Trimming the Smorgasbord

South Korea mandates economic evaluation for reimbursement

Decisions about which products will be listed for reimbursement by Korea's National Health Insurance system are now based on economic value. Korea's example suggests that the promise of emerging markets must be tempered by their growing capabilities to regulate local growth.

Beginning in January 2008, new drugs entering South Korea became subject to a Health Technology Assessment (HTA) prior to being covered by NHI. At the same time, the country moved from a "negative" list system to define reimbursement to a positive list system. Rather than listing drugs it doesn't cover, the NHI moved to providing a list of only the drugs it covers. To be entered onto the positive list (or remain on it), treatments must be deemed clinically and economically valuable on the basis of audience-based methodologies.

THE CHANGE

In making HTAs a prerequisite for formulary inclusion, South Korea became the first Asian country to use health and economic data to determine allocation of its healthcare budget. This demand for proof of a product's value represents a major shift for the South Korean healthcare system, which was traditionally broad-minded about what drugs it would cover. As a result, South Koreans have enjoyed access to a wide array of products—13,613 compared to 8,632 in the US. As a result, the country's expenditure on pharmaceuticals increased 44.6 percent between 2001 and 2005, making South Korea, in 2008, the 15th largest pharmaceutical market in the world.

THE IMPLICATIONS

How will the South Korean public—which has come to expect the "latest and greatest"—cope with potentially slower approval times and even the exclusion of certain therapies? Will patient activist groups lobby to override an economic decision in a critical care area?

The South Korean market will continue to grow, as the population remains extremely health conscious. Companies will, however, face greater price pressures as the government wrestles with placing a value on drugs in the most quantitative way it can.