1. Value based contracting for medicine: the experiences of South Korea
Eun Young Bae
Nov5, 2013
Gyeongsang National University
Thank you, Chairman for your warm introduction.
It’s a pleasure to be here today and to speak to you about Korea’s experiences of contracting the medicine
Before starting today’s prsentation, I want to congratulate the 10th anniversary of Ghanaian NHI .

2. Contents Background Reimbursement and pricing policies
Positive list system
Price negotiation
Price adjustment
Strategies for rational drug use
Issues and Challenges
I’ve divided my presentation into 4 parts.
First, I want to start today’s presentation by giving you some background information on/about the NHI of Korea
Secondly, we will move on to the reimbursement and pricing policies, And then strategies for rational drug use, and finally, I will sum up today’s presentation with the challenges we’re facing now.

3. South Korea Population: Life Expectancy: National Heath Expenditure:
Background
South Korea
Population:
50.22 million (2013)
Pop ≥65years : 12.2%
Life Expectancy:
Males 77.7 years, females 84.5 years (2011)
Infant mortality rate: 3 deaths per 1000 live births
National Heath Expenditure:
7.5% of GDP (2011)
2,315 US$ PPP (per capita)
% Public exp: 54.4
% Out of pocket payment: 36.1
Pharmaceutical Industry:
1.3% of GDP (2011)
South Korea is located here, it’s very far from here.
The flight took around 20 hrs.
This picture shows the autumn scenary which you can see in Korea during this season
Korea is very rapidly aging society, % of the old is around 12% and it is increasing every year
It spends 7.5% of GDP on health, which is relatively low compared to other developed countries,
However, its health state is comparable to those countires’ one
Pharmaceutical industry occupies 1.3% of GDP

4. Korean Health Security System
Background
Korean Health Security System
Two components:
National Health Insurance (96.4% of pop.)
Achieving universal health coverage in 1989, only 12 years after the introduction of NHI in 1977
Funded by beneficiaries contributions
Medical Assistance (3.6% of pop.)
Provides support to lower income groups
Funded by the government
Korean health security system is comprised of two parts. Around 97% of population is covered by national health insurance scheme, and remaining 3% is the beneficiaries of the medical assistance program which targets the low income group specifically
Korean NHI achieved universal coverage in 1989, 12 years after the introduction of NHI

5. Payment of medical expenses
Background
NHI management system
Policy making & policy execution
Review and assessment standards
Scope of medical care benefits
Contribution by the government
etc.
Insurance benefits, etc.
Co-payment
The insured
Medical services
contributions
Notification of review findings
This figure shows the role and relation of each institution in Korean NHI.
In 2000, NHI integrated hundreds of insurance funds into the National Health Insurance Corporation (NHIC), and established Health Insurance Review and Assessment Service (HIRA) as an independent public agency which reviews the medical claims and evaluates the appropriateness of the care provided by medical institutions
These two institution also plays an important role in reimbursement and pricing of pharmaceuticals
Notification of review findings
Claim of medical expenses
Payment of medical expenses
Source: Ministry of Health & Welfare,

6. Pharmaceutical Industry
Background
Pharmaceutical Industry
The size of Korean market
17,863millionUSD
15th largest market in 2010 (IMS Market Prognosis, Apr.2011)
No. of Manufacturers
Total number of manufacturers: 828
Number of active producers: 638
No. of Employees: 74,477 (2011)
In terms of production value, the share of the largest 50 companies stood at about 78% in 2011
Generic share is more than 40% (Shin & Choi, 2008)
As a pharmaceutical market. Korea is 15th largest market in the world
There are a lot of local companies which mainly produce generics
Even though there are more than 600 companies, largest 50 occupies about 80% of the market
Korean market is considered mature where generic share is more than 40%

