The government will lower the insurance drug prices for generics and off-patent medicines starting in Aug., but some expect little change in what patients actually pay. Some also warn that pharmacies will face a heavier burden settling inventory and that supply disruptions could recur for essential medicines with low profitability.
◇ Payment amount stays the same… pharmacies face an inventory settlement headache
What the government is cutting this time is not the price at which pharmacies sell drugs. It is the insurance drug price (ceiling amount) that serves as the basis when the National Health Insurance calculates drug costs.
Starting on the 1st, the pricing rate for generics and off-patent medicines was lowered from 53.55% to 45%. Patients pay part of this, and the National Health Insurance pays the rest. Thus, when the insurance drug price goes down, the patient's share also decreases.
However, the actual impact may be limited. Generics are already inexpensive, and what patients pay includes not only the drug cost but also dispensing fees and medication counseling fees. Even if drug prices fall somewhat, the final amount paid at the pharmacy may not change much.
The savings are also modest. For example, for a generic of the hypertension treatment "Norvasc," based on the current price (367 won), taking one tablet a day for a year puts the annual drug cost at 133,955 won. If the price drops to 318 won under the revamp, the annual cost falls to 116,070 won. Applying the 30% patient coinsurance rate, the actual savings for a patient amount to about 5,400 won a year.
But savings could be relatively larger for generics of anticancer drugs or rare disease treatments, where the base price is high. Korean Pharmaceutical Association Vice President Lee Gwang-min said, "If someone takes the same drug for a long time, they may feel some reduction, but most outpatients will find it hard to notice a difference."
Pharmacies, on the other hand, will shoulder another burden.
When prices are cut, the value of existing inventory also falls. Pharmacies must check inventory item by item and provide documentation to settle the difference with manufacturers or wholesalers. As price adjustments are repeated, the administrative burden inevitably grows.
Lee said, "We are not opposed to price cuts per se, but if the number of affected items is large and adjustments are repeated, smaller pharmacies will find it harder to operate."
◇Low-profit drugs disappear first… the warning from lorazepam
The medical community is worried about the supply of essential medicines.
If prices fall, manufacturers may stop producing some medicines whose profitability declines. There is particular concern that essential medicines that are not widely used but are indispensable in emergency rooms and intensive care units could be affected first.
Korean Medical Association Organization Insurance Director Cho Won-young said, "Doctors do not change prescriptions because of price cuts, but if manufacturers start scaling back production of low-profit items, the options for what can ultimately be prescribed will inevitably shrink."
Cho added, "Drugs with lower prices could disappear from the market first," and said, "Patients will ask why their usual medications are gone, and doctors will face a greater burden explaining as they switch prescriptions to other drugs."
Even items long used in the market are not free from low-margin problems when they are essential medicines. A representative case is the lorazepam injection. This drug is the first essential medicine administered to patients in status epilepticus (an emergency in which seizures do not stop) or children with seizures.
The previous manufacturer, Ildong Pharmaceutical(249420), halted production in 2023, citing worsening profitability and aging facilities. After the field held out with remaining stock, in May Samjin Pharmaceutical(005500) agreed to manufacture it, averting a supply gap.
◇ Essential drug outages keep recurring… "compensation before production stops is needed"
The pharmaceutical industry expects similar cases to repeat.
Taejoon Pharmaceutical's "Benokain," used to anesthetize the throat before endoscopy, has already ceased production, and there are concerns about supply disruptions for the remaining alternatives. On the ground, the view is that even the remaining substitutes will run out of stock in the second half of this year.
The limits of the exit-prevention essential drugs program are again coming into focus.
This program designates and manages medicines that are essential for patient care but face production stoppage risks due to low profitability. However, for many items, prices have long failed to reflect reality, and production remains concentrated in specific manufacturers.
According to data submitted to the National Assembly last year, of 628 exit-prevention essential drugs, 197 items—about one-third—had their prices frozen for five years or more, and 57 of these have maintained the same price for over 20 years.
A representative at a company producing exit-prevention essential drugs said, "Ildong Pharmaceutical's 'Ativan (lorazepam)' was also an exit-prevention essential drug," and added, "Most keep producing out of social responsibility despite losses, but corporations cannot shoulder losses indefinitely."
The Health and Welfare Ministry says it will minimize supply disruptions through phased price cuts and support for exit-prevention essential drugs. But critics say the existing after-the-fact response is insufficient.
Insurance Director Cho said, "We need to proactively manage low-priced essential medicines at risk of production stoppage and set up a compensation framework at an appropriate level."