Price and Discount Laws and Regulations | South Korea | GLI (2023)

In Korea, drug pricing and reimbursement is regulated by the National Health Insurance System ("NHI"), which is a single-payer system operated by the National Health Insurance Service ("NHIS"). Health insurance coverage is lower than in other developed countries, resulting in relatively high patient co-payment rates and a large number of non-reimbursable (not listed) products and services. Reducing the financial burden of these characteristics on patients has long been a government policy goal, and strengthening health insurance coverage by limiting reimbursement costs has always been an important political stimulus in the presidential election. The new government, which took office in May 2022, has also committed to strengthening health insurance coverage for serious and rare diseases. Once a pharmaceutical product is approved, companies can apply to the Health Insurance Assessment and Review Service ("HIRA") to list the product for reimbursement with the NHI. For new drugs, reimbursement listing generally involves a two-step process where: (i) HIRA first decides whether or not the product is eligible for NHI reimbursement, assessing the clinical usefulness and cost-effectiveness of the product; and (ii) the Company and the NHIS will negotiate the maximum reimbursement price (“MRP”) for the product based on factors such as the price of the product in other countries, local prices of comparable drugs and the impact on the NHI budget . For certain oncology medicinal products, orphan medicinal products or antibiotics for which a pharmacoeconomic (“PE”) assessment is difficult, the PE assessment may be waived. The Company may enter into a risk-sharing agreement ("RSA") for certain oncology drugs or orphan drugs used for life-threatening diseases or drugs to improve the quality of life for patients. Fixed MRPs for generics and combination drugs are established according to a fixed schedule and the reimbursement schedule can be completed within three months. Due to the change in the reimbursement system in 2020, all drugs, including generic drugs and health insurance drugs, are required to conclude supplementary agreements that ensure sufficient supply of drugs in the Korean market.

In 2020, 97.2% of Korean citizens were registered with the NHI; Unenrolled individuals receive subsidies in the form of government sick pay. NHI is funded primarily by insurance premiums paid by members and government grants (14%); The remainder is accounted for by tobacco tax health promotion funds (6%).

Although most Koreans are enrolled in the NHI, the benefit they receive is low due to relatively high rates of co-payment (30% to 60% for outpatients, 20% for inpatients) and the relatively large proportion of products and services that do not are refunded , restricted. Patients pay copayments and unreimbursed medications out of their own pockets. In order to reduce the financial burden on patients, a reduced reimbursement rate of 5% and 10% for cancer and rare disease treatments applies. NHI's relatively high copayments and low coverage rate also come with a lower premium rate, which in 2021 was 6.86% of monthly income.

Medications are classified into prescription medications, which require a prescription from a doctor or dentist, and over-the-counter medications, which can be purchased without a prescription at pharmacies (or convenience stores for certain classified medications), such as “insurance”. medicines that should be readily available”). The regulatory agency responsible for drug approval is the Ministry of Food and Drug Safety (“MFDS”).

To obtain approval of new pharmaceutical products (chemical and biological drugs), the company must provide safety and efficacy data, the standards and testing methods used for the product, the Drug Master File ("DMF") and those required for certification submit required Good Manufacturing Practice (“GMP”) data. For imported products, the company must also present a manufacturing certificate from the country where the product is manufactured and a sales certificate from countries where the product has already been registered. After reviewing the submitted data, the MFDS decides on product approval and, if necessary, performs an on-site GMP inspection.

The legal processing period for applications for approval of a new medicine is 120 days; However, the deadline will be suspended if the MFDS requests the completion of the file.

When requesting the approval of the generic medicine, the company must always present bioequivalence data to prove the efficacy; however, depending on the pharmaceutical form or active substance, physicochemical equivalence data or data from a comparative dissolution test can be provided. When requesting the approval of the biosimilar, the company must present quality, non-clinical and clinical compatibility data.

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The determination of whether a drug is prescribed or non-prescribed is made at the time the MFDS reviews drug regulatory materials. The determination is made in accordance with the "Regulation of Pharmaceutical Classification Standards". If a medication is habit-based/addictive or a narcotic/psychotropic and requires the expertise of a physician, it is classified as a prescription medication. A drug that does not fall into the prescription drug category is classified as an over-the-counter drug.

Who is/are the payers?

The Korean NHI is a social insurance system in which the payer is the NHIS, a public body organized on the basis of a statutory mandate. This single payer system was introduced in July 2000 with the passage of the National Health Insurance Act. NHIS responsibilities include: managing policyholders and dependent classifications; raise and collect bonuses; and pay insurance benefits.

