The South Korean government's policy to reduce drug prices raises concerns about its potential negative impact on public health and the domestic pharmaceutical industry's sustainability.
The South Korean government is accelerating its policy aimed at reducing drug prices, driven by the need to ensure the sustainability of public health insurance finances. While the intention behind this approach—a concern for health insurance funding—is commendable, there are serious doubts about whether the current implementation adequately considers the health of the citizenry and the fledgling innovation ecosystem for new drug development in South Korea. A reevaluation is necessary, as the impact of these policies could severely undermine both the health of the public and the future of the local pharmaceutical and biotech industries.
A significant focus of the current discussions is the reduction of prices for domestically produced specialized drugs, particularly generic medications. In the short term, such a price reduction may seem to promise savings for health insurance. However, uniformly reducing the prices of generics poses a threat to an already precarious supply chain of essential medicines and could ultimately jeopardize public health and the nation's health security. Examples from other countries, particularly those in Europe using external reference pricing, show that generic drug prices have fallen while costs of living have risen, leading to companies exiting the market and making shortages of vital medications commonplace, even in advanced pharmaceutical nations like Germany and Switzerland.
Moreover, the unique structural characteristics of the South Korean pharmaceutical industry cannot be overlooked. Unlike in the U.S. or Europe, domestic companies have traditionally relied on revenues from generic drugs to fund research and development for new medicines. This successful feedback loop has contributed to a notable increase in the number of new drug approvals and tech exports from South Korea over recent years. However, the current pricing policy resembles a zero-sum game, where the costs of expanding coverage for high-priced innovative drugs are offloaded onto domestic generic drug prices. As highlighted in the case of the immunotherapy drug Keytruda, when a single drug's expanded coverage imposes billions in financial burdens, it becomes unsustainable for domestic pharmaceutical firms, thus threatening their profitability and the overall health innovation landscape in the country.
