The government is sharply lowering domestic generic drug prices, which have been higher than those in advanced economies. The Ministry of Health and Welfare held a Health Insurance Policy Deliberation Committee meeting on the 26th and set generic drug prices at a minimum of 45% of the price of original drugs (innovative prescription medicines). This marks the first overhaul of the pricing formula in 14 years, since generic drug prices were uniformly set at 53.55% of original drug prices in 2012.
Under the revised plan, patient costs will also decrease significantly. Samjin Pharmaceutical's antiplatelet agent Plaris tablets (75mg) will drop from approximately 1,077 won per tablet to around 905 won, a reduction of about 172 won per tablet. However, there are considerable concerns that the government's price cuts could shrink the domestic pharmaceutical ecosystem. Pharmaceutical companies may struggle to secure funding for research and development, talent cultivation, and facility investment due to declining revenues. Experts also point out that the government is pressuring price cuts while leaving regulations intact. The government has invited policy distrust by swinging between hot and cold on generic-related policies. In 2008, it lowered barriers to allow businesses without manufacturing facilities to commission production at other companies' plants. The following year, it raised regulatory barriers by expanding mandatory bioequivalence testing — a type of in-vivo efficacy test for generics — to all active ingredients. Then in 2011, it eased regulations again, only to tighten active pharmaceutical ingredient registration standards once more in 2019.
Nevertheless, this price adjustment has its justification. Even after policies to promote generic drug manufacturing and sales, average domestic generic prices remain more than twice the Organisation for Economic Co-operation and Development (OECD) member average. This is because pharmaceutical companies have focused on sales competition to secure distribution channels such as hospitals and pharmacies rather than competing on price. Illegal rebates exchanged in the process were passed on to consumer prices.
The government's policy aim of reducing the public burden by lowering generic prices is not wrong. The intent to shift pharmaceutical investment competition from generics to new drug development is also understandable. However, the government must carefully calibrate its policy intensity by examining domestic companies' capacity to absorb the changes, so as not to kill the goose that lays the golden eggs. Regulatory reform and fiscal support for technological innovation must also accompany the measures for the policy to achieve its intended effectiveness.