7. Background
Total expenditure on pharmaceuticals and other medical non-durables, /capita, US$ purchasing power parity (2011)
We will now look at several graphs related to the drug expenditures
First graph shows the per capita expenditure on pharmaceuticals.
As you can see here, Korea spends less than OECD average
Source: OECD health data 2013

8. Background
Total expenditure on pharmaceuticals and other medical non-durables, % total expenditure on health (2011)
However, this graph(pharmaceutical expenditures as a % of total expenditure on health.) shows a little different story
As you can see here, Korea is among the high spending country as a % of total health expenditure
And this is why many cost containment policies were implemented in Korea for a decade.
Source: OECD health data 2013

9. Separation of prescribing and dispensing
Background
Separation of prescribing and dispensing
In 2000, the government initiated a reform that separated the role of prescribing from dispensing
The reform aims to reduce the overuse and misuse of drugs by eliminating the provider’s profits from drugs
Since then, the use of antibiotics and injections has fallen, and the number of drugs per prescription has decreased
However, the pharmaceutical expenditure continued to increase contrary to expectations, and the share of high priced brands has increased
Therefore, the government introduced a series of cost-containment policies thereafter.
Before the role of prescribing and dispensing was not separated so the physicians and pharmacists both prescribed and dispensed drugs. Usually, both professionals bought the drug at a lower price than listed price, they can get benefit from selling the drug, and this incentive system resulted in the overuse and misuse of drugs. The pharmaceutical reform attempts to change the provider's economic incentives by eliminating the providers' profit from drugs.
Since then, the use of antibiotics and injections has fallen, and the number of drugs per prescription has decrease,
However, pharmaceutical expenditure increased contrary to expectations, This is attributable to the fact that some drugs that were previously purchased outside of the health insurance system now require a prescription. In addition, physicians who used to prescribe generic drugs in the past because of the higher margin
of those drugs switched to brand name drugs when the financial incentive was eliminated
Therefore, As of 2000, Korean government began to introduce a series of cost containment polices

10. Annual growth in pharmaceutical expenditure per capita, 2001-2005
Background
Annual growth in pharmaceutical expenditure per capita,
This slides show the annual growth in pharmaceutical expenditure per capita for the period of 2001 to 2005, here Korea is among those countries which have experienced rapidly increasing drug expenditures.
Source: OECD Health Data 2013

11. Drug Expenditure Rationalization Plan
Background
Drug Expenditure Rationalization Plan
In 2006, the MOHW implemented the Drug Expenditure Rationalization Plan (DERP)
Implementation of the positive list system was the core feature of DERP
Background of DERP
The share of drug spending was relatively high, and had increased more than the other medical expenditure
Need to strengthen the insurer’s purchasing power
PE guidelines were published in 2006.
Strong political will to reform drug policies
Despite many attempts at countering it, drug expenditures continued to rise. In May of 2006, the government
announced the drug expenditure rationalization plan (DERP), which focused on the introduction of a “positive list system (PLS)”
At that time, the government had strong will to reform the reimbursement and pricing policies for drug, because of the following reasons
Background of DERP
First, The share of drug spending, as a percentage of health care exp, was very high, and had increased more than the other medical expenditure, which raised issue of allocative efficiency.
Secondly, there was a Need to strengthen the insurer’s purchasing power. Before 2000, there were hundreds of sickness funds in Korea, and it was integrated into one, NHIC, in 2000, more active role of insurer is required.
Thirdly, PE guidelines were drafted in 2005, and published in 2006.
Strong political will to reform drug policies
My personal opinion is that political will was the most important driving force of introducing PLS in Korea