Health facilities, including hospitals and pharmacies, have “Health Provider” status in the NHI system. These healthcare providers are responsible for providing various healthcare services (e.g. health checks, tests) and products (e.g. medicines, consumables), the costs of which are borne by the NHIS (up to a maximum amount of reimbursement) and by patients (co-payments). . For some services or products, the patient must pay the full cost out of pocket.

Drug manufacturers and importers who wish to be reimbursed by the NHI for their products must submit a drug review application (with a copy of the product's marketing authorization) to HIRA. The decision on whether the product is eligible for reimbursement under the NHI will be made after the HIRA's Drug Evaluation and Reimbursement Committee ("DREC") reviews aspects such as the clinical usefulness and cost-effectiveness of the product.

How does reimbursement for a new pharmaceutical product work?

Korea operates a "positive list" system whereby only products that have been shown to be clinically useful and cost-effective can be reimbursed by the NHI. For certain drugs with clinical benefit but as yet unproven cost-effectiveness, there is a trial listing system in which the NHI reimburses the drug for a certain period of time, after which its suitability for the drug is reassessed.

New drugs to be included on the reimbursement list must undergo a PE assessment by HIRA, after which the company and NHIS negotiate the product's MRP, which is the maximum price a healthcare facility can receive for the product in question. HIRA's PE assessment takes many forms, and companies can submit data showing the cost-effectiveness of the product versus treatment alternatives (primarily based on current standard of care) or accept an MRP based on Weighted Average Price (" WAP"). comparable products (a company accepting an MRP that is 90-100% of the WAP does not need to negotiate the MRP with the NHIS).

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To improve patient access to new cancer drugs and orphan drugs for which there are no comparable treatments, regulations exempt these drugs from EP review or allow EP review to be performed based on RSAs (if inclusion in the NHI under conditions such as a company refunding a certain portion of the drug price to the NHIS).

The PRM of generic and combined drugs is determined based on a formula established in the regulations.

Companies that disagree with the results of the HIRA review may request a reassessment from HIRA within 30 days of receiving the results of the review. HIRA must generally complete your reassessment within 120 days of your request. However, the likelihood that this reassessment process will produce different results is not high.

How is the refund amount determined? Which methodology is used?

For new and generic drugs, the MRP is defined separately for each product.

For new drugs, the PRM is usually prepared after the EP has evaluated the feasibility of the product and negotiated with the NHIS. The NHIS and the company negotiate the MRP based on factors such as the recommended amount of the DREC, the reimbursement price in other jurisdictions and the local price of comparable drugs. As discussed above, companies can choose to accept an MRP of 90-100% of the WAP of aftermarket products, in which case they can quickly obtain a list of discounts without negotiating with the NHIS. But even in that case, the effect of the fast-listing would be negligible, as the negotiation process required to set the NHI reimbursement price and agreeing on a steady supply of drugs would limit the timeline for the fast-listing.

For generic and combination drugs, the MRP is based on formulas set out in the regulations without a PE assessment and negotiation of the MRP with the NHIS (however, as described below, negotiations must be carried out with the NHIS before an addendum can be entered into ) to: ensure : a sufficient supply on the market) and the repayment amount must not exceed three months. As per regulatory changes that took effect in July 2020, the number of generic versions of a drug and the quality of the generic are reflected in the PRM. Furthermore, under the revised rules, when a generic drug seeks approval, the generic drug manufacturer must negotiate a stable supply contract for that generic drug with the NHIS.

How are drug prices determined? What is the relationship between price and reimbursement?

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When a company submits an NHI reimbursement list request to the HIRA for a new drug, the HIRA assesses the clinical usefulness and cost-effectiveness of the product. HIRA first reviews clinical utility based on data such as clinical trial articles, product reimbursement status in other jurisdictions and applicable reimbursement criteria, and whether the product is considered in clinical practice guidelines or mentioned in textbooks for the disease. relevant.

If HIRA finds the product clinically useful, it assesses whether the drug is cost-effective compared to alternative treatments or comparable drugs. If a drug is clinically superior but expensive, the company must provide PE data. If HIRA determines that there is no improvement in clinical benefit, the company may list the product by accepting an MRP that matches the WAP of treatment alternatives. For certain cancer drugs and orphan drugs for which alternative treatments are not available, the Company may choose to enter into an RSA (based on which, for example, the publicly disclosed list price for the product may differ from the net price ). or be exempt from the obligation to submit PE data, in which case the “adjusted price” (ex-factory price plus national distribution margin and VAT) of the product in A7 countries would be used as a viable price reference. Relevant regulations have recently been amended so that RSAs are now available for certain innovative medicines that help improve quality of life. In addition, the government amended the relevant PE exemption provisions to allow the NHI listing of certain drugs that fall under the category of “antibiotics, tuberculosis treatments or emergency antidotes on the Essential Medicines List” as established and announced by the MFDS ” without presenting PE data.

