[Ip-health] European Union Chamber of Commerce in Korea, Pharmaceutical Trade Issuses and Recommendations for 2004

[James Love]

This is a detailed and very interesting report published by the European
Chamber of Commerce in Korea, concerning trade disputes with Korea over
pricing of medicines.  I have pulled out a few illustrative sections of
the report, followed by the entire report.  Jamie


European Union Chamber of Commerce in Korea, Trade Issues and
Recommendations for 2004

** Our long running focus relates to Patient Access, Pricing and
Reimbursement, because in this domain the authorities have targeted
innovative, largely foreign products through cost containment measures,
whilst retaining an unusually high generic, largely local , pricing policy.

** MOHW's has decided to set up from January 2004 under HIRA
responsibility, a DUR committee for the purpose to promote an
appropriate drug usage by carrying out development and implementation of
guidelines for drug use evaluation. . . Although we do not oppose the
principle of DUR committee, we would like to emphasize that the drug
utilization review should be made purely on a scientific basis, and not
on cost.

** A7 Pricing
Situation.  The Korean authorities originally accepted to define prices
of innovative medicines as the average of the prices in 7 countries
(France, Germany, Italy, Japan, Switzerland, UK and US) as set forth in
the MOHW Notification No 2001-17, revised on April 18,2001.
However, as "innovative" has never been precisely defined and needs to
be agreed for each product, this qualification remains up to the
arbitrary decision of those bodies charged with the responsibility of
defining whether a product attains the classification of "innovative",
and in fact, it is a way not to apply A7 pricing in most of the cases.
Indeed there are only few products that have received A7 pricing
according to the interpretation of industry.

** Improving cost efficiency ratio of healthcare policy is a legitimate
goal. One should keep in mind, however, that improving this ratio but
not reducing cost of healthcare is the legitimate goal.  Rationalization
of healthcare delivery but not it cost reduction are the usual effect of
pharmacoeconomics.  Accordingly, pharmacoeconomics cannot and should not
be used as an alibi for drugs prices limitation or reduction.

**  There also seems to be a continued misunderstanding by the KFDA of
its obligations under TRIPs Article 39.3 with regard to the use of
clinical data from published journal articles. Generic products have
been able to gain registration during the re-examination period even
though the data in the studies cited were the property of the
originator. KFDA claim that the TRIPs protection prevents use of
publicly disclosed data only for "commercial purposes". Foreign
companies in Korea, however, assert that registration is clearly
intended for a commercial purpose.  Recommendation.  The Korean
Government should implement a prospective system for the administration
of patent protection in pharmaceuticals, including directly linking the
relevant product registration review (KFDA) and patent (KIPO) agencies
for appropriate enforcement of patent protection. KFDA should also
recognize that the purpose of securing a registration is clearly
commercial.

WHOLE REPORT BELOW......

http://www.eucck.org/trade/2004/question/el/pharmacy.htm

PHARMACEUTICALS COMMITTEE


1 . Overview.


The Korean authorities felt that comments in the 2003 paper, saying that
"the foreign pharmaceutical industry feels rather unwelcome in Korea",
were unfounded.
The feeling in our industry is however unchanged.

Response to our 2003 paper has been limited to a partial reversal of the
LTP system. The current situation confronting LTP is that it is being
challenged in Korean courts of law and is in the view of industry, a
contravention of the Korean constitution.

However; as new issues in 2004 we must now add, the suggested
application of Pharmaco-Economics, known from other countries to be
extremely complex, the discriminatory introduction of the Drug Master
File and the KFDA's unwillingness to accept internationally approved
dissolution tests for Pharmaceutical Equivalence Testing (PET).

Our paper, with those additions, therefore remains largely unchanged to
that presented in 2003 and the preceding years.

Our long running focus relates to Patient Access, Pricing and
Reimbursement, because in this domain the authorities have targeted
innovative, largely foreign products through cost containment measures
,whilst retaining an unusually high generic, largely local , pricing
policy. Such measures have usually been implemented without any industry
consultation or possibility for appeal.
Overall, there remains a lack of transparency and an absence of true
dialogue with industry.

We fully understand the difficulties the Ministry of Health and Welfare
has had in managing the insurance finance deficit, and the European
pharmaceutical industry has offered to be a partner in addressing it in
a fair and rational way.
As expressed many times previously, we believe that the Korean
government should look at ways to curtail the excessive prescribing of
drugs and its unusually high generic pricing policy. We support the
rational use of medicines, and emphasize that the quality of healthcare
for the Korean patients should not be compromised.

