Tensions are rising in Korea's pharmaceutical and biotech industry ahead of the government's finalization of its generic drug pricing reform plan. The industry recalls the 2012 blanket drug price reduction policy and warns that a uniform regulatory approach ignoring the industry's current standing and capabilities could damage the industrial ecosystem.
According to industry sources on May 22, the Health Insurance Policy Deliberation Committee under the Ministry of Health and Welfare is set to vote on the pricing reform plan, including price cuts for domestically produced generics, on May 26. The plan is expected to include policy incentives such as pricing premiums for innovation-leading companies with strong R&D capabilities.
However, since price reductions will eventually apply uniformly to all pharmaceutical companies after a certain period, concerns are growing that indiscriminate pricing regulations could collapse the industrial ecosystem. The industry questions whether the government's view of domestic pharmaceutical capabilities remains stuck in 2012, when the blanket price cuts were implemented.
In 2012, Korea's pharmaceutical industry was largely domestic-focused and generic-centered, with limited capacity for global new drug development or large-scale R&D investment.
Since then, the industry has accelerated innovation through various means and achieved visible results in both domestic and overseas markets. Critics argue the government has highlighted only the generic-centered structure while ignoring this progress.
R&D spending by listed domestic pharmaceutical companies surged from 801.3 billion won in 2012 to 4.6 trillion won in 2024—a 5.7-fold increase. The average annual growth rate reached 15.7%. During the same period, R&D spending as a percentage of revenue rose from 7.0% to 11.9%, up 4.9 percentage points.
As of December 2012, only 19 domestically developed new drugs existed, with Kanab being virtually the only one achieving commercially meaningful results overseas.
By December 2024, that number doubled to 38. Starting with gastroesophageal reflux disease treatment K-CAB in 2018, domestically developed drugs including Cenobamate for epilepsy (2019), Leclaza for lung cancer (2021), Rolontis for neutropenia (2021), Fexuclue for GERD (2021), and Envlo for diabetes (2022) have entered not only Latin American, Asian, and Middle Eastern markets but also advanced markets including the U.S., Europe, and Japan. These drugs are expanding their commercial impact rather than merely achieving overseas presence.
Technology Exports and AI Drug Development Expand; "Differentiated Policy Needed, Not Blanket Regulation"
Korea's pharmaceutical and biotech industry reached a turning point in new drug technology exports in 2015. That year, Hanmi Pharmaceutical signed a technology export deal worth approximately 4.8 trillion won with French global pharmaceutical company Sanofi. The agreement was based on Lapscovery, a platform technology that dramatically extends the short duration of efficacy in biopharmaceuticals.
This was the largest technology export in Korean pharmaceutical history, marking a shift from simple raw material exports to leading global markets with innovative new drug technologies. Large-scale technology transfers by pharmaceutical and biotech companies followed.
Recently, AI-based new drug development has also gained momentum. Daewoong Pharmaceutical built its proprietary AI drug development platform Daisy, utilizing a database of 800 million compounds called David to support virtual screening and ADMET predictions for R&D innovation. JW Pharmaceutical's JWave is an AI-based integrated R&D platform that supports candidate discovery and preclinical stages using data from over 45,000 compounds. Yuhan Corporation is collaborating with AI specialists such as Syntekabio and Cyclica to develop candidate discovery systems, focusing on efficiency in early-stage drug development.
The industry argues that as pharmaceuticals evolve from a generic-centered manufacturing industry to an ecosystem integrating generics, improved new drugs, bio CDMO (contract development and manufacturing), and new drugs, sophisticated policy design considering industrial competitiveness is needed rather than blanket pricing regulations.
"In R&D-based industries like pharmaceuticals, a virtuous cycle where profits are reinvested into R&D is crucial," an industry official said. "However, this pricing reform does not distinguish between innovation-leading companies and others, applying blanket price cuts that could seriously damage the industry's healthy ecosystem."
Nevertheless, the excessive proliferation of generics and resulting unfair trade practices remain longstanding challenges. The consensus is that Korea's pharmaceutical industry's innovative progress cannot be fully recognized until these issues are resolved.
"The government's pricing reform appears to stem from concerns about product proliferation and sales practices centered on similar products," another industry official said. "Since the industry itself bears some responsibility, true recognition as an innovative industry will require both institutional reform and self-correction by companies."
A Ministry of Health and Welfare official responded: "We aim to make necessary adjustments while minimizing industry shock and strengthening incentives for companies that need to advance. We continue to discuss approaches that will proceed as gradually and sequentially as possible to ease industry concerns."
