[Ip-health] Korea Times: Swollen Drug Prices - US Intervention Neither Understandable Nor Acceptable

[mpalmedo@cptech.org]

http://times.hankooki.com/lpage/opinion/200605/kt2006050516320754050.htm

Swollen Drug Prices - US Intervention Is Neither Understandable Nor
Acceptable

Korea Times
May 5, 2006

The National Health Insurance Corp. paid $7.7 billion to cover drug
expenditure last year, up 73 percent from 2001. The drug cost also
accounts for 29.2 percent of total insurance payments, 1.6 times higher
and growing 2.1 times faster than the average of major industrial
countries. Still, the government's belated efforts to remove bubbles from
drug prices and improve the NHIC's fiscal health are facing opposition
from not only the pharmaceutical industry but also Washington. Seoul
should push it through.

As early as in September, the Health-Welfare Ministry plans to change its
drug insurance system to cover only cost-effective products. This is
natural to both curb soaring drug costs and rectify chronic abuse and
misuse of drugs. A Korean prescription usually contains three or four
different drugs, compared with one or two in a foreign one. Behind the
NHIC's snowballing deficits are this over-prescription, a near automatic
insurance coverage and excessive pricing of new foreign medicines.

The domestic drug distribution system of course leaves much to be desired.
Marketing costs at Korean pharmaceutical firms, including PR, rebates and
other promotional expenses, account for 35 percent of the total, almost
three times higher than manufacturers' average. The government's
first-come, first-served insurance coverage also drives makers to compete
over speed, not quality. The policy shift toward favoring less expensive,
more effective drugs is expected to rectify many of these practices.

>From now on, less competitive pharmaceutical firms will not just see their
businesses decline but face shutdowns as well. The small, lagging domestic
makers, whose combined annual sales of $8 billion barely equal that of one
multinational giant, should strive to drastically improve their scale and
technology. Officials responsible for deciding insurance coverage and
setting prices could be targets of intensive industrial lobbying. The
exposure to possible corruption requires them to be doubly careful and
clear in the process.

The new move could also wrinkle the bottom lines of multinational firms
operating here. Currently, Koreans are paying the average cost that
consumers in seven major industrial countries are handing over to
pharmacists for "original" drugs developed abroad. This is hard to accept,
considering the wide gap in national income. The real problem, however,
will occur when current prices could double or even triple under a
Korea-U.S. free trade accord.

Actually, maintenance of the present drug pricing system was one of the
four preconditions set by Washington for launching bilateral trade talks.
Seoul officials have maintained such public sectors as medicine and
education are not subject for negotiation. Seeing them handle this issue,
which forms an important part of medical care, however, not a few Koreans
are feeling nervous about the negative effects of the FTA.

05-05-2006 16:32