News & Event

[2012. 01] The drug price reduction scheme took effect

Date2012.07.03 View351

The Ministry of Health and Welfare has implemented
a new scheme to reduce the drug prices since January, 2012. The new medicine
price system is the result of
A set of measures to reconstruct medicine price schemes and
strengthen the pharmaceutical industry
introduced last August, 2011,
which includes the revision of the system to set drug price to reduce the
expenses for the purchase of drugs by individuals and measures to support the specialization
of pharmaceutical companies focusing on innovation.


Under the plan, the gradual system fixing different prices for the
drugs with the same substances according to the order they are listed on health
insurance has been abolished since this January. From now on one price cap will
be given for the drugs that have the same ingredients so that pharmaceutical
companies will give up the current practice to list generic (copy) medicines
earlier than others and try to compete to improve the quality.


The price cap will be reduced to 53.55 percent from the previous
68~80 percent of those of the original ones prior to the expiration of their
patents and drug manufacturers will be encouraged to compete freely within the
range of the price. The range of the price cap will remain between 59.5 percent
and 70 percent in order to promote more stable supply of drugs and faster
listing of generic medicines for a period of 1 year after the original patent


This scheme will apply to already listed drugs, resulting in cutting
the price of most drugs to about 53.55 percent of the original prices. The new
drug price system is expected to reduce the expenses for drug purchase by
1.7 billion dollars.


Pharmaceutical industry has strongly opposed the collective drug
reduction scheme and continuously proposed a gradual reduction from 2014 to
relieve the financial burden of the industry; however, these have not been


 Under the new government policy, drug manufacturers
will be forced to adopt measures to restructure their operating system
including cutting sales and R&D costs and laying off employees to survive.

  In addition, the Korean Pharmaceutical
Association is working on establishing a ‘Drug price
gap compensate system’ so that the process of
compensation among drug-makers, drug wholesalers and pharmacies is carried out
as smoothly as possible because there are price differences in the drugs
already purchased by pharmacies.