Seoul to increase R&D portion in certifying pharma companies as ‘innovative’

The government will likely raise the share of R&D in the certification of innovative pharmaceutical companies while relaxing the criteria for disqualifying existing ones due to their administrative penalties and kickback records.

An official from the Health Industry Promotion Division at the Ministry of Health and Welfare disclosed these changes at a meeting with journalists on Wednesday while explaining the ministry’s plan to improve certification standards for innovative pharmaceutical companies.

Announcing its major administrative plans for 2025 early this year, the ministry expressed its intention to improve core regulations for the health and pharmaceutical industries to support their global advancement. One part of the plan is to revise the certification standards for innovative pharmaceutical companies.

Notably, the improvement plan includes adding additional factors to companies' R&D investment efforts and scoring the disqualification criteria based on the number of administrative penalties and the amount of rebates provided.

The Innovative Pharmaceutical Company Certification System aims to reinvigorate new drug research and development by pharmaceutical companies operating in Korea. It grants benefits, such as preferential drug prices and tax support, to companies with a high proportion of R&D investment.

In line with its purpose of requiring high ethical standards, the system applies strict disqualification criteria for illegal rebates and excludes innovative pharmaceutical companies that have been administratively fined twice or more for violating the Pharmaceutical Affairs Act for three years, with a total amount of more than 5 million won ($3,430).

However, some industry insiders have complained that even if a company has invested in R&D and ethical management for a long time, its previous records of kickbacks have influenced the government’s selection of innovative companies, dampening their will to develop new drugs.

According to the ministry official, the proposed improvement plan reflects this industry’s complaints by considering scoring disqualification criteria based on the number of administrative penalties or the amount of rebates provided.

“In the current system, innovative pharmaceutical companies are eliminated if they violate the criteria. By introducing quantitative indicators to score the disqualification criteria, we are trying to create a way to make up for it by adding value to R&D efforts,” the official said, wanting to remain anonymous until details are fixed.

The ministry is also considering categorizing the certification criteria for multinational pharmaceutical companies.

The Korean Research-based Pharma Industry Association (KRPIA) has been advocating for a standard that recognizes and promotes the activities of multinational pharmaceutical companies to build global-level R&D capabilities. The industry executives said the ministry finally seems to be listening. In addition, one improvement under consideration is specifying the reasons for rejection when notifying the results of the innovative pharmaceutical company certification.

In a Q&A session following the announcement of this year’s administrative plan, Vice Minister of Health and Welfare Park Min-soo also said, “The most important criterion for selecting innovative certified companies will be the R&D criteria, but we are trying to readjust the criteria according to the specific status and reality of the industry.”

“We are considering expanding various quantitative assessments, creating customized criteria for each type of pharmaceutical company, and making reasonable improvements to the disqualification criteria,” Park added.

Under the Special Act on Pharmaceutical Industry Development and Support, the proposed improvements must be reviewed by the Pharmaceutical Industry Development and Support Committee. The ministry is preparing for the committee's deliberations and plans to issue an administrative notice in February.