The Ministry of Health and Welfare is considering introducing a new drug pricing system applied to the “blockbuster drugs” with their annual amount of claims reaching tens of billions won.
“We think it is also necessary to control drug charges themselves,” Kwak Myung-sub, director of the ministry’s Division of Pharmaceutical Benefits, told a news conference Wednesday. Kwak said his division is working out ways on how to manage payment requests by the claims' value.
More specifically, the ministry plans to introduce a system called the “fixed budget for pharmaceutical expenditures,” and linking it to the “price-volume agreement” scheme. In order words, the government will set a criterion for claims a particular drug can request to health insurance a year, and control those whose claims exceed that ceiling.
As the new system aims at lowering the price of a drug according to its claims amount, it is likely to trigger resistance from the industry if realized, industry watchers said.
The price-volume agreement is a system to reduce the price of drugs whose actual uses increase larger than expected at the time of price negotiation, or those drugs applied by health insurance without price negotiations but whose applications increased drastically year to year.
If a drug use rises 30 percent in the first year of health insurance coverage, and 60 percent in the second year, on a year-on-year comparison, the ministry reduces its price. As the system is focusing on the year-to-year increase in use, however, the ministry has experience difficulties controlling the cost of drugs that makes a significant amount of claims, the observers said.
Take a drug whose annual claims is 1 billion won ($897,000), for instance. If its claims increase by 300 million won and 600 million, the growth rate is 30 percent and 60 percent, respectively. In the case of a drug whose annual claim reaches 10 billion won, however, its claims should grow by 3 billion won and 6 billion won, respectively, to meet the criterion, making it hard for officials to reduce its price by applying the price-volume agreement.
To solve the problem, the ministry expanded the application of the price-volume agreement to drugs whose claims volume increased 10 percent from a year earlier and its claims value increased by 5 billion won or more, as of 2015. Still, officials are finding it difficult to control “blockbuster” drugs even with the expanded criteria, they said.
Accordingly, the ministry is considering managing drug prices by claims value and adopting the fixed budget for pharmaceutical expenditure as its alternative. National Health Insurance Corp. has recently placed a research order on this subject.
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