If the Korean government is serious about embracing the challenges of
globalization and the development of a biotech hub for North East Asia,
they will have to ensure that the environment for research-based
industry becomes not only more attractive, but also more stable and
predictable.

The European pharmaceutical industry is willing to work with the Korean
government and other stakeholders to ensure that such environment is
created.

In the specific context of the TBR complaint, some measures have been
implemented, however only partially, whilst on others the government has
started to backtrack. The TBR is still ongoing,

Our Trade Issues are therefore,

A. Patient and Physician Access.
A1. Prescribing / Reimbursement Guidelines
A2. Product Pricing
     a) A7 Pricing for Innovative New Products.
     b) ATP/ LTP
     c) Triennial Re-Pricing
     d) Pharmaco-Economics.
B. Other Issues.
B1. License Ownership (and Toll Manufacturing)
B2. Cross Border Testing
B3. Harmonization of Clinical Trials
B4. Data Protection/IPR Issues
B5. Drug Master File
B6. Pharmaceutical Equivalence Testing (PET)

2 . Detail


A1. Prescribing/Reimbursement Guidelines - Modern Medicine Restrictions

Situation

As a supplementary method to contain costs within the health care
sector, prescribing/reimbursement guidelines for modern medicines have
been implemented by the Korean Ministry of Health (MOHW) in association
with the Health Insurance Review Agency (HIRA).

Guidelines are developed within a financial framework focusing upon
limiting access to modern medicines of international origin. Actual
experience so far has shown that there appears to be little or no
consideration given to sound medical or scientific rationale supporting
guidelines. Additionally, industry is not permitted to engage in
consultation with the guideline drug committee in order to challenge
guideline validity. It is the opinion of industry that constituent
members of the drug evaluation committee do not possess necessary
medical competency in each specialty field to judge or recommend
guidelines. Industry also believes that scant attention is paid to
recommendations made by expert committees, as their opinion is more
clinically focused and not financially driven.

Potential prescribers of modern medicines are severely restricted in
selection of the most appropriate therapy options and similarly are
threatened that use of modern medicines will negatively impact hospital
drug reimbursement.

=C2=B7 Drug Utilization Review Committee (DUR):
The only 2003 modification to the above is the creation of a "Drug
Utilization Review Committee".


Situation

MOHW's has decided to set up from January 2004 under HIRA
responsibility, a DUR committee for the purpose to promote an
appropriate drug usage by carrying out development and implementation of
guidelines for drug use evaluation

How it will compliment the existing guidelines has not yet been defined,
however; the committee will probably establish itself as the prima
vehicle responsible for setting the new prescribing rules. The extent of
and method of industry participation is not yet clear.

Recommendation

Although we do not oppose the principle of DUR committee, we would like
to emphasize that the drug utilization review should be made purely on a
scientific basis, and not on cost.

In this light, we have concerns about the proposed composition of the
DUR Committee membership, as industry participation is currently
omitted. Furthermore scope of responsibilities of the DUR Committee and
their implementation process are not clearly explained in the draft
regulations

Finally, we would like to suggest that relevant stakeholders, including
industry, be given the opportunity to review and comment on the outcome
of the DUR Committee. We also believe that results of the DUR studies
will have to be informed to relevant stakeholders for feedback in a
clear and timely manner.

EUCCK will endeavor to seek dialogue with HIRA and MOHW to clearly
understand the operational activities of the DUR and its consultation
objectives with industry.


=E2=97=8F A2. Product Pricing

=C2=B7 A7 Pricing

Situation
The Korean authorities originally accepted to define prices of
innovative medicines as the average of the prices in 7 countries
(France, Germany, Italy, Japan, Switzerland, UK and US) as set forth in
the MOHW Notification No 2001-17, revised on April 18,2001.
However, as "innovative" has never been precisely defined and needs to
be agreed for each product, this qualification remains up to the
arbitrary decision of those bodies charged with the responsibility of
defining whether a product attains the classification of "innovative",
and in fact, it is a way not to apply A7 pricing in most of the cases.
Indeed there are only few products that have received A7 pricing
according to the interpretation of industry.

