In July, the nation implemented a “tiered system” to restructure the drug-pricing method, which called for differentiating drug prices to keep generic medicines from recklessly rushing into the market.

This system sets different drug prices depending on bioequivalence studies' performance and the use of substances registered in the drug master file (DMF). The prices of generic drugs that meet both qualifications are set at 53.55 percent of the original drug price. In comparison, products that satisfy only one condition are priced at 45.52 percent. Those without any qualification are fixed at 38.69 percent of the original drug’s price.

Drug prices are also applied differently according to the order of registration for health insurance coverage. The health authorities will price the 21st generic drug at 85 percent of a lower price between the two -- the lowest price among identical medicines and 38.69 percent of the original drug’s price.

However, there are considerable concerns over the industry's new pricing policy as the government decided not to abolish the joint bioequivalence testing system. 

Suppose 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 generic copies of the original medication.

On the other hand, companies, which spend much time and money to use raw material registered in DMF and demonstrate therapeutic equivalence, may not be eligible for 53.55 percent of the original drug’s price if their generic drugs are pushed to the 21st place in the registration.

This year, the pharmaceutical industry was overheated as Chong Kun Dang looked for drugmakers for contract manufacturing of its dyslipidemia treatment Atoezy. Atoezy is a drug that combined atorvastatin with ezetimibe. Chong Kun Dang developed it as a copy of MSD’s original medicine Atozet.

Chong Kun Dang offered the condition that it would provide clinical data of Atoezy. The company won approval in early October, and more than 20 pharmaceutical companies, even including those which had been preparing to develop the generic of the existing Atozet, joined the group.

If everything goes on as Chong Kun Dang planned, Atozet’s generic copies, which can apply for registration only after January 2021 when Atozet’s review period expires, will be applied with the lowest level of prices.

For this reason, some pharmaceutical companies filed 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.

Contrary to the government’s intention to prevent the random appearances of generic drugs in introducing a tiered drug pricing system, some companies used it as a means of preserving their drug prices. That explains why industry watchers predict the issues surrounding the tiered drug pricing system for generic drugs are likely to continue through 2021.