South Korea

South Korea is the tenth largest pharmaceutical market worldwide, as more than 48 million Koreans receive prescription drug coverage under the single-payer National Health Insurance Program (NHI). The NHI is under the purview of The Ministry of Health and Welfare (MOHW), which also oversees the Korean FDA, responsible for drug approvals, and the Health Insurance Review and Assessment Service (HIRA), which determines a drug’s reimbursement. The Korean consumer is more active in the reimbursement process than in many other single payer markets. Political parties and active citizen advocates are indirect but important allies in achieving access in Korea. Knowing how to navigate these diverse stakeholder groups is critical to achieving reimbursement success in the Korean healthcare market.

South Korea’s Payer Stakeholders

The NHI provides health insurance for 96 percent of the Korean population, while the remaining 4 percent, primarily senior citizens, are covered under the Medical Aid program. The NHI is funded by worker payroll taxes and employer contributions.

In the NHI co-pay is determined based on the patient’s financial need, and coverage is guaranteed. The dominant method of payment is reimbursement of fee-for-service, and no Korean citizen covered under the NHI pays completely out-of-pocket for approved medication and procedures.

Government spending on prescription drugs has been on the rise, increasing 43 percent from 2006 to 2010. While overall health expenditures increased 11 percent annually from 2000 to 2005, spending on prescription drugs rose at an annual rate of 17.7 percent. Treatments that are KFDA approved but not covered by NHI, for reasons such as cost, or value may be paid for by the patient out- of pocket.

Important Points to Keep in Mind

• In Korea, the reimbursement decision-making process has three distinct steps:

1. The HIRA assesses appropriateness of the reimbursement within 150 days of application
2. The NHI determines the maximum price via negotiation within 60 days
3. After further review the MOHW announces the price to the public within 30 days

• Manufacturers must provide pharmacoeconomic evidence to show proof of value of a new drug. HIRA then reviews for the drug’s clinical benefit, cost effectiveness, budget impact based on expected sales, international reference price and the general impact on public health to determine reimbursement.

• Unfavorable reimbursement decisions from the NHI can be appealed. The process is as follows:

1. The manufacturer submits an application for review to the HIRA
2. The HIRA internal review board has 30 days to review before submission to the NHI for secondary review
3. The results are returned to the manufacturer within 150 days

• The NHI desires drugs that are of a high quality, accessible to patients, cost-effective, and encourage the manufacturer to invest revenue in the research and development of new treatment options. To this extent, technologies transfers and in-country investment can often weigh in favor of a company during the pricing and reimbursement negotiation process.

• It is important to consider that the MOHW does make an effort to meet the growing demand and expectations of quality healthcare, and demonstrated value is important. Consumers are also invested in the purchase of healthcare services, as they contribute to the system via premiums and co-pay. Having politically active consumers on board with your value story can pressure the MOHW and HIRA into making favorable reimbursement decisions.

• Cost-containment measures are widely practiced in Korea. For example, when pricing a new drug, Korean authorities take into consideration the price of the drug that the new product is intended to replace. Supply-side measures such as price cuts in the years after launch are also common. Finally, at the end of a product’s lifecycle, a tiered pricing system is implemented when a drug goes off patent that gradually lowers the price of the branded product until it is equal to that of a generic.

Implications for Industry

In recent years, mounting pressure on the sustainability of the NHI has sparked proposed reforms to the reimbursement structure, including the possible creation of a separate elderly care system, and integration of economic valuations into delivery, approval and pricing of medical devices, procedures and pharmaceuticals. As reforms are implemented, a flexible access strategy will serve prospective new medicine entrants into the Korean market well.

Pharmaceutical companies launching new products in Korea should not only be prepared for market access success, but also for local communications compliance. Having a strategy to communicate value not just with the MOHW and the NHI but also the Korean public is critically important. GLOBALHealthPR can help you demonstrate and effectively communicate the value of your new product to the Korean market in innovative but compliant ways.