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Seoul pushes for 17% drug price cut

Aug. 12, 2011 - 19:13 By
Ministry to reduce caps on prices of out-of-patent pharmaceuticals

The government on Friday unveiled a set of plans to cut generic drug prices by up to 33 percent starting next year, prompting fierce protests from pharmaceutical companies.

The new measures will bring down the prices of some 8,776 of the 14,410 drugs registered to the national health insurance system by 17 percent on average.

The across-the-board cuts will allow patients to save about 600 billion won in annual drug costs and the government 1.5 trillion won in health insurance payouts the Health Ministry said.

The cuts will be achieved by reducing the caps on the prices of pharmaceuticals, which are set by a panel under the Health Ministry.

It will bring about the largest-ever reduction in drug prices since the separation of medical dispensing and prescribing in 2000.

The ministry expects the move to reduce the share of total health insurance payouts taken up by drug expenditure to 24 percent from the current 30 percent.

“Related rules will be revised to implement the measures in January,” Health Minister Chin Soo-hee said in a briefing.

The ministry also decided to scrap the system where drug prices are graded in the order they were registered with the national health insurance program in a bid to accelerate development of generic drugs as soon as the patents of the original drugs expire.

Instead, payments for the same drugs will be capped irrespective of manufacturer to induce competition among pharmaceutical companies to develop better quality drugs.

The ceilings for drug prices upon patent expiration of the original drugs will also be lowered to 53.55 percent of the price before expiration.

Currently, once the patents expire, original drugs are sold at a maximum of 80 percent of the pre-expiration price and generic drugs at 68 percent.

Prices of newly registered medicine, however, will be capped at between 59.5 and 70 percent of the pre-expiration price for a year after registration to induce stable supply.

Patented drugs and special drugs are exempted from the extensive price cuts.

The ministry’s plan, however, was met with strong backlash from the pharmaceutical industry.

“The Health Ministry is pushing ahead with a senseless policy to cut drug prices,” an association of pharmaceutical companies said in a statement.

“We will take all possible means including legal action for the survival of the pharmaceutical industry.”

About 100 chief executives and employees of pharmaceutical firms staged a rally downtown Seoul and some visited the Health Ministry headquarters.

The ministry also unveiled plans to support innovative pharmaceutical companies to be selected based on their research & development performance and potential for exports.

The ministry will create a fund for this purpose, and use the money saved by the drug price cuts for R&D support.

By Kim So-hyun (