The government has proposed that a new health insurance reimbursement system must be designed to ensure patients requiring “high-cost orphan drugs” -- which are no longer rare due to advances in medical technology -- can consistently access them.

Lee So-young, director of the Drug Effectiveness Evaluation Division at the Health Insurance Review and Assessment Service (HIRA), emphasized the necessity of designing a new reimbursement system during a symposium titled “Treatment Directions for Rare and Severe Diseases and Social Ethics” co-hosted by HIRA, the Korean Society for Medical Ethics, and the Korean Bioethics Association on Thursday.

Why did HIRA, responsible for insurance benefit evaluation and review, put forward this opinion?

The reasons include the approval status of rare disease drugs, which now constitute over half of all new drugs; the clearly limited health insurance finances; increased patient demand; and the high drug prices proposed by pharmaceutical companies – all of which threaten the sustainability of the national health insurance system.

“Reimbursement must ensure patients can continue safe and effective treatment, which requires stable funding. Pharmaceutical companies must have the motivation and profit generation to continuously develop good new drugs,” Lee said. “If even one of these elements is out of place, sustainability is impossible.”

For this reason, the health insurance reimbursement system from the era when orphan drugs were rare is insufficient to guarantee the sustainability of the health insurance system, Lee said.

“Orphan drugs now constitute the majority of newly approved drugs,” she said. “Orphan drugs are no longer rare; they are mainstream. It is time to create a system that matches this reality.”

For example, 52 percent of drugs newly approved in the United States last year were orphan drugs. Korea is no different. Last year, 26 orphan drugs were approved domestically, accounting for 60 percent of the 44 new drugs approved overall. The trend of high-cost orphan drugs becoming the new standard in drug development is not a recent phenomenon. “It began over a decade ago,” Lee said.

Lee assessed that the value placed on the approval and review of orphan drugs is similarly “humanitarian” worldwide. “There is a principle that if it is an extremely serious disease, life-threatening, and there is an unmet need, it must be developed quickly, approved quickly, and covered by insurance quickly,” she said.

The U.S. Food and Drug Administration (FDA) pioneered this approach. Last year, 66 percent of all new drugs approved by the FDA were authorized through four separate approval tracks established under this principle. Since orphan drugs are high-cost new medications, coverage after approval is essential to ensure treatment accessibility. However, coverage policies varied across countries.

When asked whether all fast-track approved drugs received coverage, Lee said, “Not all did,” indicating that fast-track approval for new drugs did not necessarily lead to coverage access. The reason is evident in a study observing 46 fast-track approved drugs for over five years: only 10 drugs (22 percent) demonstrated proven life extension or improved quality of life.

Twenty-nine (63 percent) were converted to full approval. Although fast-track approval was granted, approval was withdrawn for 10 (22 percent) of the new drugs, and seven (15 percent) have yet to demonstrate safety and efficacy in clinical studies. That explains why reimbursement, which requires reviewing not only the efficacy and safety of new drugs but also their cost-effectiveness, presents difficulties.

Consequently, Korea has implemented reimbursement systems, such as the “Risk-Sharing System” with pharmaceutical companies for new drugs that cannot fully guarantee efficacy and safety, and the “Cost-Effectiveness Assessment Exemption System” to ensure rapid access to treatment for diseases severely threatening patients' lives and quality of life.

It's not just high-cost new drugs that have increased. The number of patients under the special billing system for rare diseases increased by 27 percent from 2020 to 2024, while total drug costs and expenses for rare disease treatments rose 46 percent over the same period. The number of risk-sharing drugs grew from 29 to 65 during this time, and spending on these drugs jumped 166 percent.

So, how much is Korea spending on rare disease treatments? Last year, they accounted for 34 percent of the total health insurance drug costs, which were 3.2 trillion won ($2.2 billion). Despite this significant investment, Director Lee noted that ensuring the safety of these drugs is also a challenge.

Lee cited the case of Elevydis, a one-shot gene therapy for Duchenne muscular dystrophy that received accelerated approval in the U.S. last year, where multiple patients died after administration, as a prime example. This drug, which had also faced calls for rapid introduction in Korea, ultimately failed to gain approval in Europe as well.

Nevertheless, this should not dampen the will to develop new drugs. The mere “hope” that new drugs are being developed provides immense motivation for patients with rare diseases and their families. Moreover, some new drugs have the potential to miraculously transform the lives of patients with rare diseases. However, this requires significant costs.

“Rare diseases present unique challenges in research and development. The small patient population makes recruiting subjects extremely difficult, and standard protocols cannot be applied. This necessitates the continuous development of specialized protocols.” Lee said. “High cost is an inherent characteristic of rare disease treatments.”

Director Lee emphasized that this situation necessitates the design of a new reimbursement system for rare disease drugs. She argued that we must ensure patients' access to treatment for unmet medical needs and find ways to fairly use these new drugs with uncertain efficacy and safety, all within limits that do not threaten the national health insurance finances.

As an alternative, Lee referenced the “Evidence-Generation Conditional Coverage” system, which was revised and announced in March of this year. “This system ensures patient access to treatments for severe diseases by covering them upon listing, even if their clinical usefulness and cost-effectiveness are somewhat uncertain, conditional on subsequent evaluation,” she explained.

Lee emphasized that evidence-based conditional reimbursement, which uses real-world data from clinical practice for post-market management, is necessary in Korea's current situation, where risk-sharing mechanisms and post-market monitoring for drugs exempted from cost-effectiveness evaluation are required. She also noted that internationally, post-market performance evaluation using real-world data for new drugs is becoming increasingly prevalent.

Establishing a separate fund, distinct from existing health-related funds like the National Health Promotion Fund, Emergency Medical Fund, and Lottery Fund, was proposed as one solution. The U.K. operates a Cancer Fund and an Innovative Medicines Fund linked to evidence-based conditional reimbursement, and Taiwan also runs a separate fund tied to this approach.

“We can explore stable and fair funding methods by establishing a separate fund for rare disease treatments, similar to other countries,” Lee said. She proposed separating conditional reimbursement targets into a separate fund to strengthen pharmaceutical companies' responsibility for reevaluating real-world data and implementing reimbursement based on evaluation results as an alternative.

In conclusion, Lee said, “National cooperation is essential to resolve the most critical uncertainty regarding patient safety. A sophisticated system design must be established through social consensus to ensure patient access and safety for rare disease treatments while simultaneously achieving fairness in resource allocation and sustainability of insurance finances.”