Last summer, the Korean government put into service a new law, the “National Health Insurance Act,” which, among other things, significantly changed Korean government policy regarding reimbursement of medical devices. Government approval of the listed coverage and price is required before a medical device can be marketed for sale in Korea. The new rule was enacted in large part as a cost-containment mechanism, and is also part of a series of policies aimed at combating corruption in the Korean health care industry.
As a follow up to the National Health Insurance Act, in November 2000 the Korean government instituted a new so-called “ceiling price system,” under which the government negotiates with firms to set price limits for reimbursable medical devices. Depending on the product, limits are set on an individual basis or on an average price basis of a group of similar products. This pricing mechanism has caused some controversy, as grouping products tends to equate lower technology products with new innovations, holding down reimbursement rates for new technology. In fact, U.S. Department of Commerce officials met with Korean government representatives in April 2001 to discuss this issue. U.S. officials argued that lower reimbursement rates have made it more difficult for new medical devices to enter the Korean market, ultimately denying Korean citizens access to cutting edge developments in medical technology. Korean officials acknowledged the difficulties and indicated that the Health Insurance Review Agency (HIRA) has recently created a task force to address reimbursement pricing issues. However, the government needs to keep costs down, as Korean patient co-payments average only 3-4% of costs, well below worldwide averages.
To be listed for reimbursement, medical device suppliers must submit an application to the Korea Food & Drug Administration (KFDA) within 30 days of receiving approval for the product. Foreign manufacturers may not submit this themselves. Instead, the application must be submitted on their half by their local distributor. To apply for reimbursement coverage, a firm must provide HIRA with a proposed price (including cost breakdown), expected sales volume, a copy of the product’s approval documents, information on cost-effectiveness (as compared to similar or competing treatments), information on clinical use(s), product information, and other reference materials.