"Innovative Pharmaceutical Company" Certification Overhauled After 14 Years... Stricter R&D Standards

Ministry of Health and Welfare Overhauls Innovative Pharmaceutical Company Certification System
R&D, Clinical Trials, and Export Performance to Be Quantitatively Evaluated
New Customized Evaluation System Introduced for Foreign Companies

The government is planning a complete overhaul of the Innovative Pharmaceutical Company certification system for the first time in 14 years since its introduction. By raising the requirements for research and development (R&D) investment and quantifying evaluation indicators, the aim is to focus support on companies that actively invest in new drug development.

On July 30, the Ministry of Health and Welfare announced the promulgation and implementation of amendments to the Enforcement Decree, Enforcement Rules, and public notifications of the "Special Act on the Promotion and Support of the Pharmaceutical Industry" (the Pharmaceutical Industry Act) containing these new measures.

The Innovative Pharmaceutical Company certification system is a scheme in which the government certifies pharmaceutical companies with capabilities in new drug R&D and overseas expansion performance, offering support in tax benefits, R&D, and policy finance. This is the first time since its establishment in 2012 that the evaluation criteria and operation method have been comprehensively reformed.

Based on the ratio of pharmaceutical research and development expenses to pharmaceutical sales revenue. Ministry of Health and Welfare

First, the requirement concerning the ratio of R&D expenditure to pharmaceutical sales revenue for certification as an innovative pharmaceutical company will be raised by 2 percentage points from the current standard. The Ministry has decided to grant a three-year grace period from the effective date to ease short-term burdens on companies.

The number of evaluation items for certification review will be reduced from the current 25 to 17, and the total evaluation score will be adjusted from 120 to 100. Four items—R&D investment scale, number of clinical trials, export scale, and others—will be converted into quantitative indicators to enhance objectivity. A new evaluation item has been introduced to assess corporate social responsibility, reflecting contributions to stabilizing the pharmaceutical supply chain.

The criteria for disqualification from certification due to rebate-related violations have also been revised. Previously, administrative dispositions under the Pharmaceutical Affairs Act or the Fair Trade Act, imposed within five years prior to the evaluation date, could lead to certification being revoked even if the violation occurred long before and only the administrative action was delayed, which drew criticism.

Going forward, the review criterion will be changed from the date of administrative action to the date when the violation ended. Rebate violations that ended more than five years before the review date will be excluded from review. If an administrative appeal or litigation is filed against an administrative action, certification can be revoked within one year from the date the decision to dismiss the appeal or the court ruling becomes final.

A separate certification type will also be established for foreign pharmaceutical companies. While the same evaluation criteria had been applied to both domestic and foreign companies, going forward, general innovative pharmaceutical companies and foreign innovative pharmaceutical companies will be separately evaluated.

For foreign companies, greater weight will be assigned to investments in domestic research and production facilities, attraction of foreign capital, joint research, and open innovation. In contrast, indicators such as candidate substance development, technology transfer of patents, and global expansion of pharmaceuticals will carry less weight, in recognition that corporate headquarters often hold key technologies and patents.

Measures have also been introduced to enhance transparency in the certification review process. The detailed evaluation indicators and the minimum passing score of 65 for certification will be specified in official notifications, and companies that fail to obtain certification will be notified of the reasons in detail.

The Ministry of Health and Welfare plans to accept applications for certification as innovative pharmaceutical companies for one month from August 18 to September 18. Following review by the Certification Review Committee and the Pharmaceutical Industry Promotion and Support Committee, new certifications are expected to be completed within the year.

Seong Changhyun, Director General of Healthcare Industry Policy at the Ministry of Health and Welfare, stated, "This reform measures are intended to provide greater support to innovative companies that make active investments in research and development," adding, "We will spare no effort in supporting domestic pharmaceutical and biotechnology firms so that they can focus on new drug research and development and grow into globally competitive companies."

This content was produced with the assistance of AI translation services.