12. Officially adopted by number of A7 countries a
Background
Introduction of New Drugs into South Korean National Health Insurance Review
Total
Officially adopted by number of A7 countries a 1 2
3-7
2003a 61
3 (4.9)
25 (41.0)
16 (26.2)
17 (27.9)
2004a 50
1 (2.0)
19 (38.0)
11 (22.0)
2005a
2 (4.0)
14 (28.0)
16 (32.0)
18 (36.0)
2007b 11
3 (27.3)
2 (18.2)
4 (36.4)
2008b 30
9 (30.0)
8 (26.7)
1 (3.3)
12 (40.0)
2009b 28
7 (25.0)
4 (14.3)
1 (3.6)
16 (57.1)
2010b 19
2 (10.5)
6 (31.6)
1 (5.3)
10 (52.6)
2011b 18
2 (11.1)
4 (22.2)
3 (16.7)
9 (50.0)
This table shows how early new drugs are introduced to Korean National Health Insurance system at that time.
At the time HIRA reviews a drug, only 1-2 countries of the 7 referenced countries list that drug in more than 50% of the cases. That means Korea is the 2nd or 3rd country to adopt those drugs.
Source: aYang BM, et al. 2008; bYang BM, et al a Number of advanced seven(A7) countries that have adopted the submitted drug

13. Cost containment policies in South Korea
Monitoring & fb
Incentive for cost saving
Amended ACT
Generic substitution
Amended ACT
Demand side
copayment E = P Ⅹ Q
Positive list
Price negotiation
Price adjustment
ACT
PVA
Supply side
This slide shows the policies which are put in place in Korea, arranged a series of policies according to the Mossialos’s frame
These policies targets supplyside, and these influences the price, and this influences both the price and quantities,
These policies targets demend side,
These policies especially targets physicians, and influeces both price and quantities
These targets pharmacists, and also influences both the price and quantities
Copayment policies targets patients, and influences the quantities
From now on, I will explain each policies in more detail
Source: Mossialos E, 2006.

14. Coverage decision for drugs
R&P policies
Coverage decision for drugs
The positive list system was introduced in 2007
New drugs should verify its value (Therapeutic & Economic value)
Paradigm shift from cost-based approach to value based approach
Cost-effectiveness is an important decision criterion
Submission of PE data is required to establish a premium price for the drugs
Separation of reimbursement and pricing decisions
NHIC negotiates the price with the company
If price negotiation fails, the drugs can not be listed, except for “essential drugs”
5 year plan to re-evaluate “listed” drugs ( )
On completion of the pilot project, the government decided to lower the prices without systematic evaluations
From 2007,our Government changed the listing system, from negative to positive.
Under the negative list system, all drugs which were approved by KFDA can be listed with only a few exceptions,
But, under the positive system, only clinically and economically valuable drugs can be listed
I think it goes beyond the mere change of the listing system, it means paradigm shift from cost-based approach to value based approach
Cost-effectiveness became the important decision criteria
But, some essential drugs The “necessary drugs for treatment” can be listed regardless of their cost-effectiveness
And, Process of reimbursement decision and pricing are separated
NHIC negotiates the price with the company, after the submitted drugs are recommended by the Drug Reimbursement Evaluation Committee(DREC)
If price negotiation fails, the drugs can not be listed, except for “necessary drugs for treatment”
The government also announced it would re-evaluate the entire list of subsidized drugs over a 5 year period ( )
Rationale of re-evaluation was first, too many drugs are listed on the national formulary (around 20,000), and the fact negatively influences the efficiency of the system. Secondly, the principle of listing should be applied to both old drugs and new drugs impartially. Lastly, If the comparator is not cost-effective, the value of new drugs are also not appropriately evaluated
Among 49 groups, two were chosen as pilot groups
Lipid modifying agents (ATC code C10)
Antimigraine preparations(ATC code N02C)
At the conclusion of the pilot project, the MOHW decided to reduce the price of existing drugs instead of re-evaluating them
Drugs with uncertaine clinical usefulness were de-listed through the abstract evaluation process

