Global drugmakers may be slower to launch new drugs in South Korea now that the U.S. is linking drug prices in South Korea and other countries to its own, according to a new forecast. If a South Korean launch can affect prices in the far larger U.S. market, companies' calculations could change.

Richard Kane, vice president for international policy at the Pharmaceutical Research and Manufacturers of America (PhRMA), said in an interview at the Grand Hyatt Seoul on October 28 that drugmakers weigh the impact on their global business when they launch new drugs in countries that U.S. policy uses as reference points.

South Korea has the lowest price among the 19 reference countries for about one in five patented drugs in the U.S. Medicare program, he said. Were it not for the fact that many innovative new drugs are unavailable in South Korea, the effect of South Korea's low drug prices on U.S. prices would have been greater.

PhRMA represents U.S. research-based biopharmaceutical companies. Philip Chen, PhRMA's vice president for international affairs, and Lee Young-shin, vice chair of the Korea Research-based Pharmaceutical Industry Association (KRPIA), also took part in the interview.

South Korea's drug prices affect U.S. prices, becoming a factor in companies' launch decisions

Kane said many countries set drug prices by referring to prices abroad, but U.S. policy can carry more weight because the U.S. market is large and its prices are high.

He explained that if launching a new drug in a relatively small market affects the price a company receives in the U.S., the company will consider the effect not only on sales in that country but on its entire global business.

The Global Benchmark for Efficient Drug Pricing (GLOBE) model, finalized by the U.S. Centers for Medicare & Medicaid Services (CMS), references drug prices in 19 countries, including South Korea. For some Part B drugs, price data collection begins in January next year. Rebate calculations and adjustments to patients' out-of-pocket costs take effect in April.

An explanatory document provided by PhRMA interprets the U.S. most-favored-nation (MFN) drug pricing policy as an effort to make other high-income countries shoulder more of the cost of global biopharmaceutical innovation. In effect, it requires them to raise spending on innovative drugs, as a share of gross domestic product, to a level similar to that of the U.S.

Kane and Chen praised South Korea's clinical research capabilities but stressed that the results should translate into new drugs reaching patients in South Korea. They pointed out that drugs tested in clinical trials in South Korea sometimes do not win national health insurance coverage, which keeps them from reaching more patients or delays their introduction.

Kane added that typically, patients in a country that takes part in clinical trials get the benefit of that drug, but often that is not the case.

Chen said South Korean patients wait about four years after a new drug's first launch overseas, and about half of that time comes in the cost-effectiveness evaluation and the pricing and reimbursement decisions that follow approval by the Ministry of Food and Drug Safety.

If the time it takes to introduce new drugs is shortened, South Korean patients will benefit, he said. Improving the approval system alone cannot eliminate all of the delay. It also needs to look at the process from approval until patients actually use the drug.

U.S.-U.K. Agreement is Worth South Korea's Consideration… Investment in Innovative Drugs Must Expand

The two officials pointed to the U.S.-U.K. drug pricing agreement as a possible response for South Korea. They said South Korea could look to the structure under which the U.K. expanded spending on innovative drugs and patient access while pursuing trade and supply chain cooperation with the U.S.

The agreement text released by the U.K. government calls for raising the net price of new drugs and lifting the National Institute for Health and Care Excellence (NICE) cost-effectiveness threshold from 20,000 to 30,000 GBP (26,540 to 39,810 USD) about per quality-adjusted life year (QALY) to 25,000 to 35,000 GBP (about 33,200 to 46,450 USD). QALY is a unit of health benefit that reflects both length and quality of life.

The U.S. agreed to exempt U.K.-made pharmaceuticals from the tariffs in question through January 19, 2029, on the condition that major U.K. drugmakers reach and comply with drug pricing and tariff agreements with the U.S. government.

South Korea's Health Insurance Review and Assessment Service and National Health Insurance Service modeled their drug pricing and reimbursement policies on those of the U.K.'s NICE and National Health Service, so South Korea could also enter an agreement with a structure very similar to the U.S.-U.K. agreement, Kane argued.

He also proposed raising the net price of new drugs by raising the threshold for the incremental cost-effectiveness ratio (ICER), the additional-cost standard that recognizes a new drug's health benefit.

Chen cautioned against making tariff reduction the sole aim of cooperation between the two countries.

An agreement between countries should bring the two nations closer together in biopharmaceutical innovation, Chen said. It would include both ways for patients to get access to new drugs and mechanisms for the two countries' industries to work more closely together, and tariffs are only one part of that.

All three agreed that South Korea, an aging society, must consider health care spending and industry development together if it wants to adopt new technologies and treatments and maintain its competitiveness in innovation.

Chen said that it needs to think about reforms that look at health care spending not merely as a cost but from the perspective of growing the economy.

Global drugmakers may be slower to launch new drugs in South Korea now that the U.S. is li …

PhRMA: U.S. Drug Price Referencing Could Delay New Drug Launches in Korea