In order to try to improve the quality of generics and ensure an efficient and competitive generics market, the Korean Ministry of Food and Drug Safety (MFDS) introduced a ‘tiered system’ to restructure the drug pricing for generics in July 2020. However, since its introduction the system has not gone without criticism.
The system sets different prices for generics in order to ensure high standards of good manufacturing practices and thorough quality control, as well as prevent companies flooding the market with generics [1].
The system prices generics according to the performance of bioequivalence studies and the use of substances registered in the Drug Master File. The prices of generics that meet both qualifications are set at 53.55% of the originator drug price. In comparison, products that satisfy only one condition are priced at 45.52%. While those without any qualification are fixed at 38.69% of the originator’s price.
Prices for generics are also applied differently according to the order of registration for health insurance coverage. This means that for the 21st generic drug to be registered its price will be set 85% lower than the price between the two -- the lowest price among identical medicines and 38.69% of the originator drug’s price.
However, concerns have been raised about the system after the government decided not to abolish the joint bioequivalence testing system. Claims have been made that the system is open to exploitation, for example, if a company with the first-registered drug forms a group of consignors and consignees by granting bioequivalence data. In that case, all pharmaceutical companies belonging to the group are given the same price for their generics of the originator medication.
On the other hand, companies that spend both time and money on using raw materials registered in the DMF and demonstrate therapeutic equivalence, may not be eligible for 53.55% of the originator’s price if their generics are pushed to the 21st place in the registration.
In fact, a group was indeed formed by Chong Kun Dang and more than 20 other companies with generics of cholesterol medication Atozet (ezetimibe/atorvastatin), after Chong Kun Dang provided the clinical data for its version (Atoezy). This has led to some pharmaceutical companies filing a complaint against the consigner-consignee group for contract manufacture of Atoezy with the Korea Fair Trade Commission, arguing that such a group's formation is equivalent to collusion.
The conclusion is that the system, rather than creating a more competitive environment for generics is actually enabling some companies to use it as a means of preserving their drug prices.
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Reference
1. GaBI Online - Generics and Biosimilars Initiative. Generics reform in Korea [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2021 Feb 19]. Available from: www.gabionline.net/Guidelines/Generics-reform-in-Korea
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Source: Korea Biomedical Review, MFDS
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