Furthermore when the innovative qualification is rejected,
pharmaceutical companies do not have the possibility to express and
develop officially their positions until price publication.
However generics remain premium priced (80% of originals), provided they
can demonstrate bio-equivalence which in real terms, should be a
pre-requisite for public healthcare interest. This demonstrates
indirectly the lack of reward for R&D innovation in Korea.

Recommendation

A7 Pricing should be correctly implemented for all products approved as
a new drug by the Commissioner of the Korea Food and Drug Administration
in accordance with Article 2, Paragraph 12 under the Pharmaceutical
Affairs Act, and if it is either a patented or PMS protected
preparation, without any exception. It should be agreed within a short
period of time,
Otherwise there is also no logic in applying the rule of triennial
re-re-pricing based on A7, if A7 average is not granted at the initial
stage.
Full implementation of A7 pricing creates a win-win for government,
society and industry.
For government, it can rely on the policy of 7 developed countries. Most
of these countries already have a thorough evaluation process to define
the price of a new pharmaceutical, whereby they take several criteria
into account. This allows the Korean government to avoid duplication and
to devote its resources to other needs. Linked to triennial re-pricing,
it also allows government to adapt prices to a changing environment.
For society, the early access to new products will have advantages in
terms of health for the Korean citizens.
For both local and foreign industry it creates predictability on prices
and a smooth introduction of new products. It also creates an incentive
for R&D investment through rewards for innovation by Korean Authorities


=C2=B7 ATP / LTP

Situation

The Korean authorities originally introduced Actual Transaction Pricing
in November 1999. In 2003 Government moved to LTP, Lowest (found)
Transaction Price that they had to withdraw after one implementation,
due to major opposition of all stakeholders especially as it could cause
irreparable damages to the industry. Several litigations against MOHW
are still on going by local and foreign companies. Initial findings
suggest that the action may be unconstitutional however; the final court
ruling will establish what constitutional issues are breeched.
Consequently MOHW announced that after one implementation of LTP they
would come back to ATP.

So far, in spite of strong assertions to the contrary ATP has never been
fully implemented in its original spirit, as the representativeness of
the surveyed transaction remain more than questionable. Furthermore,
companies are facing price reductions as a consequence of transaction
clearly beyond their control i.e. discount practices from wholesalers to
pharmacies or to other wholesalers Also financial discounts implemented
to shorten payment term have been at the origin of price cuts whereas
they should be out of the scope of the ATP surveys.

Recommendation

Industry supports ATP, because in combination with SDP (separation of
dispensing and prescribing), it ensures a more efficient use of health
insurance funds. The purpose of reimbursement is to alleviate the
financial burden of patients, not to provide an income for the
healthcare provider. Healthcare providers should be paid for the
services provided.

Therefore, ATP should be fully implemented first and then evaluated.
There should be regular control of prescribers /dispensers, and
penalties should target all those who do not comply with the provisions.
Those products incorrectly re-priced under the single LTP application
should revert to their original pricing.

=C2=B7 Triennial Re-pricing

Situation

In October 2003 MOHW implemented the second round of triennial A7
average price revision.

Recommendation

Industry does not oppose triennial re-pricing if implemented in a fair
way. The intention is to fully ensure A7 implementation, and it is
consistent with the average A7 pricing. Thus changes should be allowed
both up and down, and not only price reductions. There should be full
implementation of A7 comparisons, with both up and downward adjustments.
These adjustments should equally apply to original products and
generics, without discrimination in favor of lower reductions for generics.


=C2=B7 Pharmaco-Economics:

Situation

In industrialized countries, budget constraints and growing public
demand for higher levels of healthcare have made the efficient delivery
of high quality healthcare a major priority.

Researches into the economic assessment of drugs known as
pharmaco-economics have been conducted since the 1970's. In Korea
utilization of pharmaco-economics could provide a tool to assist with
drug registration, evaluation of clinical treatment guidelines, and
evaluation of pharmaceutical care services, budget planning and pricing
decision.

EUCCK welcomes the Korean government willingness to utilize
pharmaco-economics in its decisions related to healthcare policy. We do
believe that an appropriate utilization of pharmaco-economics can have
positive impact on healthcare policy.

Pharmaco-economics can help optimize the utilization of healthcare
resources, which is its primary goal. It can also assist MOHW in
anticipating the budgetary impact of its decisions.

European companies involved in healthcare are very eager to cooperate
with authorities in the implementation of a transparent policy clearly
oriented towards rationalization of resources and improvement of health
care in Korea.

