[Editorial] Dealing With ‘Bubble’ in Pharmaceutical Prices
Korean health and medical organizations have filed a formal petition asking for a reduction in the price of pharmaceutical treatments made by multinational companies and as paid by insurance. It is the first time anyone has called for the cost of specific pharmaceuticals to be reduced, and from the perspective of consumers.
What they are taking issue with is the “bubble” in the price of wonder drugs on which multinational companies hold patents. Paying more for products that are of superior effectiveness is natural. But once a product gets classified as a new innovation it gets priced at tens of thousands of won, even when it is not exceptionally effective.
If you include their royalties, multinational companies have 50 percent of the domestic market, and their share is growing rapidly every year. It is the reason the National Health Insurance Corporation pays twice more in pharmaceuticals expenses than developed nations. Former Minister of Health and Welfare Lee Tae Bok was not exaggerating when he said “multinational pharmaceutical corporations are making exorbitant profits of W1.4 trillion yearly in Korea.”
The government says that the key to its policy on the price of pharmaceutical products is reducing the cost of medical treatment and thereby reducing the burden on national health insurance and the people. It says that through a program of price reevaluation, this year it will lower the price paid for 1,477 items by an average of 10.7 percent (W59.1 billion). However, that is only a 1 percent difference if you compare it to the five to six trillion won in paid in prescriptions not filled by hospitals, and only 0.1 percent if you look at products made by foreign pharmaceutical companies. And given the course of the current negotiations on a free trade agreement (FTA) with the United States, there’s reason to worry that it won’t be possible to lower prices.
Currently prices are based not on prime costs but on the price reported by the companies that produce them. And since you can only review factors that should change the price every three years, it is not possible to make price adjustments at the appropriate time. All that does is encourage the practice of giving hospitals and clinics money for prescribing their products. Talk about lower costs will remain meaningless if the irrational standards and practices are allowed to continue.
The Hankyoreh, 14 March 2006.
[Translations by Seoul Selection]