South Korea is supporting innovative pharmaceutical companies by revising the health insurance benefits system. The new system of preferential drug pricing, if designed effectively, can boost innovation in the country’s pharmaceutical research, says GlobalData.
According to GlobalData, the pharmaceutical market in South Korea is estimated to grow at a compound annual growth rate (CAGR) of 3.8% to reach $34.3 billion in 2025.
Preferential drug pricing is one of the three strategies South Korea is planning to adopt to promote the growth of eight companies in the pharmaceutical, medical device, and cosmetic industries by 2030. The other two strategies are strictly managing innovative companies and providing aggressive support for overseas expansion of drug makers.
Venkat Kartheek Vale, Pharma Analyst at GlobalData, said: “South Korea’s pharmaceutical market is expected to grow with increasing investments in the industry and rising elderly population that demand drugs to treat diseases of high burden. However, on the other side, high out-of-pocket expenditure is a barrier to patients seeking expensive and innovative treatments. At this juncture, preferential drug pricing can bring some relief to patients by improving access to essential treatments, provided the insurance payers expand the coverage of such drugs.”
South Korea formulated the preferential drug pricing system under the Special Act on the Promotion and Support of the Pharmaceutical Industry. Though the system is established legally, the government has not introduced it due to a possible trade dispute risk. To make the system suitable for international trade orders, the government will start related research in 2022.
South Korea has been following a positive listing system since 2006, which allows only cost-effective drugs to be listed in the national drug formulary. However, to improve patients’ access to essential drugs, the government later decided to exempt essential drugs from cost-effectiveness evaluation. Still, the criteria being very specific made the system ineffective for improving access to such new drugs. Consequently, new systems such as risk-sharing agreements and cost-effectiveness analysis waivers have been introduced.
Vale concluded: “South Korea has been trying to improve patients’ access to essential drugs by adopting new systems, and it is of great interest to see how the preferential drug policy will be an attractive proposition for the pharmaceutical companies. A balanced pricing policy that promotes competitive environment will help the pharmaceutical companies in developing innovative treatments.”
Image credit: Volodymyr Hryshchenko