Improving cost efficiency ratio of healthcare policy is a legitimate
goal. One should keep in mind, however, that improving this ratio but
not reducing cost of healthcare is the legitimate goal.

Rationalization of healthcare delivery but not it cost reduction are the
usual effect of pharmacoeconomics.

Accordingly, pharmacoeconomics cannot and should not be used as an alibi
for drugs prices limitation or reduction.

Other countries have found direct application of pharmacoeconomics to
the calculation of drug prices to be difficult. The potential
applicability of pharmacoeconomics to the calculation of price of new
drugs is still under investigation and debate.
Average prices of drugs in Korea are the lowest amongst OECD countries
even after adjustment for purchasing power parity. Analysis shows that
total expenditures in pharmaceuticals as a share of GDP are in Korea
much below the average of other industrialized counties. These facts do
not restrain the potential benefits of pharmacoeconomics to the Korean
healthcare system. It does reinforce the conclusion that rather than
using pharmacoeconomics to simply determine drug prices, a broader
application in relation for example, to guidelines, on proper use of
healthcare should be made.

Recommendation

Industry does not oppose in principle but it is essential to ensure that
Pharmaco-economic studies are used for the right reasons i.e. to promote
a cost-effectiveness approach of drug utilization and not price control.

Simultaneously the Government should be prepared to give access to the
industry of costing elements in order to be able to conduct such studies
and analyses.
In our opinion, the key to a positive impact of pharmacoeconomics in
healthcare policy is threefold:
=C2=B7 The setting of clearly defined and appropriate objectives.
=C2=B7 A consultation with all health care providers at every step
=C2=B7 A quasi-judicial process with fair public hearing and clear decision
criteria

B1. Product License Ownership and Toll Manufacture

Situation

Under the current regulations, it is impossible for a non-manufacturer
or a research institute in Korea, to acquire a product license for a
locally manufactured product. They are required to license the product
to a KGMP approved manufacturer and have experienced difficulties to
regain ownership of the product if they plan to cancel such license
agreement at a later stage.

Therefore, toll manufacturing, which is a well established international
practice allowing non manufacturing companies or research institutes to
use the services of GMP approved manufacturers without entering into a
license agreements is not possible in Korea.

KFDA has taken up this issue because of approaches made by the Korean
biotechnology industry where Korean R&D firms and institutes are in the
process of developing new products but do not have production capabilities.

KFDA has planned to propose separation of product and manufacturing
licenses and thus allow toll manufacture, but its implementation remains
to be seen.

Recommendation

The government should support the KFDA initiative and quickly implement
the separation of product and manufacturing licenses for all
pharmaceutical products (not only biologicals).

This will encourage foreign companies to have their products produced
locally and not to import them as finished products. In addition, it
will encourage local manufacturing companies to invest in / and improve
their facilities.


B2. Cross Border Testing

Situation

During the registration process of imported products, KFDA require from
the local importer, in addition to foreign test results, local test
results of 3 batches of a new product.  Quality inspection is
subsequently carried out by the government for the first shipment only.
   These requirements are acceptable.

However, after launch, importers must continue to repeat full testing on
each imported batch of biological and non-biological products and keep
locally prepared Certificates of Analysis (CoA) on file. This testing
should follow the complete approved Testing Specification (TS), not just
testing for identity, content and, if possible, sterility.

This regulation is burdensome, particularly for imported biological
products, but also for some modern, chemical-based products, for which
required modern testing methods are not yet available in Korea. KFDA
insist that the importers must use local testing facilities in Korea.
This is often impossible or highly expensive to be built up.

Recommendation

As the legal responsibility for the continuous quality of a product lies
with the manufacturer, not the importer, The CoA of an overseas GMP
certified manufacturer should be accepted. KFDA may want to inspect and
approve such manufacturer.

If local retesting is required it should be limited to identity, content
and sterility (if necessary).

B3. Harmonization of Clinical Trials / Bridging Studies

Situation

There is a continuous disagreement between the Industry and KFDA about
the need for a Bridging Study prior to registration of a new product.
International standards (ICH E5) exist for the evaluation of clinical
data related to potential differences in safety or efficacy of a drug
due to ethnic differences.

