The Korean government will lower the pricing standard for generic drugs from the current 53.55% of brand-name drug prices to as low as 45%, marking the first comprehensive overhaul in 14 years since the across-the-board price cuts in 2012. The move is aimed at improving National Health Insurance finances and encouraging pharmaceutical companies to invest in research and development. The government plans to channel fiscal savings from the price reductions toward expanding insurance coverage for new drugs and stabilizing the supply of essential medicines, while pushing drugmakers to shift from simply selling generics to expanding R&D investment.
The Ministry of Health and Welfare convened the 6th Health Insurance Policy Deliberation Committee on the 26th and approved the drug pricing reform plan. Under the revised plan, generic drug prices for ordinary pharmaceutical companies will be adjusted to approximately 45% of brand-name levels.
Patient costs are also expected to decline. Samjin Pharmaceutical's antiplatelet drug Plaris Tablet (75mg) currently costs about 1,077 won per tablet. At its current level of 49.5% of the brand-name price, the reform would bring the price down to about 978 won per tablet — a reduction of approximately 99 won. Based on the National Health Insurance copayment rate of 30% for outpatient clinic visits, the actual reduction patients would feel is about 30 won per tablet. For patients taking one tablet daily, the monthly drug cost would drop from 9,693 won to 9,000 won, a savings of about 700 won.
"The generic drug price reduction is expected to take effect as early as October this year after revisions to the relevant public notice," a Ministry of Health and Welfare official said. "We expect this reform will reasonably ease the public's burden of pharmaceutical spending."
The reform is designed not as a one-time measure but as a phased reduction over an extended period. In the first phase, prices for drugs listed before 2012 will be gradually lowered from 2026 through 2032 to reach the 45% level, with expected fiscal savings of approximately 1.1 trillion won. In the second phase, drugs listed from 2013 onward will undergo additional reductions from 2030 through 2036, targeting savings of 1.3 trillion won. Once all price cuts are completed in 2036, the government expects to save approximately 2.4 trillion won ($1.8 billion) annually in health insurance expenditures.
The core of the reform lies not in simple price cuts but in a tiered pricing structure. While generic drug prices for ordinary pharmaceutical companies will fall to 45% of brand-name levels, innovative pharmaceutical companies will receive preferential treatment at 49% for four years, and the newly introduced "semi-innovative" category will receive 47% for three years. The strategy maintains incentives for innovation by allowing relatively higher prices for companies with R&D investment capacity, even within the broader framework of price reductions.
To qualify as an innovative pharmaceutical company, firms with average annual pharmaceutical sales of 100 billion won or more over the past three years must invest at least 7% of pharmaceutical sales in R&D, while firms below the 100 billion won threshold must invest at least 9%. The government decided to grant a three-year grace period considering the industry's burden. For the semi-innovative category, companies with sales of 100 billion won or more must invest at least 5% in R&D, while those below the threshold must invest at least 7%.
The government's aggressive reform is driven by structural problems in Korea's generic drug market, analysts say. Korea's generic drug prices are estimated at roughly twice the Organisation for Economic Co-operation and Development (OECD) average. Meanwhile, the market remains heavily skewed toward generics, with approximately 80% of all reimbursed drugs being copies.
Alongside price cuts, the government introduced mechanisms to reshape the market structure itself. A key measure is the strengthened "staircase price reduction" system, which triggers additional price cuts when the number of generics with the same active ingredient exceeds a certain threshold. The trigger point has been moved up from the 20th product to the 13th. The government also introduced a new "multi-product listing management" concept. When the number of same-ingredient generics exceeds a certain level, unfavorable pricing structures will be applied to new entrants, effectively limiting market entry. The intent is to shift competition in the market from quantitative expansion to qualitative competition.
"We will reform the high-cost structure centered on generics, promote new drug development, and manage the pace of pharmaceutical spending increases to ensure the sustainability of National Health Insurance finances," a Ministry of Health and Welfare official said. "Achieving both industrial competitiveness and fiscal stability is the core objective of this reform."