Health Insurance Drug Price Reduction | “A Signal That the Generic Profit Model Is Collapsing”…Restructuring of the Pharmaceutical Industry Begins in Earnest

1) New Drugs: Expanded Access and Strengthened Management

2) Generics: Reduced Profitability and Restricted Market Entry

3) Already-Listed Drugs: Expanded Phased Price Reductions

4) Supply-Stable Drugs: Expanded Selective Incentives

This health insurance drug price reduction policy is a structural change that affects the entire framework of pharmaceutical companies’ revenue structures, product strategies, and regulatory response systems.

Therefore, rather than a piecemeal response, it is necessary to establish a comprehensive response strategy that encompasses the portfolio, regulation, finance, and supply chain.

In particular, elements such as the lowering of the drug pricing rate, the phased reductions for already-listed drugs, and the introduction of periodic drug price reassessment are highly likely to act as factors that, beyond short-term reductions in profit, require a long-term restructuring of the business.

Accordingly, companies must build a proactive response system centered on the following key risks.

1. Reviewing Health Insurance Drug Price Reduction Risks

• Reviewing whether there is an indirect price-reduction effect arising from grouping based on the same active ingredient
• Reviewing the possibility of applying exceptions to drug price reductions (such as for supply-stable drugs)
• Simulating revenue and profitability and analyzing the impact on earnings in the event of a drug price reduction

2. Portfolio Restructuring Strategy

• Analyzing whether the revenue structure is generic-centered and the degree of dependence on it
• Reviewing the expansion into areas that may benefit from the policy, such as innovative new drugs, treatments for rare diseases, and essential drugs
• Determining whether to discontinue or strategically retain products with low profitability

3. Responses for Innovative and Quasi-Innovative Pharmaceutical Companies

• Checking whether the certification requirements for an innovative pharmaceutical company or a quasi-innovative pharmaceutical company are met
• Conducting an advance review of disqualification risks, such as the R&D investment ratio and any history of rebates
• Establishing internal structural improvements and an investment plan to maintain certification or obtain new certification

4. Responses for New Drug Listing and Post-Listing Management

• Reviewing whether a drug is eligible for fast-track listing (rare diseases or innovative new drugs) and establishing an entry strategy
• Refining the response strategy for economic evaluation in light of changes to the ICER threshold
• Reviewing the possibility of using the flexible drug pricing contract system
• Building a response system for outcome-based post-listing evaluation

5. Responses to Reimbursement Reassessment and Periodic Drug Price Adjustment

• Conducting an advance check of the possibility of being subject to reassessment of clinical usefulness
• Building a data management system in preparation for drug price evaluation on a future cycle of three to five years
• Continuously monitoring international drug price comparisons and changes in the market structure

6. Supply Chain and Supply Stabilization Strategy

• Reviewing products eligible for designation as drugs to prevent withdrawal from the market
• Confirming whether domestically produced raw materials are used and the possibility of applying incentives
• Reviewing whether a drug qualifies as a directly manufactured drug and the application of policy preferences

7. Compliance and Government Relations Responses

• Reviewing the internal compliance system in light of changes in drug pricing policy
• Building a system for rapid responses to changes in subordinate notices and detailed standards
• Establishing a government relations strategy for submitting industry opinions and having them reflected in policy