Once HIRA determines that the product is eligible for reimbursement under the NHI, the company will negotiate with the NHIS (unless the company is exempt from negotiations due to acceptance of WAP-based MRP, in which case the final MRP will be 90 -100% determines WAP). In this negotiation, the price recommended by HIRA is applied as theIn factRoof. Factors considered during negotiation include the price of the product in OECD countries, Taiwan and Singapore, the MRP of treatment alternatives already listed on the NHI, the relative prices of the product and treatment alternatives in other countries, and the potential impact on the INSS. If negotiations with the NHIS fail, the product will not be listed and the company will have to start the HIRA review phase again if they want a product refund.

Discount/refund schemes are generally not permitted, except for products that are subject to an RSA or for which the PE assessment has been waived. This means that advertised and actual prices are the same for the vast majority of drugs in Korea.

Once the product is listed on the NHI, its MRP may be reduced if the volume of the product significantly exceeds what the company expected at the time of the NHI negotiation, or if the volume exceeds a certain threshold due to the expansion of the product's reimbursement scope or the market exceeds growth. Once a product is patent free and generics are listed, the MRP of the original brand/product is reduced. It is extremely rare for a product's MRP to increase after it has been placed on the discount list; this would only occur in exceptional circumstances, e.g. B. when a company tries to withdraw a product from the Korean market because the current MRP is significantly lower than the production/import costs.

As discussed, the MRP for both generic and combination drugs will be set based on a formula once HIRA completes its review, although recent changes have priced generic drugs based on the number of generic drugs approved for use, reimbursement and drug quality. calculated differently. generic.

Furthermore, as noted above, the 2020 Reimbursement Scheme Amendment introduced a process whereby manufacturers of all registered medicines covered by NHI insurance would need to enter into negotiations with the NHIS to enter into an ancillary agreement to ensure adequate coverage with the relevant guaranteed drugs. If the agreed delivery is not met by the manufacturer, the manufacturer faces fines for non-compliance.

As discussed above, demonstrating cost-effectiveness is an important factor considered when defining the MRP, and alternatives (e.g., the WAP-equivalent MRP of alternative treatments or an "adjusted price" that takes into account the distribution margin) as well. may be available nationally. depending on the type of drug.

There are several mechanisms by which the government can reduce the MRP of a product after inclusion in the MRP, including (i) for products sold to hospitals under the MRP (in which case the MRP may be reduced by the actual price to reflect the transaction), (ii) a “price-volume linkage” regime where the MRP of products sold well above the volume forecast by the Company may have their MRP reduced, and (iii) MRP reductions or reimbursement suspension (or imposition of fineinsteadreimbursement suspension) if a company is found to have bribed medical professionals or medical facilities.

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According to US Census Bureau statistics, as of 2016, Korea had the world's fastest aging population and was poised to become a "super-aging" society (where more than one in five people are age 65 or older). more). by 2026. Korea's population over 65 was expected to reach 35.9% by 2050, second only to Japan (40.1%). According to Statistics Korea, the proportion of people over 65 has already reached 16.4% by the end of 2020 and is expected to rise to 46.5% of the population by 2067.

This increase in the elderly population has led to an increase in chronic diseases associated with aging and medical costs in general. Spending on health insurance doubled between 2009 and 2018, from KRW 39.3390 trillion to KRW 77.6583 trillion, according to data submitted to the National Assembly by the NHIS in 2019. health plans was 7.8%; By population groups, the average was higher in the age group above 65 years (11.0%). Total health spending as a percentage of GDP was 8.4% in 2020 and has been rising steadily. This situation has led to calls to promote and prioritize preventive medicine and reduce reliance on expensive treatments for illnesses.

In response to COVID-19, remote medical treatment and drug delivery were temporarily permitted to prevent infection of medical staff and patients, emphasizing the desirability of telemedicine and building public consensus on its adoption. Bills to lift the ban on telemedicine have been successively introduced recently, and the newly elected president has campaigned to expand the mobile form of telemedicine to areas with poor medical conditions.

Advance planning is important for a successful entry into the Korean market. Companies are advised to plan their pricing and access strategy based on the clinical profile of the product well before the product is approved in Korea. Other suggestions to consider would be: involving personnel with knowledge of the Korean regulatory landscape in the planning of clinical trials around the world to ensure that pricing considerations for Korea are adequately addressed; and check in advance for dates likely to be requested by HIRA. If appropriate treatment is included in global treatment guidelines and/or textbooks, this would provide useful support for pricing and access strategy.


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