Healthcare Policy DOI: 10.5124/jkma.2010.53.10.922 pissn: 1975-8456 eissn: 2093-5951 http://jkma.org Policy alternatives of drug cost containment in health insurance Sun Mi Lim, PhD Yoon Hyung Park, MD Department of Preventive Medicine, Soonchunhyung University College of Medicine, Cheonan, Korea * Corresponding author: Yoon Hyung Park, E-mail: parky@sch.ac.kr Received September 13, 2010 Accepted September 24, 2010 Abstract Currently, the drug pricing and reimbursement schemes in the Korean Medical Insurance System are based on a purchasing price reimbursement system. Since the pharmaceutical pricing is not stable and is continuously increasing, a need has developed for an analysis of the reason for the increase in pharmaceutical pricing and appropriate management measures. Consequently, a policy for the optimization of pharmaceutical expenditures in the Korean National Health Insurance (KNHI) System was introduced in 2006. In this policy, conversion to positive list system, price-volume agreements, and intensification of postmanagement of drug costs were newly introduced. In Korea, there are difficulties in smooth decisionmaking between the insured and the pharmaceutical companies in the process of determining the reimbursed price. When a proper agreement on the drug price is not made, the expenses of drug could incentive rapidly. This study was focused on the process of change in the policy of drug pricing and reimbursement in KNHI system to analyze its significance and study appropriate measures for drug reimbursement decision-making. The data for this study was collected mainly from announcement data of international and domestic agencies, related groups, and experts, along with data on the current situation regarding purchase of drugs, yearly status data, and statistical data for drugs. In Korea, the positive list system for the insured decides whether or not the national insurance will provide reimburse. Thus, it affects the demand determination through a large impact on the burden on the patients themselves. Principly the price of drug determined by the patient as a direct demander. The KNHI could be a agency for patient. The KNHI should find-out the proper purchasing method. Thus, this study proposes principles for drug pricing and reimbursement by inducing price competition according to market principles in Korea's health insurance determination. Keywords: Health insurance; Drug price; Reimbursement c Korean Medical Association This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons. org/licenses/by-nc/3.0) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited. 922
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Lim SM Park YH Official Price Reported Price 3.43% 5.15% 5.00% Wholisalers deal lower limit 22.00% Average bid price Figure 1. 90.1 Condition of the range of distribution deal [1]. Range of the deal being distributed in real 924
Policy alternatives of drug cost containment in health insurance Table 1. Market price by year following-up control performance [4] Reimbursement price Year No. No. of Average Estimated reduced health insurance reduction reduction expendition (billion KRW) items rate (%) 2000 2 617 2.6 About 3.33 (23) 2001 3 5,819 7.4 About 182.4 (1,277) 2002 4 1,953 5.7 About 82.1 (57.5) 2003 3 1,794 3.2 About 66.9 (46.8) 2004 3 782 2.2 About 5.4 (3.8) 2005 4 1,561 1.5 About 13 (9) 2006 4 1,519 0.9 About 8.1 (5.7) 2007 2 1,099 0.7 About 8.3 (5.8) 2008 1 346 0.5 About 1.3 (0.9) 925
Lim SM Park YH Drug cost Drug cost person (KRW) (100 million won) 200,000 29.2% 80,000 28.4% 180,000 27.2% 72.289 70,000 160,000 140,000 120,000 100,000 23.5% 41,804 90 thousands 63.535 25.2% 153 thousands 55,831 134 thousands 41,014 119 thousands 108 thousands 60,000 50,000 40,000 0 2001 2002 2003 2004 2004 0 Drug cost person Total drug cost Ratio of drug cost Figure 2. Drug cost conditions [9]. Table 2. Statistics relevant to OECD drug cost (1998-2003) [9] OECD Korea USA France Japan Germany average Drug cost rate of increase ( 98-03, %) 6.1 12.7 9.6 5.8 2.2 3.5 Drug cost per one person 366 309 728 606 393 436 ( 03, USD PPP) Drug cost weight in health 17.8 28.8 12.9 20.9 18.4 14.6 care a) expenses ( 03, %) Medical care b) expenses per 2,308 1,074 5,635 2,903 2,139 2,996 one person ( 03, USD PPP) a) Health care cost: medical service&medical insurance, administration cost of public health and other funds of treatment prevention care (disease) health promotion program, rehabilitation (disability), hospice. b) Medicine care cost: treatment, non-treatment medicine, vaccine, vitamin, mineral, oral contraceptive pill and Chinese medicine. 926