15. Process of new drug listing
R&P policies
Process of new drug listing
Health Insurance
Review
Agency
Manufacturer / Importer
Application
Ask for re-evaluation (30 days)
HIRA
Reviews the applications
Notify
comment
Disseminate review results
Independent review
Economic Sub-Comttee
Pharmaceutical Benefit Coverage Assessment Committee
Reject to list
150(120)days
Report
MOHW
Tentative list
Un-negotiated essential
NHIC
(price negotiation)
Benefit Coordination Cmte
(compulsory listing)
This figure shows the whole process of listing new drugs. In addition to this process independent review process was introduced recently, according to KORUS FTA agreement
The process begins by the submission
If a company submits the application form, and related documents, HIRA staff reviews it
Here, PBCAC considers the submitted cases, and makes recommendations on the listing
The committee’s decision will be passed to manufacturers, and manufacturer will decide whether to ask for re-evaluation; in case the submitted drugs are rejected
If there is no re-evaluation request, HIRA will report the deliberation results to the MOHW, and the price negotiation will start. The NHIC not HIRA negotiates the price with the manufacturer.
If the NHIC and the manufacturer reach an agreement with price, that drug will be listed.
If the NHIC and the manufacturer fails in negotiations, the submitted drugs will not be listed, except for essential drugs
In case of essential drugs, another independent committee coordinates the each party’s interest, and can set a price when two parties can’t reach an agreement finally.
60days
Report
Report
60days
Health Insurance Policy Deliberation Cmte
MOHW
Listing & Notice
Agree to list
30days

16. Deliberation by committee
R&P policies
Deliberation by committee
Pharmaceutical Benefit Coverage Assessment Committee was newly established in 2007
PBCAC is an independent committee, and has a mandate to review the submission and make recommendations on listing
PBCAC composes of 21 members together with staff from the KFDA and HIRA who specialize in the following areas:
Internal medicine / Surgery / Pediatrics / Pharmacology / Epidemiology / PE / clinical pharmacy
2 members are from the consumer advocacy group
Committee members should disclose any conflicts of interest to the committee chair and HIRA in advance.
PHCAC was newly established in 2007, and madates to review the submission and makes recommendation on listing
Committee members should disclose any conflicts of interest to the committee chair and HIRA in advance.

17. Factors considered in deliberation
R&P policies
Factors considered in deliberation
Available alternatives
Budget impact
Decision Making
Cost-effectiveness
Necessity/
Severity of disease
PBCAC consider following factors during its deliberation
Are there any therapeutic alternatives available?
How severe the disease is?
Is the drug cost-effective?
Is there any therapeutic benefits not appropriately reflected in the C-E analysis?
Is the drug listed in other countries, at what price?
Will the drug influence NHI budget a lot if it is introduced?
Reimbursement status in other countries
Therapeutic benefits

18. R&P policies
Rule of rescue
The following drugs are considered “necessary drugs for treatment”
When there are no alternative treatments
When there are no alternative drugs, and indication is for severe life-threatening diseases
Used for rare diseases, and is considered necessary to treat those patients
Drugs recognized by the committee as necessary for the treatment of patients
If price negotiation fails for the above drugs, the benefit coordination committee can determine the price (compulsory listing)
When the committee deliberates the cases, it considers if the submitted drug meets the following 4 conditions
The following drugs are considered “necessary drugs for treatment”
When there’s no alternative treatment available;
When the indications are for severe life-threatening diseases;
Used to treat rare diseases, and are considered a necessity to treat those patients;
When there’s supporting evidence for their effectiveness
Drugs which meet all of these 4 conditions are accepted as essential drugs
If price negotiation for the above mentioned drug cases fails, the benefit coordination committee will determine the prices (compulsory listing)
9 molecules were admitted as “necessary drugs for treatment” from 2007 to the end of 2011

