Feature Article: 20 Years After the National Health Insurance Act, HTA Policy Changes Reshape Market Access in South Korea

Background

The total amount spent by insurance in South Korea grew approximately 20 percent annually from 1990 to 2005, largely as a result of the rising costs of therapies. The landscape of the South Korean healthcare market has evolved significantly over the last 20 years to address aging populations and rising healthcare costs. Of the costs that have been rising, drug therapies are undoubtedly a huge component; currently, drug costs within the South Korean system account for approximately 25% of the entire health insurance costs and are expected to further increase with aging population trends. Although the healthcare system and the health technology assessment (HTA) process have progressed with the rapidly evolving healthcare landscape, criticisms of the system and appraisal process of therapies have grown in recent years.

In July of 2000, a single-payer system was established in South Korea through the National Health Insurance Act. The National Health Insurance (NHI) is funded by insurance premiums paid by enrollees, government subsidies, and health promotions funds that are generated through taxes on tobacco. By 2018, 97.2% of South Korean citizens were enrolled in the country’s NHI. The small percentage of the South Korean population who are not enrolled are able to receive subsidies in the form of medical benefit payments from the government so that they can obtain access to healthcare. The Ministry of Health and Welfare in South Korea determines which medical services are provided and reimbursable under the Health Insurance and Review Assessment (HIRA) Service.  Notably, the benefits received by NHI enrollees are subject to coinsurance costs that range from 30% to 60% for outpatient services and 20% for inpatient services. Some drugs are not reimbursed and must be covered by patients’ out-of-pocket costs, whereas covered therapies are subject to co-payments, with high-cost therapies such as oncology drugs or drugs for orphan diseases benefiting from a reduced co-payment.

In 2000, the HIRA was established to manage claims review and quality assessment of the NHI. In 2001, the South Korean government introduced the idea of economic evidence-based decision making when cost-effectiveness was introduced as one of the requirements for positive reimbursement decisions. After this decision was announced, the HIRA developed guidelines which then became the standard for economic evaluations. Policies made in collaboration have resulted in lowered drug expenditures. In fact, in 2010, a policy set a ceiling for generic drug pricing at 53.55% of the original price of the brand drug two years after the drug goes off patent.

Overview of South Korea’s HTA Structure for Pharmaceutical Therapies

In order to contain the cost expenditures of healthcare, the government announced in May of 2006 a drug expenditure rationalization plan (DERP). Under the DERP, the system for reimbursement and drug listing changed from a negative list system to a positive one that has been employed since December 2006. Under the previous negative list system, all therapies were included on formulary by default until they were actively excluded. Under the “positive list system,” only therapies that are proven to be economically and clinically valuable can be listed and reimbursed under the NHI. Not every drug that is approved by South Korea’s Ministry of Food and Drug Safety (MFDS) as being safe will be listed for reimbursement; the positive list system selectively grants benefits to therapies that offer high economic treatment value. The positive list system has been effective in generating savings among highly utilized therapies. Under the positive list system, which utilizes price-volume agreements, the prices for drugs whose use increased by 30% to 60% were reduced by up to 10% according to an agreement between the National Health Insurance Service (NHIS) and pharmaceutical companies. An overview of the changes between the negative and positive list system can be found in Figure 1.

Figure 1. Negative/Positive List System

Pharmaceutical manufacturers may voluntarily submit their products for review to be reimbursed under the NHIS. Upon application to HIRA, an economic evaluation including cost-effectiveness evaluation is conducted by HIRA in order to assess the added benefits and value for inclusion of the new drug. HIRA’s evaluation is based on relevant textbooks and guidelines, HTA reports, clinical papers, substitution possibilities, and drug specificity.

Typically, the Assessment Committee of HIRA completes their review within 150 days after receipt of application. The applicant (pharmaceutical manufacturer) can submit comment or opinion surrounding the results of the HIRA assessment within a 30-day timeframe of receiving notice of review. If reassessment is required by HIRA at the direction of the Ministry of Health and Welfare (MoHW), the process occurs within 120 days. Within 60 days after assessment results (or reassessment), pricing conversations occur; the NHIS uses the results of HIRA’s assessment to negotiate the price of the drug with the pharmaceutical manufacturer. Once an agreement is reached, the final price is published to the public by the MoHW.  An overview of the application and review process for reimbursement can be found in Figure 2.

Figure 2. Overview of HTA Decision Process in South Korea

Dissatisfaction With the HTA Process

When the DERP initially announced their plans, pilot evaluations and subsequent evaluations were delayed due to challenges with methodology. Pharmaceutical companies frequently raised concerns regarding transparency of the evaluation process, the methodology of the evaluations, and the impact the evaluations would have on pharmaceutical industries and patient access. While the process was amended to address some of these concerns, many are still dissatisfied with the system. Critics have argued that while South Korea’s positive list system was able to successfully allocate financial resources more effectively for medications, the system has decreased patient access to novel therapies that may be essential, but that are deemed not cost-effective by current methodologies.

Between 2007 and 2011, all drugs covered by NHIS underwent a clinical usefulness evaluation. Within the last few years, the Korean government has discussed a post-approval cost-effectiveness process, in which reimbursement and prices will be re-determined through a follow-up evaluation process that evaluates consistency of clinical outcomes. In 2019, a hearing to establish the criteria for post-approval evaluations organized by the HIRA occurred in Seoul. At the hearing, HIRA announced plans to review high-cost drugs, such as oncology agents and those for orphan diseases, or products whose clinical efficacy may be unclear upon approval.  The post-approval evaluations would consider impacts on society and public health, and account for any demographic changes, utilization increases, and other factors that would substantiate evaluation. The head of the team responsible for improving the pharmaceutical benefit assessment system at HIRA reported that plans to conduct post-approval evaluations would “secure financing for broader health insurance coverage by enhancing the ‘adequacy’ of drug costs.”

Pharmaceutical companies expressed concern about the post-approval evaluations and have stated these would be a “double assessment,” as they have already undergone clinical usefulness evaluation. While the reevaluation process may be effective in reducing expenditures, the criteria and type of evidence considered in these evaluations is critical, particularly as vulnerable populations with cancer or orphan diseases may be most at risk.

Impact to the Life Science Industry

To obtain market access within South Korea, is it imperative that pharmaceutical manufacturers prepare early for the HTA process. Beyond robust clinical data, applicants should generate cost-effectiveness data and analyses applicable to the South Korean population. With respect to timing, anticipate that the HTA procedure and pricing decisions will take approximately one year (270 days after receipt of submission of drug assessment application to HIRA). Importantly, pharmaceutical manufacturers should understand that initial listing on the positive-list system and initial pricing may be re-evaluated in the future. Pharmaceutical companies can actively prepare for post-approval evaluations by collecting real-world data regarding drug utilization, clinical outcomes, and costs. 

The article should be referenced as follows: 

Gittings K, Campbell D. 20 years after the national health insurance act, HTA policy changes reshape market access in South Korea. HTA Quarterly. Fall 2020. https://www.xcenda.com/insights/htaq-fall-2020-hta-policy-market-access-south-korea

Sources:

• Health Insurance Review & Assessment Service. Healthcare benefit management. https://www.hira.or.kr/eng/about/05/02/02/index.html. Accessed July 15, 2020.
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