An Update on Reimbursement for Medical Devices in Korea

In Korea, the National Health Insurance (NHI) Act oversees all public health insurance. This Act covers the entire population and all citizens earning an income in Korea must contribute a percentage of their monthly salary. The Ministry of Health and Welfare (MOHW) is the government agency responsible for the NHI. The MOHW is responsible for establishing health insurance policies and also determines the premium amounts. There are two health insurance agencies under the MOHW, namely the Health Insurance Review Agency (HIRA) and the National Health Insurance Corporation (NHIC). In particular, the HIRA is responsible for reviewing reimbursement coverage/non-coverage and pricing applications from pharmaceutical and medical device companies.

Today, the Korean government considers medical devices to be a profitable business and therefore, often considers price reduction as an option. The HIRA tends to not appreciate the value of new technology and sometimes reduces prices at its own discretion. Therefore, medical device companies often consider reimbursement options carefully.

The MOHW has three options available when determining reimbursement of a medical device. (1) Reimbursement Approval, where the government approves the reimbursement of the device and also decides on the price. In this case, the NHI pays 80 percent of the cost; the patients co-pay the remaining 20 percent. (2) Full-Patient Charge, though the government still determines the upper price limit. This choice is selected when the MOHW recognizes the necessity of the device, but has no funds available for reimbursement. (3) Non-Reimbursement will allow a device to be priced freely and patients will be charged the full cost.

Medical device companies often consider the following two options when deciding on whether to apply for reimbursement. First, a medical device company can attempt to obtain reimbursement approval, but will take the risk of price reduction and perhaps limited indications. At times, companies may deal with this situation by inflating their proposed reimbursement prices. If reimbursement is obtained, the company may be able to expand their market and obtain a larger sales volume. Of course, the profitability of business could decrease, depending on the price level set by the MOHW.

Second, a company can avoid applying for reimbursement. This will allow the company to set their prices freely and try to expand their business through marketing and promotional sales activities. Sometimes, local distributors will oppose government reimbursement because they believe that the MOHW will reduce the price of the medical device and/or limit the scope of its use.