Korea's pharmaceutical industry pushed back against the government's aggressive drug price reduction policy, warning it could collapse the domestic industry ecosystem.
The industry particularly opposed the move as production costs have reached critical levels amid a "quadruple whammy" of surging oil prices, exchange rates, raw material costs, and logistics fees triggered by Middle East tensions. Companies warned that forcing through massive price cuts under these conditions would undermine R&D investment, the engine of future growth.
The Emergency Committee for Drug Pricing System Reform for Industrial Development, comprising seven organizations including the Korea Pharmaceutical and Bio-Pharma Manufacturers Association, held a press conference on the 10th at the association's headquarters in Seocho-gu, Seoul. The committee formally proposed a comprehensive review of the price-cutting policy and joint research between the government and industry.
The core of the government's reform plan is to lower the price calculation ratio for new generic drugs from the current 53.55% to the 40% range. The committee estimated that implementing this plan would reduce total industry sales by up to 3.6 trillion won ($2.6 billion) annually.
"With listed pharmaceutical companies' operating profit margins at only around 5%, price cuts exceeding 10% are beyond what the industry can bear," said Noh Yeon-hong, chairman of the emergency committee. "Even if we share the painful burden considering insurance finances, 10% is the absolute limit."
The committee argues that sales losses will directly lead to sharp declines in R&D investment. According to its analysis, the government proposal would reduce annual sales by more than 3 trillion won. This would sever the industry's virtuous cycle of reinvesting domestic prescription drug revenues into new drug development. The result would be fatal damage to K-pharma pipelines and development capabilities that have recently begun achieving global success.
Worsening external economic conditions are also heightening industry concerns. "With high overseas dependence on pharmaceutical raw materials, international oil prices and exchange rates have surged, pushing production costs to their limits," the committee emphasized. Companies would be driven to the breaking point if drug prices are also cut while raw material costs are already soaring.
The committee proposed that the government launch joint public-private research on three core agenda items: analyzing how price-cutting policies focused on domestic prescription drugs would affect public health and industrial structure; examining distribution practices including the rise of contract sales organizations and commission issues; and developing a sustainable industrial strategy to become a "top-five global pharmaceutical and bio powerhouse."
"The government must accept the industry's demands, produce objective research results within one year, and jointly develop implementation measures based on those findings," Noh said. "What matters most is getting the direction and design right, not rushing to enforce a unilateral implementation schedule."
The committee plans to launch a large-scale petition drive targeting pharmaceutical company executives and industry workers to convey voices from the field.