Policy alternatives of drug cost containment in health insurance Price rationalization (Positive list system, Drug price negotiation, Estimation standard improvement, use amount-drug price reestimation) Transparent distribution, (drug information center construction, Low price purchase incentive system) Plan for drug price rationalization of health insurance Quality enforcement (KGMP Differential grade estimation, Biological equality test item expansion Use amount rationalization (Self-regulated prescription, Open prescription ratio, Item numver control, Information supply) Figure 3. Health insurance drug price rationalization. 927
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Policy alternatives of drug cost containment in health insurance Table 3. Result of drug reimbursement price negotiation (Issued Apr. 14, 2009) [11] (unit: case) Year Acceptance Cmopletion Sub total Agreed Breakdown In progress Total 115 101 73 28 14 2009 19 5 4 1 14 2008 72 72 57 15 0 2007 24 24 12 12 0 Negotiation agreement price in contrast with application price: 85.1% (estimated yearly reduction 18 billion KRW). 929
Lim SM Park YH Out of list Drug listing and reimbursement price form writing. submission Drug listing and reimbursement pricing (within 150 days after applied) or revaluation application (within 120 days after applied) -Economic condition. Standard of reimbursement reporting Breakodown of negotiation notice Reported to the minister of ministry of health and welfare Negotiation between national health insurance and drug manufacturer, importer (within 60 days from accepted) Negotiation drug Reevaluation request Drug manufacturer, Importer s reestimation application in case of different opinion on the results (within 30 days form accepted) listing in health insurance Breakdown of negotiation Drug reimbursement adjustment committee Health insurance policy committee deliberation (within 30 days from accepted. In case of adjustment is within 60 days) Ministry of health and welfare notification Figure 4. Procedure for reimbursement drug listing and pricing in health insurance [12]. 930
Policy alternatives of drug cost containment in health insurance Table 4. Health Insurance Drug Reimbursement Committee (plan) Composition - Ministry of Health and Welfare - Korea Food&Drug Administration (KFDA) - Health Insurance Review&Assessment Service (HIRA) - National Health Insurance Cooperation - Korea Pharmaceutical Manufacturers Association (KPMA) - Consumer organization Major Roles - Comparing the accepted drug with the effect of drug - Economic evaluation - Price negotiation - Price decision Advantages - Drug acceptance, period cut of price negotiation (270 days - 90 days) - Price negotiation reinforcement: concurrent negotiation both listing and pricing from the previous price negotiation after listing (single undertaking) - Enforcement of negotiation and social agreement as the participation of stake holders Health insurance drug reimbursement Drug listing and pricing application form writing-submission - New drug economic evaluation, Price negotiation - Work of generic bid price decision - Price negotiation Health insurance policy committee deliberation (within 30 days from accepted. In case of aadjustment/ within 60 days) Ministry of health and welfare notification (Within 190 days after acceptance) Figure 5. New drug insurance acceptance procedure by the Health Insurance Drug Reimbursement Committee. 931
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Lim SM Park YH insurance system. Seoul: Health Insurance Review&Assessment Service; 2009. 18. Organisation for Economic Co-operation and Development. OECD health data 2009: statistics and indicator. Paris: OECD; 2009. 19. Ministry of Health and Welfare. Drug cost containment in health insurance. Seoul: Ministry of Health and Welfare; 2006. 10. Bae EY, Kim JH, Choi SE. Development of economic evaluation drug reimbursement system of health insurance Seoul: Health Insurance Review & Assessment Service; 2005. 11. National Health Insurance Cooperation. Korea s insurance medical price system and the management methods. Seoul: National Health Insurance Cooperation; 2009. 12. Health Insurance Review&Assessment Service [Internet]. Seoul: Health Insurance Review&Assessment Service; 2010 [cited 2010 Sep 20]. Available from: http://www.hira.or.kr. 13.LFN Pharmaceutical Benefits Board. The Swedish pharmaceutical reimbursement system. Solna, Sweden: LFN; 2007. Peer Reviewers Commentary 934