19. HIRA posts the recommendations and reasons of consideration made by the committee on its website

20. R&P policies
Price negotiation
When HIRA decides to reimburse a new drug in the NHI, the manufacturer has to negotiate its price with the National Health Insurance Corporation (NHIC)
Factors considered for price negotiation
Assessment report by PBCAC of HIRA
Budget impact
Price of the drug in foreign countries including OECD
Patent status
Domestic R&D expenditure
When HIRA decides to reimburse a new drug in the NHI, the manufacturer has to negotiate its price with the National Health Insurance Corporation (NHIC)
Following factors are considered for price negotiation
Assessment report by PBCAC of HIRA
Budget impact
Price of the drug in foreign countries including OECD
Patent status
Domestic R&D expenditure

21. Old pricing rules Innovative drugs Other new drugs Generics
R&P policies
Old pricing rules
Innovative drugs
Average of A7 countries’ list prices (France, Germany, Italy, Japan, Switzerland, UK, USA)
Other new drugs
Relative pricing scheme
PN: price of new drug; PO: price of old drug; PN_F: price of new drug in foreign countries; PO_F: price of old drug in foreign countries
Generics
Stepped pricing: the price of first generic should be lower than 80% of original drug. The following generics should be priced at a lower price than existing drugs. If the total number of listed products with same the molecules exceeds 6, the new generics should be priced at 90% of the cheapest generic
Before the 2006 reform, the price was determined according to the following pricing formulae
Most new drugs was priced according to relative pricing scheme, where the price ratio of new drugs against old drugs in other countries are used in calculating the new drugs’ price level
The generics price level should be lower than 80% of the original drug, and subsequent generic should be priced lower than least priced generic If the total number of listed products with same the molecules exceeds 6, the new generics should be priced at 90% of the cheapest generic

22. Price adjustment after generic entry
R&P policies
Price adjustment after generic entry
New pricing rules were applied from Jan 2012
Also applied for drugs listed before 2012
Price reduced to 53.55% of original drugs
From 2012 the pricing rule for generic has changed.
As you can see in the picture. When the fist generic enters the originator’s price reduced to 70% original price, and 1st generics can be priced at 59.5% of original price, 1 year after, both the original and generic should be reduced to 53.55% of original drugs
According to the government announcement, total 6506 products reduced its price after reform
The price of 6506 products (47.1%) was reduced - average price dropped 14%
Source: Yoo Mi-Young (2013)

23. Price-volume arrangement
R&P policies
Price-volume arrangement
Listed price will be adjusted in following cases
When the drug use exceeds the estimated volume by more than 30% of the company’s original listing estimate.
When the volume has increased by more than 30% in a 6 month period after new indications were added
When the sales volume rises by more than 60% year on year
Prices will be adjusted according to the negotiation results
% of price cuts is limited to 10%
The company submits the expected sales volume when they apply for the listing. If the sales volume exceeds the expected volume by more than 30%, the company should lower the price according to the negotiation result with NHIC. Percentage of price cuts has been limited to 10%. and when it’s annual increase rate exceeds 60%, its price is adjusted again according to the negotiation results.
Recently, government announced that PVA will also be applied for drugs whose sales value increased more than 5million KW , even though its increase rate is lower than 60%

24. Reimbursement based on acquisition costs
R&P policies
Reimbursement based on acquisition costs
The providers are reimbursed for drug costs based on actual transaction costs (ATC)
The maximum reimbursable amount cannot exceed the list price
ATC renders lack of incentives to purchase the products at cheaper price
Recently, the government has allowed hospitals & pharmacies to claim 70% of the difference between the listed price and purchase price when they buy drugs at a lower price than the listed price
Based on the transaction information, the government will adjust the list price next year
If the pharmaceutical companies give kickbacks to providers illegally, both parties are punished
From 2000, the providers has been reimbursed for drug costs based on actual transaction cost,
But the ATC renders lack of incentives to purchase the products at cheaper price

25. Reimbursement based on actual transaction cost
Purchase price
incentives
Purchase price
List price
Reimbursable amount
Reimbursement based on actual transaction cost

