Botanical drugs, once spotlighted as a growth engine for Korea's pharmaceutical and biotech companies, are becoming a burden that cannot even cover their production costs. As a growing number of botanical drugs are priced below 100 won per tablet, the government has played a powerful price-cut card, leaving companies agonizing over whether to launch products that have already completed development.
According to the industry on Tuesday, the Health Insurance Review and Assessment Service (HIRA) recently held a Drug Reimbursement Evaluation Committee meeting and deliberated that Chong Kun Dang's gastritis treatment "Gitec" has "reimbursement appropriateness if the company accepts a price below the assessed amount." Although the drug's efficacy has been clinically proven, the condition requires the company to accept a price below the amount presented by HIRA in order to continue discussions on health insurance coverage.
Gitec is an acute and chronic gastritis treatment made from materials including the stem bark of camphor and cinnamon trees, and received approval from the Ministry of Food and Drug Safety in July 2022. The commercialization came 10 years after Chong Kun Dang began developing Gitec. Moreover, it drew attention from the pharmaceutical industry as the first botanical-based drug to emerge in more than a decade since the approval of PMG Pharm's osteoarthritis treatment "Layla" in 2012.
However, the drug has remained unsold for nearly four years since approval. Typically, for a new drug to be listed on health insurance, the company must accept the market average price level of existing drugs during the price negotiation stage with the government. The problem is that the existing botanical-based gastritis treatments used as Gitec's comparison benchmark have been priced at around 100 won per tablet due to repeated price cuts. In the case of Stillen, its price fell to as low as 95 won per tablet after a 14.4% cut in February this year. Although the conditions presented by the committee have not been disclosed, the prevailing view inside and outside the industry is that reimbursement listing will be possible only if a price of just over 100 won per tablet is accepted. "We have done our best so that Gitec, which we have worked on for a long time, can be recognized for its value as a new drug," a Chong Kun Dang official said. "Nothing has yet been decided regarding the price or launch timing."
Other pharmaceutical companies face the same situation. Gastritis treatments containing mugwort-based artemisia extract are increasingly shrinking as they undergo reimbursement reassessments. Due to the nature of herbal preparations, it is difficult to prove equivalence through bioequivalence tests that compare blood concentrations of active ingredients, so the majority of "Stillen" generic products have seen their prices cut by more than 14%. To make matters worse, it is known that quite a few companies are considering market withdrawal as their prescription footing narrows, pushed back by aggressive sales offensives of new products such as domestic potassium-competitive acid blocker (P-CAB) class gastroesophageal reflux disease treatments.
Experts pointed out that botanical drugs, once encouraged for development by the government, have fallen into the status of a nuisance because of inconsistent policy. The Ministry of Health and Welfare once pursued a price-preference policy to promote research and development of botanical-based new drugs. The Ministry of Food and Drug Safety also eased the requirements for submitted data and review standards at approval, compared to new drugs, for medicines developed using botanical ingredients whose composition and efficacy are novel. However, after the Board of Audit and Inspection raised suspicions of preferential treatment in 2015, the preferential measures disappeared, and even the term "new drug" could no longer be used. The Ministry of Health and Welfare's 2023 announcement that it would prepare a price-preference plan limited to botanical drugs whose superiority had been proven was also not realized. "As botanical drugs whose safety and efficacy have been verified over a long period become major targets of reimbursement reassessment, this leads to a vicious cycle that erodes companies' will to develop new drugs," said Lee Jong-hyuk, a professor at Chung-Ang University's College of Pharmacy. "There is a need to design a system that operates coherently from development to pricing by establishing a separate evaluation and support track that reflects the special nature of botanical drugs."
