NHIS-Commissioned Study Finds Generic Medicines Used Less in South Korea Compared to OECD Countries

SEOUL, South Korea – Head researcher Professor Lee Sang-won of the National Health Insurance Service (NHIS)-commissioned project, “Improvement of Drug Supply and Purchasing System,” has expressed support for South Korean health policy to lower generic drug prices and expand their use.

While generics in OECD countries comprise 70% of medicines used, in South Korea generics make up only 61.8% of the total, and their costs account for only 47.7%, according to Lee.

As head researcher, Lee believes that the government should intervene to artificially lower generic drug prices and increase the use of generic drugs, particularly domestically-produced generics, which would help lead to lower prices.

While the prices of generics drugs are around 53.55% less than those of the originator drugs, Lee has argued for prices to go down even further, based on factors such as initial registration, the arrival of the first generic, etc.

According to Pricentric’s South Korea County Overview, the first year after patent expiration the price of original drugs and generic drugs will be set at 70% and 59.9% of the original drug’s price. Then, beginning in the second year after patent expiration, the price for all drugs will be set at 53.5% of the original drug price, regardless of the order of drug entry. Through this, the differences between the prices of original drugs and generics would be eliminated.

In fact, since 2012 it has been mandated in South Korea that all drugs of the same active ingredient (off-patent, generics, and branded) be priced the same.

While the government demands this, Lee said that it needs to better support companies so that price cuts do not negatively impact their business. Price cuts should encourage high-quality generics to reach the market, not prevent them.

The industry has vocalized its opposition to the need for further price cuts for generic drugs in South Korea, as such a move would not rightfully encourage competition. Instead, industry groups such as the Korean Research-based Pharmaceutical Industry Association (KRPIA) wants to see a policy that supports investment in innovation in new drug development.

The issue with generic drug pricing in South Korea exposes a recent trend in South Korea: the healthcare system is notorious for focusing heavily on cost-containment, mostly in the last decade.

In response, KRPIA raises many crucial points, specifically by asking how further price cuts for generic drugs will impact the production of these medicines. The fear is, quality will go down if the government grows more stringent in its stance on prices for these already discounted products.