to lower the rate directly to 40%," adding, "It appears to have consistently had in mind a steep cut in the low-40% range."
The committee is expected to approve the final plan at its full meeting on the 26th. Although an additional subcommittee is scheduled on the 18th, the price system reform plan has been excluded from discussion.
If the notice is issued immediately after approval, the policy will be finalized, but some expect actual implementation could be delayed to January next year after a grace period to account for on-site confusion.
◇ Pressure for "fiscal savings" persists despite National Assembly variable… "Fact-based debate needed"
The variable is the National Assembly. The Health and Welfare Committee of the National Assembly on the 10th requested a separate report on the price system reform during the ministry's work report. Rep. Kim Seon-min of the Rebuilding Korea Party raised the issue by pointing out that the policy was not included in the work report materials, asking, "Are you pushing reform without reporting to the standing committee?"
Minister Jung Eun-kyeong of the ministry said, "The policy is not yet finalized," adding, "We will brief the National Assembly later through a written report or an in-person visit." However, Health and Welfare Committee Chair Park Ju-min cited the importance of the matter and demanded, "Once the discussion is concluded, provide an additional work report at the full committee meeting."
If a standing committee of the National Assembly requests a work report from the government, the government must comply. For this reason, even if the committee approves the policy, there is talk that the implementation timeline could be delayed or some details revised.
Whether National Assembly involvement will be a savior for the industry is uncertain. That is because concerns about the depletion of health insurance finances are growing not only in the ruling camp but also within the opposition. Recently, Democratic Party of Korea lawmakers Nam In-soon, Lee Su-jin, Seo Young-seok, Kim Yoon, and Jang Jong-tae, who sit on the committee, argued for reform, saying at a forum that "a price structure higher than international standards and excessive oversupply of items are causing fiscal waste."
At the time, Lee Jae-guk, vice chair of the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), who attended the forum, countered, "There is a view that defines generics as a 'cartel' that eats into health insurance finances, but we need a debate based on facts," adding, "The United States and Japan also encourage the use of generics to secure the sustainability of health insurance finances."