"We must keep the hard-won flame alive. It is imperative to increase the self-reliance in active pharmaceutical ingredients (API) to establish pharmaceutical sovereignty by improving the self-sufficiency rate of medicines."

Han Ssang-soo, who chairs the Special Committee for API within the Korea Pharmaceutical and Biopharmaceutical Manufacturers Association (KPBMA), said so during a recent meeting with journalists covering the association while stressing the need for heightening the self-sufficiency rate of API. Kim is also CEO of Inist ST, an API provider. 

Over the past five years, the self-sufficiency of API has ranged from 11.6 to 36.5 percent (23.1 percent on average), reflecting high dependence on overseas suppliers. On the other hand, homemade API prices are about three times higher than those of Chinese and Indian products, revealing low price competitiveness. Besides, there are only 152 companies that can manufacture and import API, with their aggregate output remaining at 3.4 trillion won ($2.6 billion), or 22.2 billion won per company. Moreover, the government’s policy support to help develop API and reinvigorate the sector remains sluggish.

Against this backdrop, the association has activated a special committee on API, stepping up efforts to improve the self-sufficiency of API. Korea Biomedical Review met with Han to learn about the committee's activities and plans.

Question: What is the background for establishing the committee, and how is it composed?

Answer: As Korea underwent the Covid-19 pandemic, there were mounting calls for establishing pharmaceutical sovereignty, improving the self-sufficiency of drugs, and stabilizing the supply of essential national drugs. Government agencies, including the Ministry of Health and Welfare and the Ministry of Food and Drug Safety, and related organizations and associations, moved toward collecting and institutionalizing various policy options. However, it is difficult to say that effective measures are being implemented.

To establish pharmaceutical sovereignty by improving the self-sufficiency rate of pharmaceuticals, it is essential to increase the self-reliance of APIs.

Unfortunately, however, no institution or organization represents the domestic API industry, and this committee was established against the backdrop. The committee comprises executives, higher officials at domestic API manufacturers, and team leaders as working-group officials. Fifteen companies participated in it and held the first meeting on June 27. The 15 firms include Kyongbo Pharmaceutical, Dong-A ST, Yungjin Pharmaceutical, Yuhan Chemical, CKD Bio, Estech Pharma, Ildong Pharmaceutical, JW Pharmaceutical,  Hankook Korus Pharm, and Huons Meditech.

Q: What’s the committee's action plan?

A: The committee will hold quarter-yearly meetings to make practical policy proposals and recommendations to improve the self-sufficiency rate of APIs, share information on the development and production of APIs, and strengthen cooperation among member companies. In particular, in the area of policy recommendations, we will select and prioritize practicable policies and propose and implement concrete measures to ensure that each one is effectively reflected on policies and implemented.

Q: It is understood that it will propose to the government to reduce the drug price of medicines using homemade APIs and provide tax support.

A: To expand the use of domestic ingredients, I think the best way is to provide incentives, including incentives in drug pricing, for domestic pharmaceutical companies. I understand various organizations have already proposed plans to expand the scope and period of the current drug pricing incentive system for finished pharmaceutical products using in-house APIs, and the government positively considers them. However, it does not apply to companies that specialize in manufacturing APIs. Therefore, it is necessary to expand the system to all homemade APIs. To this end, the priority should be discussing the definition of homemade APIs and additional incentive rates for them.

Q: Why is the price competitiveness of homegrown APIs low?

A: This is, of course, due to the high-cost structure. Direct manufacturing costs are raw material, labor, and utility costs. Especially electricity and water costs account for a large share and they constantly rise. Besides, we must invest in R&D and facilities to develop efficient processes. This committee will work out specific and appropriate tax support proposals for each cost factor and expense and deliver them to the government.

Q: Economies of scale are needed to lower production costs. It also requires self-support steps, including developing overseas markets. What efforts do you make in this regard?

A: These are the problems and dilemmas facing domestic API makers. As with any industry, you can only lower costs by mass-producing them, and to do so, you need to secure sales outlets. It may be another chicken-or-egg question, but the investment should come first. Inist ST also invested massively into expanding its C-GMP plant for mass production at our plant in Osong and passed the FDA’s inspection last year. It also installs small-batch facilities and isolators to produce highly active substances. Through this, the company recently signed a CDMO contract with a U.S. drug-developing company invested by GSK and Merck and is participating in new drug projects, including ADC.

I believe that efforts should be made to increase production capacity and add pipelines by parallel investment in facilities for mass production and R&D for new drug development. There are also moves by companies to reduce costs and secure supply stability by collaborating with domestic chemical manufacturers, breaking away from the existing strategy of minimizing domestic production stages to reduce costs.

Q: Since the Covid-19 pandemic, there have been calls to improve the self-sufficiency of APIs, but support for this seems to be sluggish. What do you think is the reason?

A: Various opinions have been proposed since the Covid-19 outbreak to improve the self-sufficiency rate of raw materials, including preferential R&D support for finished pharmaceuticals using homemade APIs, increasing tax support, and country of origin labeling. However, none of them have been effectively implemented so far. The slow progress of support policies is because they require enacting or revising laws, enforcement decrees, ordinances, and regulations, leading to conflicts of interest between relevant departments and industries. Above all, no center of gravity exists to sustain and attract attention. This committee will continue to raise issues and make suggestions to help speed up the process. We look forward to the media’s continued interest and support.

Q: What could be your final message?

A: The committee will not simply represent the industry's interests but will propose viable alternatives and concrete measures to improve Korea's pharmaceutical sovereignty and self-sufficiency. The committee will continue to push for policies and practices until its goals are reflected and implemented.