Despite concerns about a weakened process for verifying effectiveness and a heavier burden on the National Health Insurance budget, a drug pricing reform plan that includes fast-track listing for rare-disease treatments passed the Health Insurance Policy Deliberation Committee (HIPDC) on the 26th. The government says the measure is meant to improve access to innovative new drugs, but debate over the purpose and impact of the system is expected to continue, led by civil society groups.
◇ Introducing "list first, evaluate later"… post-listing verification based on real-world clinical data
The Ministry of Health and Welfare finalized the direction of drug pricing reforms at the HIPDC meeting that day, including introducing a fast-track listing process that shortens the National Health Insurance listing period for rare-disease treatments from up to 240 days to within 100 days, improving the cost-effectiveness assessment standard (ICER), and expanding the flexible pricing agreement system.
Under the reform plan, after approval by the Ministery of Food and Drug Safety, the Health Insurance Review & Assessment Service (HIRA)'s assessment period for reimbursement appropriateness will be shortened from up to 150 days to about one month. The National Health Insurance Service's drug price negotiation period will also be reduced from up to 60 days to one month. The government's goal is to manage the entire listing process, including deliberations by the ministry and the HIPDC, within 100 days.
For treatments listed through the fast track, the government will introduce a system to conduct post-listing evaluations of clinical effectiveness and cost-effectiveness using real-world evidence (RWE) accumulated in actual clinical settings. Depending on the results, drug price levels, reimbursement scope, and whether to apply a risk-sharing scheme may be adjusted.
The ICER, the economic evaluation standard for innovative new drugs, will also be revised.
ICER is an indicator that quantifies the health improvement gained relative to the additional expense invested compared with a comparator treatment. Cost-effectiveness is recognized when it is below a certain threshold. It is typically calculated based on per-capita gross domestic product (GDP), and in Korea, about 50 million won has effectively been used as the reference line. For anticancer drugs or rare-disease treatments, it has been flexibly applied up to about twice that level.
The government decided to improve the system to apply the ICER standard more flexibly by applying weights that reflect disease severity, treatment effect, and the impact on the National Health Insurance budget. Related policy research will proceed within the year and will be applied in stages starting next year.
The scope of the flexible pricing agreement system will be expanded beyond newly listed new drugs to include original drugs whose patents have expired, new drugs whose risk-sharing schemes have ended, and biosimilars.
Also known as the "dual-contract system," the flexible pricing agreement keeps the publicly posted list price at a level similar to major overseas countries while the National Health Insurance Service and the pharmaceutical company separately contract for the actual applied price. It separates the posted price from the actual transaction price.
As domestic drug prices have been set lower than overseas, the so-called "Korean passing" of new drugs—where multinational pharmaceutical companies delay or skip launches in the Korean market—has been repeatedly raised as an issue. There has also been criticism that because each country's drug prices are used as reference prices in international price negotiations, a low domestic price level can disadvantage Korean pharmaceutical companies' drug exports.
There has also been criticism that because each country's drug prices are used as reference prices in international negotiations on drug prices, a low domestic price level can disadvantage Korean pharmaceutical companies' drug exports.
The government explained that while it has operated a limited dual-pricing structure in which, for some drugs with uncertain cost-effectiveness, pharmaceutical companies refund part of the insured drug spending to the fund if treatment effects are not proven, there have been criticisms that the conditions are stringent and the eligible scope is limited.
◇ "Concern about fiscal burden from unverified drugs"… transparency worries over dual contracts as well
The government expects the reform to move up the timing of National Health Insurance coverage for rare-disease treatments and innovative new drugs, improving patients' access to care. However, pressure to raise premiums due to increased drug spending and debate over fiscal sustainability are expected to continue for the time being.
The People's Health Movement Headquarters, a coalition of more than 40 groups including the Korean Health and Medical Workers' Union, People's Solidarity for Participatory Democracy (PSPD), the Federation of Korean Trade Unions, and the Korean Confederation of Trade Unions (KCTU), held a press conference on the 24th and argued that the fast-track listing system weakens the existing positive-listing system.
They noted that for rare-disease treatments, there are cases of approval without phase 3 clinical trials, and about 40% of conditionally approved drugs fail to prove effectiveness at the final stage or are withdrawn from the market.
The group also said that if about 50 rare-disease treatments costing several hundred million won per year each are included in reimbursement, additional fiscal burdens in the scale of trillions of won could arise. It also emphasized that once a drug is listed for reimbursement, in practice it is difficult to delist or adjust its price.
There are also concerns that the government's bargaining power on drug prices could be structurally weakened if flexible application of ICER accumulates as precedent. The more precedents are built, the greater the upward pressure could be on the average price level of new innovative drugs.
Earlier, 13 academic experts issued a joint opinion, saying, "Sufficient scientific evidence has not been presented that the current ICER threshold is excessively low," and, "Flexible application by disease severity and raising the threshold should be conceptually distinguished."
There is also continued pushback over expanding the flexible pricing agreement system.
The Association of Pharmacists for a Healthy Society argued in its opinion during the pre-announcement of legislation period that "the public faces restrictions not only in accessing the decision-making process for drug reimbursement, but also in accessing actual price information," and that "there is no way to verify whether fair negotiations have been conducted for all drugs under the expanded system."
They also said that domestic new drugs for cancer and severe diseases are already subject to risk-sharing schemes, and for drugs such as diabetes treatments, prices are set in comparison with existing similar products, raising doubts about whether the flexible pricing agreement system will meaningfully help secure overseas price competitiveness.
The Citizens' Coalition for Economic Justice also said, "A secretly agreed pricing structure can lead to higher patient burdens and waste of National Health Insurance finances," adding, "Expanding eligibility to drugs for which many generics and biosimilars already exist lacks sufficient explanation."