"Treatment materials vary by type, but most are affected by naphtha supply to some degree. We can hold out for now, but if the current situation drags on, serious problems could arise, and that sense of crisis is spreading across the industry."
With the Strait of Hormuz blockade by Iran triggering both instability in naphtha supplies and a rise in exchange rates, calls are growing to ease the "treatment material exchange-rate linkage system," which manages prices of imported treatment materials.
According to health authorities on the 3rd, the domestic medical device industry proposed improving the treatment material exchange-rate linkage system at the "meeting of health care-related agencies to respond to the Middle East war," chaired recently by Second Vice Minister Lee Hyeong-hun of the Ministry of Health and Welfare.
The industry believes that if the current structure—where the cap adjustment range remains limited despite surges in exchange rates and raw material prices—continues, some companies may be forced to scale back or halt supplies of essential treatment materials.
It says that even if medical device suppliers raise supply prices due to higher raw material costs, hospitals cannot bill for treatment material expense above the National Health Insurance cap, raising concerns about supply disruptions.
In fact, some companies are said to have raised supply prices for disposable syringes and needles by up to 20% starting on the 1st.
A GC Medical Science official said, "For the containers that hold dialysis solution, supply is possible through this month, but some disruptions may occur starting in May."
JW Pharmaceutical, HK inno.N, and Dai Han Pharm, the three domestic manufacturers of infusion solutions, are known to have secured enough infusion bags to last at least through June.
An industry official said, "If the current structure continues, companies that cannot withstand worsening profitability may end up abandoning the supply of essential medical devices," adding, "Ultimately, the damage will fall on patients."
◇ Naphtha doubles, exchange rate tops 1,530 won… "At this rate, we'll stop supply"
The treatment material exchange-rate linkage system adjusts the National Health Insurance cap by reflecting the average exchange-rate change over the previous six months every April and October to stabilize prices of imported treatment materials. If the exchange-rate fluctuation exceeds 2%, the cap is raised or lowered.
Treatment materials are consumable medical supplies used in hospital consultations, tests, and surgeries, and include most disposable items excluding pharmaceuticals and medical equipment. The scope ranges from general consumables such as syringes, transfusion sets, gauze, and sutures, to functional treatment supplies like catheters, endoscopic treatment instruments, and dialysis filters, and to implants such as artificial joints and stents.
Among these, syringes, catheters, transfusion sets, and various medical bags and tubing are mostly made from synthetic resins and are directly affected by naphtha price fluctuations.
However, the industry notes that the current system cannot keep up with the rapid rise in costs as prices of plastic raw materials surge due to instability in naphtha supplies and the won-dollar exchange rate rises at the same time.
On the 31st, amid concerns that the war among the United States, Israel, and Iran will drag on, the won-dollar exchange rate topped 1,531.9 won intraday for the first time since the financial crisis. The market is even mentioning the possibility of a short-term break above the 1,560 level.
According to Opinet, the information site of the Korea National Oil Corporation (KNOC), as of the 31st, the international naphtha price was $141.72 per barrel. That is more than double the $68.87 per barrel on Feb. 27, just before the United States attacked Iran.
The industry says the system needs reform, such as expanding the exchange-rate linkage adjustment rate. For example, if the cap adjustment rate for the 1,300–1,400 won range (about 3%–5%) is expanded to around 10%, companies' capacity to respond could improve by partially offsetting cost pressures even in a high exchange-rate environment.
◇ "Without an overhaul of the cap calculation system, supply instability will recur"
Along with the limits of the exchange-rate linkage system, some say the very structure for calculating the National Health Insurance cap needs to be revised.
Domestic medical devices are supplied to clinical settings through the National Health Insurance benefits system. Treatment materials are managed under a "negative list" approach that recognizes as covered any items not designated as noncovered.
According to the Korea Medical Devices Industry Association, the number of listed treatment material items rose rapidly from 6,759 in 2001 to 17,696 in 2011 and 35,570 in 2023. As of 2022, treatment material expense was about 4.6 trillion won, accounting for 4.6% of total National Health Insurance medical expenses.
Although the number of items and the scale of expenditure have expanded, cases where supply fails to remain stable continue to occur. For example, surgeries have been disrupted by shortages of cardiovascular cannulas used in heart surgery, or the supply of cerebrospinal fluid valves needed to treat hydrocephalus has been delayed.
The industry explains that when the cap is low, it is difficult for corporations to secure profitability, leading to contractions in domestic production and research and development, and ultimately weakening the supply base.
Another industry official said, "For cannulas, the domestic cap is only one-third of Europe's," adding, "It is effectively at cost level."
A Ministry of Health and Welfare official said, "We are reviewing the proposals from the industry from multiple angles." Whether to improve the system will be decided by comprehensively considering future trends in exchange rates and raw material prices.