The government said it would additionally reference Canada and Australia when setting drug prices from January next year. Accordingly, the number of reference countries for drug pricing will increase from seven to nine.

To date, Korea has calculated the foreign average drug price of seven countries, also known as A7 -- the U.S., U.K., Germany, France, Italy, Switzerland, and Japan.

However, there have been consistent comments from government officials that the calculation formula was outdated and the basis for the calculation needed to be revised.

As a result, the Health Insurance Review and Assessment Service (HIRA) released a prior notice of the partial revision of the regulations on evaluation criteria and procedures for eligibility for insurance benefits, announcing it would add Canada and Australia when calculating the foreign average drug price.

With this revision, the foreign average drug price calculation method will also change by reflecting the exchange rate, value-added tax, and the scope of distributions, in addition to the ex-factory shipment price in each of the nine foreign countries.

In the calculation, any decimal denominations will be removed.

For ex-factory prices in the nine countries, the government will refer to each country's value-added tax, margin, and refund rate based on the amount listed in the drug price booklet of the concerned country.

If manufacturers, consignment manufacturers, and importers submit objective data issued by foreign government agencies, such as regulations of the relevant country, or notarized data confirmed by companies publishing drug price booklets, HIRA will consider such information when calculating the drug price.

If foreign drugs have the same ingredients, dosage form, and dose, or the company name or product name is the same, HIRA will search for the highest-priced product.

Also, HIRA has set targets for essential drugs that can be excluded from submitting economic evaluation data to medicines that are publicly reimbursed or covered equivalently in at least three of nine foreign countries.

At this time, HIRA will judge the appropriateness of the insurance benefit by considering the lowest price among the adjusted prices among the nine foreign countries.

The drug industry is keeping a close eye on how the new regulations will affect drug pricing as the pharmaceutical industry has constantly argued that drug prices in Korea are not high compared to A7 countries.

Pharmaceutical companies have complained that Korea does not provide adequate compensation for the value of new drugs as the prices of new drugs released on the market after negotiations with the NHIS are very low compared to those in A7 countries.

The drug industry also expressed doubt that the increase in the number of foreign drug price referral countries will expand insurance coverage opportunities for new drugs.

Some industry watchers believed there would be no significant change in new drug insurance benefits even if Australia and Canada were added.

“As the number of foreign drug price reference countries increases, the opportunity for benefits or expansion of benefits should be visible, but it is still unknown if such benefits will appear,” an industry source told Korea Biomedical Review, asking to remain anonymous due to the sensitivity of the issue.

Rather than expanding the countries that Korea uses to calculate foreign average drug prices, the official suggested reviewing and introducing a prospective rapid listing system.