The South Korean government is tightening certification standards for innovative pharmaceutical companies to drive greater research and development investment, while establishing separate certification criteria for foreign drugmakers to promote domestic investment and open innovation.
The Ministry of Health and Welfare (MOHW) said Monday it will announce proposed amendments to the enforcement decree, enforcement rules, and related notices of the Special Act on Fostering and Supporting the Pharmaceutical Industry.
The centerpiece of the overhaul is raising R&D investment thresholds. The required ratio of R&D spending to revenue will increase by 2 percentage points across the board — from 7% to 9% for companies with annual revenue below 100 billion won ($73 million), and from 5% to 7% for those with revenue of 100 billion won or more. Companies holding cGMP or EU GMP certification will also see their threshold raised from 3% to 5%. A three-year grace period will be granted to ease the burden on companies.
The ministry explained that the higher standards reflect the steady increase in R&D spending ratios since the innovative pharmaceutical certification system was first introduced. Industry officials interpret the move as a clear signal that "companies will struggle to maintain their innovative status without increasing investment."
Rebate regulations have been partially eased. Previously, companies that faced administrative penalties while litigation was ongoing continued to suffer disadvantages until a final court ruling was issued. Under the revised rules, violations will be excluded from certification reviews once five years have passed since the misconduct ended. However, certifications can still be revoked within one year if litigation is dismissed.
The certification evaluation framework is also being substantially overhauled. The number of evaluation criteria will be reduced from 25 to 17, and the total score will be adjusted from 120 to 100 points. Key indicators including R&D investment, number of clinical trials, and export volume will be quantified to enhance objectivity. Companies that fail certification will now be notified of the specific reasons for rejection, strengthening procedural transparency.
Separate standards for foreign pharmaceutical companies have also been established. The ministry will operate a dual certification system distinguishing between domestic innovative pharma firms and foreign innovative pharma firms. Foreign companies will be evaluated primarily on domestic investment, joint research, and open innovation outcomes. Industry observers view the measure as an effort to attract foreign capital and expand global partnerships.
The government plans to use the overhaul to build a new-drug-centered ecosystem spanning R&D, clinical trials, and exports. "We will strengthen industrial competitiveness centered on innovative new drug development and expand the foundation for global expansion," a ministry official said.
The proposed amendments are open for public comment until May 6, with detailed criteria set to take effect starting with new certifications and renewal reviews in the second half of this year.