The Ministry of Health and Welfare said it will issue a legislative and administrative notice from the 26th through on the 6th of next month for amendments to the Enforcement Decree and Enforcement Rule of the Special Act on Fostering and Supporting the Pharmaceutical Industry and to the Regulations on Certification of Innovative Pharmaceutical Companies, to overhaul the certification standards for innovative pharmaceutical companies.
It said the certification system has been broadly adjusted to tighten investment standards while rationalizing risk assessment criteria.
◇ Raising the lower limit for R&D investment by size… higher bar even for corporations meeting cGMP
Under the amendment, the requirement for certification as an innovative pharmaceutical company—"the ratio of pharmaceutical R&D expenses to pharmaceutical sales"—will be raised by 2 percentage points for each corporate size category.
For corporations with average sales of less than 100 billion won over the previous three years, the threshold will be adjusted from 7% to 9%, while maintaining the minimum research and development expense at 5 billion won or more. For corporations with sales of 100 billion won or more, it will be raised from 5% to 7%. For corporations that meet U.S. or European Union (EU) current good manufacturing practice standards (cGMP or EU GMP) for pharmaceuticals, it will be adjusted from 3% to 5%.
However, considering corporations' preparation period, the standard will apply starting three years after promulgation.
The ministry said an upward adjustment is needed, noting that from the system's introduction in 2012 through 2023, R&D as a share of pharmaceutical sales rose by 1.4 percentage points among listed domestic drugmakers and by 3 percentage points among innovative pharmaceutical companies.
A basis has also been established to operate the system by distinguishing innovative pharmaceutical companies into general innovative pharmaceutical companies and foreign-affiliated innovative pharmaceutical companies.
Foreign-affiliated pharmaceutical corporations may choose to apply under either the general innovative standard or the foreign-affiliated standard, and the weighting of evaluation items related to open innovation—such as attracting domestic research and production facilities and expanding joint research—will be increased. Meanwhile, considering the characteristics of foreign-affiliated corporations whose headquarters hold technology and patents, the scores for items on nonclinical/clinical candidate development and patent technology transfer performance will be partially adjusted.
◇ Reducing evaluation items from 25 to 17… expanding quantitative indicators such as exports and number of clinical trials
The detailed evaluation criteria for certification reviews will also be overhauled.
The total score will be adjusted from 120 to 100, and the number of review items will be reduced from 25 to 17. Some items, such as the scale of research and development investment, the number of clinical trials conducted, and the scale of exports, will be converted into quantitative indicators to enhance objectivity.
A new item on social responsibility activities that contribute to stabilizing the supply chain, including pharmaceutical production and distribution, will also be added to the evaluation criteria.
In evaluating general innovative pharmaceutical companies, the weight for items on partnership and collaboration activities, nonclinical and clinical trial execution, candidate development capabilities, and corporate management transparency will be increased. In contrast, the weighting for items on the size of research personnel, research and production facilities, and R&D strategy will be partially adjusted.
◇ Excluding rebate deductions "when 5 years have passed"… "immediate cancellation within 1 year" upon losing a case
Standards related to rebates in the certification process will also be improved.
Under the current system, administrative dispositions for rebates that occurred more than five years before the certification review have been excluded from the review, but when litigation was filed, the date of the final judgment was deemed the time of administrative disposition. This has drawn criticism that past violations could affect certification evaluations for an extended period.
The amendment clarifies that violations related to rebates that ended five years before the timing of the certification review or the certification extension review will be excluded from review.
In addition, if an administrative appeal or administrative lawsuit is filed, certification may be canceled within one year after a decision or judgment of dismissal. The ministry said it applied similar legislative precedents from the General Act on Public Administration, the Customs Act, and the Act on the Regulation of Violations of Public Order.
◇ Mandating notification of reasons for certification denial… "national fostering strategy to be established within the year"
Measures to improve the system to enhance transparency in the certification process were also included.
The minimum passing score for innovative pharmaceutical company certification, 65 points, will be specified in the notice, and corporations denied certification will be notified of the reasons in detail. The aim is to improve the predictability of certification reviews and acceptance of the system.
A related requirement has also been newly established so that corporations meeting cGMP or EU GMP standards can receive the relaxed R&D expense standard when applying for certification extensions, by submitting supporting documents prepared within three years of the certification expiration date. This rule will apply starting with certification extension applications in the second half of this year.
The ministry said that, using this overhaul as a starting point, it will comprehensively analyze the sales structures, research and development levels, and industrial capabilities of domestic pharma-bio corporations and establish a National Pharma-Bio Industry Fostering Strategy within the year.
Opinions on the amendment can be submitted through the ministry's Pharma-Bio Industry Division or the National Legislative Participation Center until on the 6th of next month.