Updated Drug Pricing Regulations in Korea

Korea’s Ministry for Health, Welfare, and Family Affairs (MIHWAF) is planning to implement a new drug-pricing system to address illegal rebate activities in the drug industry. MIHWAF will pay drug stores and medical institutions to buy cheaper drugs. In other words, they will pay for the difference between the government-mandated price and actual price paid if the government price is higher.

Currently, there are price caps on pharmaceuticals in Korea. Drug makers in the past have offered rebates for buyers who purchase their products at the maximum price. The ministry hopes that the new regulations will offset these rebate practices and promote buying drugs at cheaper prices. In addition, the ministry has said they will bring criminal charges against doctors and pharmacists who take rebates from drug makers.

The regulation will actually be enforced much later in the year, near fall 2010. Average drug prices purchased by medical institutions will be monitored every few months. Based on this data, the government will adjust price caps accordingly for each drug. The ministry believes that it will take a few years for the system to be fully implemented. In addition, Director Park Ha Jeong for Health and Welfare Policy at the ministry said drug prices should decrease by about 5 percent each year.

Drugs approved by agencies in advanced markets such as Japan, US, and EU will receive special treatment by having their drug prices remain high for five years.