'What’s the Use of New Drugs?'... Health Insurance New Drug Spending at the Lowest Level Among OECD

With the continuous emergence of innovative new drugs, the possibility of treating severe and rare diseases that were previously unconquerable is increasing. However, discussions on the application of domestic national health insurance often remain stagnant, and a study has found that the impact of new drugs on domestic health insurance finances is among the lowest in the Organization for Economic Cooperation and Development (OECD).

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According to the results of the study "Analysis of the Current Status of Pharmaceutical Expenditure on New Drugs in Korea and Rationalization Measures" by Professor Jonghyuk Lee of Chung-Ang University College of Pharmacy on the 4th, the expenditure within domestic health insurance finances for 227 new drug items covered by insurance over the past 10 years (2012?2021) was found to be very low, accounting for 8.5% of total pharmaceutical costs and 2.1% of total health insurance medical expenses.

This study started from the background where the need to strengthen coverage for innovative new drug treatments for domestic patients is increasing, while recently innovative new drugs have faced difficulties in being listed due to perceptions that they impose a heavy burden on health insurance finances. The research team analyzed the financial impact of new drugs according to the method of proving cost-effectiveness upon health insurance listing (cost-effectiveness evaluation, exemption from cost-effectiveness evaluation, weighted average price, others), the expenditure proportion of new drugs under Risk Sharing Agreements (RSA), and the financial impact of new drugs by classification of severe diseases. As a result, the financial expenditures for items exempted from cost-effectiveness evaluation and those under RSA, which mostly consist of new drugs for severe diseases such as cancer and rare diseases, were particularly low at 0.3% and 2.7% of total pharmaceutical costs, respectively. Furthermore, when analyzing the financial impact of new drugs by classification of severe diseases, pharmaceutical costs used for severe and rare disease new drugs accounted for only 3.3% of total pharmaceutical costs.

Professor Jonghyuk Lee stated, “The financial expenditure on domestic new drugs over the past 10 years analyzed in this study was found to be much lower than previously known figures, confirming that the impact on finances is much lower than general perceptions. In particular, new drugs exempted from cost-effectiveness evaluation showed not only a low financial impact but also very low annual pharmaceutical costs per item, and the financial ratio used for severe and rare disease new drugs was also low, indicating an urgent need to improve the expenditure structure from the perspective of patient treatment accessibility.”

Meanwhile, the Pharmaceutical Research and Manufacturers of America (PhRMA) recently released a study comparing new drug accessibility and financial impact internationally based on 460 global new drugs approved in the United States, Europe, and Japan over the past 10 years.

According to this, as of 2021, the financial impact of new drugs in Korea was 4%, ranking 30th out of 32 OECD countries surveyed, placing it near the bottom. This level is similar to that of Turkey, Greece, and Mexico. Compared to major advanced countries such as the United States (26%), Germany (19%), the United Kingdom (18%), and Japan (14%), the proportion of new drug financial expenditure in Korea was found to be 3 to 6 times lower.

There was also a significant gap compared to advanced countries in new drug approval and reimbursement rates. Korea’s new drug approval rate was 33%, lower than Japan, France, and the United Kingdom, which exceed 50%. The reimbursement rate was also 22%, showing a large gap compared to major advanced countries such as Japan (48%) and France (44%), and it was below the OECD average (29%). Particularly, only 5% of globally launched new drugs are released domestically within one year, far below the OECD average of 17%, revealing that domestic patients’ perceived accessibility to innovative new drugs is significantly low.

Lee Youngshin, Vice President of the Korea Research-based Pharmaceutical Industry Association (KRPIA), said, “Despite efforts by the government and industry, the proportion of new drugs in total health insurance pharmaceutical expenses is very low compared to advanced countries, raising concerns about domestic patients’ treatment accessibility. We hope that this study analyzing the actual financial impact of innovative new drugs will serve as evidence to improve new drug accessibility, and that the value of innovative new drugs will be reflected in the comprehensive health insurance plan to be announced in the second half of this year, providing an opportunity to establish plans from a more long-term perspective.”

This content was produced with the assistance of AI translation services.