26. Strategies for Rational Drug Use
Monitoring and feedback
HIRA monitors and evaluates the prescriptions issued by medical institutions
Monitoring indicator: percentage of antibiotics prescribed for upper respiratory diseases, injection rates, percentage of generics used, etc
Inform the result to the institution with departmental average → encourage the physician to change their irrational prescribing behaviors
Post the evaluation results on the HIRA website
Financial incentives or disincentives are being considered
To encourage the quality use of medicine, the HIRA began to monitor the prescriptions and feedback the result to individual institution with departmental average. Through this HIRA wants to encourage the physician to change their irrational prescribing behaviors
Percentage of antibiotics and injections was used as a monitoring indicator
After several years of simple monitoring and feedback, hira decided to open the result to the public, and posted evaluation reports on the HIRA website
And, now a days, it considers the implementation of financial incentives or disincentives

27. Strategies for Rational Drug Use
Incentives for outpatient prescriptions
Provide incentives to the medical institution to encourage the prudent issuing of prescriptions
Institutions which save on the per prescription cost can get part of those savings back as incentives
Generic substitution
Generic substitutions by pharmacists is permitted
When a substitution occurs, pharmacists should notify the facts to the prescribed physician
The substitution rate is very low

28. Performance
Achievements
The increasing trends of pharmaceutical expenditure has changed
% of pharmaceutical expenditure in total medical expenditure began to decrease
The increasing rate of pharmaceutical expenditure has been reduced
The entry price of new drugs has decreased
The negotiated price is lower than the determined price calculated according to the formula in the past
The number of listed drugs has been reduced

29. % of pharmaceutical expenditure in total medical expenditure
Performance
% of pharmaceutical expenditure in total medical expenditure
As you can see here, the proportion of pharmaceutical expenditures in total medical expenditure began to decrease.
Lump sum Price cut contributes to this trend.
Will this trend continue in the future?
Source: Yoo, MY (2013)
Will this trend continue?

30. Performance
Total expenditure on pharmaceuticals and other medical non-durables, /capita, US$ purchasing power parity
Implementation of DERP
US$
OECD statics also indicates that increasing trend of pharmaceutical expenditure has changed after 2007
Source: OECD health data 2013

31. Price cuts and Drug Spending
Performance
Price cuts and Drug Spending
This graph shows the relationship between the price cut and drug spending, After price cut, the expenditure for those drugs has decreased, but expenditure of other drugs has increased
Source: Kwon H-Y, et al (2013).

32. Decisions made by the committee
Performance
Decisions made by the committee
Unit: cases, %
Year
accept
reject
total
Acceptance rate
2007 18 13 31
58.1
2008 45 16 61
73.8
2009 35 51
68.6
2010 27 14 41
65.9
2011 24 11
149 70
219
68.0
Source: HIRA
The table in this slide shows the decision made by DREC from 2007 to 2011
We analyzed the data posted on the HIRA website
When the same drugs was submitted several times, only the final submission was counted
For 5 years, average acceptance rate was around 70%
However, it is comparable other international agencies,
% of positive recommendation
PBAC 54.3%, CDR 49.6%, NICE 87.4% (Clement et al, 2009)

33. Negotiation result(cases)
Performance
Price Negotiation
Year
Negotiation result(cases)
Total
success
fail
2007 8 2 10
2008 45 22 67
2009 61 6
2010 37 13 50
2011 33 9 42
Source: Kim (2012), presented at ISPOR AP conference
This table shows the price negotiation result
To ease the price negotiation, and prevent the essential drugs from failing the negotiation, NHIC introduced refund system.
For drugs which are used for specified rare diseases, essential for treatment, and there are no alternatives available, the company can refund the difference between listed price and negotiated price instead of lowering the list price
For drugs which are used for specified rare diseases, essential for treatment, and there are no alternatives available, the company can refund the difference between listed price and negotiated price instead of lowering the list price

