South Korea

South Korea has one of the largest pharmaceutical markets in Asia, with more than 50 million Koreans receiving 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. Most drugs that receive approval by the Korea Food and Drug administration are automatically added to the insurance-reimbursement list making it one of the most robust prescription drug lists in the world with 21,000 drugs approved for reimbursement.

South Korea’s Payer Stakeholders

The NHI provides health insurance for 97 percent of the South Korean population, while the remaining 3 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. However, the NHI generally has higher co-payments rates of 30-60 percent for outpatient procedures, and 20 percent for inpatients. This expense is mitigated for those who receive treatment for cancers and orphan diseases with a reduced payment rate of 5 to 10 percent.

On average, government spending on prescription drugs and medical expenditures has been on the rise due to an aging population. These increased expenses have led the Korean government to take active steps towards reducing the volume of drugs used as well as bringing down drug prices, with a 0.7 percent reduction in health expenditure as a percent of GDP from 2018 to 2019.

Important Points to Keep in Mind

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

    • The HIRA assesses appropriateness of the reimbursement within 150 days of application
    • The NHI determines the maximum price via negotiation within 60 days
    • 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:

    • The manufacturer submits an application for review to the HIRA
    • The HIRA internal review board has 30 days to review before submission to the NHI for secondary review
    • 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 try 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 South Korea. For example, when pricing a new drug, South Korean authorities take into consideration the price of the drug that the new product is intended to replace as well as its cost in other countries. 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 effectively articulate the value of your new product to the Korean market in innovative but compliant ways.

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