The KFDA continues to interpret ICH-E5 differently from most other
countries requiring Korean ethnic data to prove ethnic insensitivity
regardless of a compound's characteristics or regardless if it has been
proven in other ethnic (e.g., Chinese or Japanese) groups that ethnic
differences do not exist.

A taskforce between KFDA and industry set up guidelines for
extrapolating foreign clinical data. However, problems continued to
occur due to differing interpretation of the principle and guidelines by
different reviewer and nonscientific approach by KFDA. After the recent
changes in the review body in KFDA, interpretations have become even
stricter again and a Bridging Study is required in almost all cases.
This results in unnecessary additional clinical trials that add expenses
and delay introduction of innovative medicines to patients. This is an
additional trade barrier for the international research based companies.
Recommendation

KFDA should follow the international ICH5-E5 practices.


B 4. Data Protection/IPR Issues

Situation

Korea has not implemented specific provisions for data protection or
TRIPS compliance. Instead, there is a system of re-examination, which in
theory should afford much the same level of protection as formal data
protection legislation.

However, this obligation has been ignored by the Korean Food and Drug
Administration (KFDA) in the licensing of generic products related to
certain patented medicines from international companies. Thus, several
generic products have been registered despite the existing patented
products.

Resolution of such instances is handled by litigation which is costly
and time consuming and de facto allows erosion of the patent period.

In addition there are instances in which the originator's technical data
of the sponsor's file have apparently been used by generic competitors
to gain such registration. In these instances, injured parties are
disinclined to pursue legal proceedings against the KFDA, relying as
they do, on KFDA officials for the issuance of other product licenses.

There also seems to be a continued misunderstanding by the KFDA of its
obligations under TRIPs Article 39.3 with regard to the use of clinical
data from published journal articles. Generic products have been able to
gain registration during the re-examination period even though the data
in the studies cited were the property of the originator. KFDA claim
that the TRIPs protection prevents use of publicly disclosed data only
for "commercial purposes". Foreign companies in Korea, however, assert
that registration is clearly intended for a commercial purpose.
Recommendation

The Korean Government should implement a prospective system for the
administration of patent protection in pharmaceuticals, including
directly linking the relevant product registration review (KFDA) and
patent (KIPO) agencies for appropriate enforcement of patent protection.
KFDA should also recognize that the purpose of securing a registration
is clearly commercial.
KFDA should also recognize that it has a clear obligation to ensure that
data provided to it in pursuit of Regulatory Review require "right of
use" certification and in addition are secure from misuse by third
parties. Enforcement of the KFDA responsibility in this critical area
needs strengthening, perhaps by appointment of an independent ombudsman
to receive confidential complaints and to conduct inquiries.

B5.Drug Master File ( DMF )

Situation

The requirement for DMF was introduced in July 2002 to active
pharmaceutical ingredients to improve and assure the quality of used in
pharmaceutical products in Korea.
The research based industry supports this in principle.

However, data requirements were ambiguous and excessive, and DMF has
only been required so far for new products. This is totally against the
original intention of DMF.
KFDA has accepted this as problem and a Taskforce (TF) with industry has
been set up. This TF has made an explanatory booklet for the guide and
Q&A book and proposed a revision to the current guideline.
The TF has been dissolved in July 2003 and but no revised guideline has
been published so far.
KFDA was supposed to extend DMF to 99 active pharmaceutical ingredients
by mid 2004, but implementation is still under question. If this is not
implemented, DMF will remain a major trade issue of discrimination.

Recommendation

Implement DMF impartially and implement revisions as suggested by the TF.

B6. Pharmaceutical Equivalence Testing ( PET )

Situation

For filing of a new product registration, and in case of any changes in
an existing product, e.g. composition, source of supply etc., KFDA
require Pharmaceutical Equivalence Testing ( PET ) to show the
dissolution profile of a new product. In case of an existing product for
which changes have been requested, comparative dissolution profiles are
required and this is a requirement in many countries and companies have
developed their own testing specification specific for their particular
products. Results from these tests are generally accepted.

However, in Korea, KFDA insist on their own different testing methods
which have to be uniformly used. This is impossible for some products
and requires companies to repeat PET for all their products for Korea.

Recommendation

KFDA to accept internationally accepted dissolution testing (PET).



--
James Love | Consumer Project on Technology
http://www.cptech.org | mailto:james.love@cptech.org
P.O. Box 19367, Washington, DC 200036
voice +1.202.387.8030 | fax +1.202.234.5176