Korea's Reimbursement Steps Spark Drug Price Cut Concerns
Executive Summary
In its first announcement of major health care measures since the Moon Jae-in administration took charge, South Korea unveils steps to hike its national health insurance coverage ratio to levels in advanced countries, raising concerns that this might lead to sharp drug price cuts.
The South Korean government will beef up its national health insurance coverage ratio in a bid to sharply lower medical costs for the nation and protect low-income households from catastrophically high medical expenses.
The Ministry of Health and Welfare aims to raise the health insurance coverage ratio to 70% of all medical costs by 2022 and eventually to 80% in the longer-term, from an early 60% level at present, as the country hopes to hike the ratio to the levels of major countries.
The latest measure is the first major health care step released under the new Minister of Health and Welfare Park Neung-hoo who took charge in July. It has raised concerns in the industry of potentially sharp drug price cuts as the government indicated it will also come up with measures to reduce fiscal spending.
Difficult TO Launch Across-The-Board Cut?
South Korean analysts, however, noted that the government is unlikely to conduct a large-scale drug price cut in the near term as there haven't been any meaningful discussions around this recently. Besides, Korean drug prices are relatively lower than prices in major countries.
The country's drug prices have been steadily falling due to post-launch management, so it will be difficult for the government to launch an across-the-board drug price cut as it did in 2012.
As South Korea's health insurance benefits increase, the country's prescription drug market could grow, leading to revenue increase for the pharma industry, the analysts noted.
The government has decided to release the latest measure as the portion of health care costs covered by national health insurance has remained at around 62%-63% in the past 10 years despite continued efforts to raise health insurance benefits.
"South Korea has high proportion of non-reimbursement so the people are faced with sharply higher medical cost burden compared to the people in advanced countries," said the ministry in a statement.
Among OECD member countries, South Korea had the second highest household medical payment ratio of 36.8% in 2014, after 40.8% in Mexico. This was 1.9 times higher than the average ratio of 19.6% for OECD countries.
More Drugs Eligible For Reimbursement
The latest measure seeks to completely reimburse medical costs, excluding the costs for beauty and cosmetic surgeries. However, in case of drugs with relatively low therapeutic effects versus cost, the government will apply a "preliminary reimbursement" system which will entail different reimbursement ratios for individuals.
This also means more drugs will be eligible for reimbursement. The government will maintain the country's positive list system, in principle, to reimburse drugs that have superior efficacy versus price, but will also actively seek to reimburse non-reimbursed drugs in stages.
The government will flexibly ease the medical cost burden of patients for use of medicines that weren't reimbursed due to ambiguous therapeutic effects versus high drug prices.
It will initially expand reimbursement scope of the drugs that are reimbursed for limited applications, including indications and administration times.
For pricey novel drugs for serious diseases, the government will seek to reimburse them after preparing measures that can prevent weakening of price negotiations.
To implement the plan, the government expects to spend a total of KRW30.6tn ($26.7bn) from the latter half of this year to 2022, using accumulated reserves and state support for health insurance. Along with this, it will also need to raise health insurance premiums to a certain level, but it plans to minimize the nation's burden by maintaining the increase rate at the average hike rate of 3.2% in the past 10 years.
From the editors of PharmAsia News.