34. Performance
Number of listed drugs
Year
‘07.1
‘08.1
‘09.1
’10.1
‘11.1
‘12.1
‘13.1
Number of listed drugs
20,775
15,223
14,900
14,883
14,410
13,814
14,576
In the initial stage, drugs not produced nor claimed for 2 years were excluded
Number of new drugs has also decreased since 2007, but its impact on the length of the list is negligible
When we start positive list system, the number of covered product was more than 20000
However, it has been decrease a year after, since drugs not produced nor claimed for 2 years were excluded in the initial stage
Number of new drugs has also decreased since 2007, but its impact on the length of the list is negligible

35. Performance
Price level
ratio
negotiated price/A7 avg. price
0.5
negotiated price/relative price
0.85
negotiated price/PBCAC accepted price
0.80
The negotiated price is lower than the determined price which is calculated according to the old pricing rule
Price negotiation has contributed to the lowering of the drug prices
PBCAC’s accepted price is 108% of the relative price
The price of new drug has also decreased after reform.
The negotiated price is lower than the determined price which is calculated according to the old pricing rule
Most of all, price negotiation has contributed to the lowering of the drug prices

36. Issues & Challenges
Access to new medicine
There have been concerns about the accessibility to necessary drugs since the implementation of PLS
The acceptance rate is about 70%
Reasons of rejection
Uncertain/unacceptable cost-effectiveness 57%
Uncertain clinical usefulness 30.4%
Related with new health technology, etc. 12.6%
Acceptance rate for anti-cancer drugs is lower than the other categories of drugs, but among the rejected drugs, only a few are regarded as medically important
There have been concerns about the accessibility to necessary drugs since the implementation of PLS
Generally, the rejection rate of HIRA is not different from that of other institutions as we discussed before
Rejection rate for ant-cancer drugs is higher than the other categories of drugs, and
Main reason for the rejections were that the submitted drugs were not cost-effective
In cases of rejected anti-cancer drugs, most are rejected or have not been evaluated yet in NICE and PBAC
But, Among rejected drugs, only a few are regarded as medically important

37. Govt’s plan Expanding the coverage for severe diseases (Feb, 2013)
Issues & Challenges
Govt’s plan
Expanding the coverage for severe diseases (Feb, 2013)
Four severe diseases with a higher burden on patients: Cancer, Heart Diseases, Cerebrovascular diseases and Rare diseases
Goal: to accomplish the complete health insurance coverage for the essential health care services by 2016
To cover the necessary drugs, which are not cost-effective under the current criteria,
Risk sharing scheme will be implemented
To be flexible in considering the threshold of ICER depending on the severity of the disease.
Korean government announced that it will expand the coverage for four severe disease; such as cancer, heart disease, cerebrovascular diseases and rare diseases
And to cover the necessary drugs, but not cost-effective under the current criteria, risk sharing scheme will be implemented, and ICER threshold will be applied more generously for most severe diseases

38. Issues & Challenges
Risk sharing
Risk sharing may be the breakthrough in price negotiation with some medically important drugs
However, there is a concern over RS
It can be used to maintain high prices instead of lowering the prices to a more cost-effective level
Increased administrative burdens
Reduction in the transparency of the system
Need to expand the RS on a limited basis
Risk sharing may be the breakthrough in price negotiation with some medically important drugs
However, there is also a concern over RS
The company may prefer to maintain high list prices instead of lowering the prices to a more cost-effective level, and it can increase the administrative burden on government side.

39. Issues & Challenges
Price competition
It is expected that the generic market will shrink after price adjustment, as generics lost their price advantage compared to original drugs
Policies which stimulate the price competition, and encourage the use of cheaper generics need to be implemented in the near future
Other cost containment policies such as reference pricing, and expenditure cap also need to be considered
It is expected that the generic market will shrink after price adjustment, as generics lost their price advantage compared to original drugs
Policies which stimulate the price competition, and encourage the use of cheaper generics need to be implemented in the near future
Other cost containment policies such as reference pricing, and expenditure cap also need to be considered

40. Thank you! Me da se !