[2026 Parliamentary Audit] "HIRA's Overregulation Undermines Ingredient Self-Sufficiency... Affiliate Production Should Also Qualify"

Zero cases of drug price premiums for medicines with directly produced ingredients
Rep. Baek Seonhee: "Abuse should be prevented through voluntary disclosures"
HIRA chief: "Teething problems... We will make improvements"

The “drug price premium for medicines made with domestically produced ingredients” system has not been applied even once since it was overhauled. To prevent abuse, the government narrowed eligibility to ingredients manufactured at the finished-product marketing authorization holder’s own facility, excluding most Korean pharmaceutical companies that produce ingredients through group or affiliate structures. Critics say this has undermined the system’s goal of increasing domestic self-sufficiency in ingredients.

Rep. Baek Seonhee of the Rebuilding Korea Party, a member of the National Assembly’s Health and Welfare Committee, raised the issue during a parliamentary audit of the Health Insurance Review and Assessment Service on October 16.

Baek Seonhui, a member of the National Assembly's Health and Welfare Committee and a lawmaker from the Rebuilding Korea Party. Yonhap News.

The “Standards for Determination and Adjustment of Drug Prices,” which took effect on August 1, define a medicine as one made with directly produced ingredients if the marketing authorization holder synthesizes the ingredients at its own manufacturing facility, including through chemical modification. The standards do not recognize cases in which an affiliated company in a parent-subsidiary relationship or another company within the same group manufactures the ingredients. As a result, no companies or products currently receive a premium on the grounds that their ingredients are directly produced.

The system was introduced after the COVID-19 pandemic exposed vulnerabilities in domestic medicine supplies when China and India restricted ingredient exports. Its aim is to reduce reliance on foreign ingredients and safeguard supply chains in emergencies. Eligibility was narrowed because of past cases of abuse. When eligibility was defined more broadly, some companies failed to report changes in their ownership structures. In a lawsuit filed by the National Health Insurance Service against pharmaceutical companies, a ruling ordering them to pay the agency approximately 12.15 billion won was finalized in June this year.

Rep. Baek said, “The standards were tightened excessively out of concern that companies might abuse the system, and now not a single company qualifies. We do not know when an infectious disease pandemic will occur, so it would be a problem if efforts to achieve self-sufficiency in ingredients and stabilize supply chains were to stall here.” She said abuse should be prevented through monitoring rather than regulation, and proposed reviewing eligibility after surveying the industry and requiring companies to submit voluntary disclosures every two years. She also said a public-private consultative body should develop alternatives that reflect conditions on the ground before cuts to the prices of drugs already listed for reimbursement begin in April 2027.

Hong Seung-kwon, president of the Health Insurance Review and Assessment Service, replied, “There seem to have been some teething problems as the system was being implemented for the first time. We will continue to communicate with the public-private consultative body and relevant agencies and review the system.”

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