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Access to Orphan Drugs in South Korea : Blind Spot of the Korean Health System

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Access to Orphan Drugs in South Korea : Blind Spot of the Korean Health System Interim Report Access to Orphan Drugs in South Korea : Blind Spot of the Korean Health System UAEM Korea - 1 - Table of Contents Introduction I. Background A. Epidemiology of rare diseases in Korea B. Characteristics of Orphan Drug Industry in Korea C. Characteristics of Orphan Drug Supply in Korea D. Cases of Supply Failure by Multinational Pharmaceutical Companies E. Case Study: Gleevec F. Case Study: Lipiodol II. Stimulating the production of domestic pharmaceutical companies A. Current Policies that Support the Development of Orphan Drugs in Korea B. Policies that Support the Development of Orphan Drugs in Other Countries C. SWOT Analysis on Domestic Orphan Drug Industry D. Policy Suggestions III. Establishing State-Owned Pharmaceutical Companies A. Rationale B. Public Pharmacy in Foreign Countries C. Discussion on Public Pharmacy in Korea D. Blueprints on Public Pharmacy E. Alternatives Conclusion Appendix I. List of designated rare diseases in Korea II. List of designated orphan drugs in Korea - 2 - Introduction The South Korean government introduced social health insurance in 1977, achieving Universal Health Coverage in 1989. (Kwon, Lee, & Kim, 2015) With 97% of the population under the coverage of national health insurance, the Korean health system meets the health need of the majority of the population. (IQVIA, 2018) Yet, the Korean health system shows weakness in delivering healthcare for minority groups including rare disease patients. Rare disease patients in South Korea have difficulty in accessing orphan drugs - treatments for rare diseases - primarily due to the unstable supply. As pharmaceutical prices in Korea are used as reference prices in other countries, including China, if transnational pharmaceutical companies receive prices lower than what they demand, they often decide not to launch drugs or withdraw from supplying drugs in Korea. (Choi, 2018) This tendency of transnational pharmaceutical companies, so-called ‘Korea passing’, led to several cases of orphan drug supply failure in Korea. (Park, 2018) Not only that, even when drugs are available in Korea, many times patients cannot afford orphan drugs. Unreliable supply systems and high drug prices hinder the access to orphan drugs in Korea. Sustainable Development Goal 3 states that we should "ensure healthy lives and promote well- being to all at all ages" and one of the essentials targets for achieving Goal 3 is Target 3.B that emphasizes the need to "provide access to affordable essential medicines and vaccines". As part of such initiative, rare disease patients should be guaranteed the access to affordable orphan drugs (UN, n.d.). To improve the access to orphan drugs, Korea should increase the domestic production of orphan drugs and implement policies that relieve the economic burden on patients. This paper consists of three sections, respectively focusing on establishing a sustainable supply system of orphan drugs, ensuring affordable prices of orphan drugs, and suggesting the roles of universities in this issue. Under Section A, ‘Supply’, there are three parts: Part I. Background, Part II. Domestic Private Production, and Part III. State-owned Pharmaceutical Company. Part I will provide the Korean context of rare diseases and orphan drugs. It will explore the cases of supply failure in the past and characterize global and domestic orphan drug industries. Part I will serve as a guide to those who have no prior knowledge in this issue. Part II will concentrate on stimulating the domestic production of orphan drugs. Based on the characteristics of domestic orphan drug industry, Part II will suggest policies to stimulate the growth of the industry, however, with utmost - 3 - consideration to patients’ accessibility. Yet, entirely relying on a private sector for maintaining sustainable supply has its own risks. Public investment may not be fully translated into public return. The access to orphan drugs cannot be risked as they treat diseases that would otherwise have catastrophic health consequence. Accordingly, governments should take greater part in ensuring the access to orphan drugs. Part III will discuss the possibility of state-owned pharmaceutical companies. Although the current President Moon failed to meet the promise to establish a public pharmaceutical company, public provision of orphan drugs is still an attractive option. Referring to successful experience in other countries, this paper will suggest recommendations to lay the foundation for public pharmaceutical companies in the future. The contents of Section B, ‘Affordability’, are to be specified. Some contents will include establishing a national fund for orphan drugs and expanding the role of the Korea Orphan and Essential Drug Center (KOEDC) as well as improving the current financial support to raise the patients’ access to orphan drugs. Section C, ‘Universities’, will cast light onto possible roles that can be played by universities in innovating the access to orphan drugs in Korea. Moreover, universities consist of not only professors, researchers, or administrators but also active student bodies. The section will discuss how university students can contribute to improve the access to essential medicines in general. - 4 - Figure 1 Access to Orphan Drugs in Korea Figure 1 illustrates the overall structure of the paper. Problems pointed out in Section A, ‘Supply’, apply to the cases in which orphan drugs are not available through national health insurance. Affordability, the main theme of Section B, is yet another huddle for accessing orphan drugs. This is the case when orphan drugs are physically available, however expensive to the extent that access is deteriorated. Access to orphan drugs should be a pivotal goal for the government. Everyone has “the right to health, the right to essential medicines”, and thus the right to orphan drugs. Orphan drugs particularly require governmental intervention as they are mostly costly without alternatives while rare diseases, if untreated, lead to catastrophic health outcomes. Also, orphan drug industry is economically promising. The global orphan drug market is expected to increase at a 12% compound annual growth rate (CAGR), reaching 224-billion USD by 2024. (IQVIA, 2018) This is considerable given that the prescription drug sales are expected to increase at the rate of 6.9% - 5 - (CAGR) from 2019 to 2024. (IQVIA, 2018) This global rise in demand for orphan drugs provides an opportunity for domestic pharmaceutical companies to enter the growing market. On top of that, orphan drug designation allows for numerous benefits such as market exclusivity, tax exemption, and fast track for approval. Orphan drugs can be “Niche Busters”, drugs of which global sales are between 100-million and 500- million KRW and the number of patients is between ten thousand and one million. The market for developing blockbusters is already oversaturated. It is strategic for domestic pharmaceutical companies to focus on developing potential niche busters. The concepts of state-owned pharmaceutical companies and national fund for orphan drugs are not new and so is the emphasis on domestic drug development. Yet, with the new socialist initiatives in public health like Mooncare, the pharmaceutical industry and policies on orphan drugs have changed. Based on up-to-date information, this paper will make amendments to previously discussed ideas and suggest innovative solutions, especially with a keen eye on the role of academic institutions. This research aims to shift the focus of the Korean pharmaceutical industry from making profits to meeting the health needs of the population. Work Cited Choi, E. (2018). China referencing Korea’s pharmaceutical prices as apprehended... Transnational Pharmaceutical Companies Getting Cold Feet (“우려했던 중국의 한국약가 참조”..다국적사 초긴장). HIT News. Retrieved from http://www.hitnews.co.kr/news/articleView.html?idxno=2830 IQVIA. (2018). IQVIA Market Prognosis 2018-2022: Asia / Australia - South Korea. London. Kwon, S., Lee, T., & Kim, C. (2015). Republic of Korea Health Systems Review. Park, S. (2018). Access to Medicines and Price Transparency: Beyond the Trade-off (의약품 접근성과 약가 투명성 : 트레이드오프인가 ?). Health and Welfare Policy Forum (보건복지포럼), (November), 63–78. United Nations. (n.d.). Sustainable Development Goal 3. Retrieved from https://sustainabledevelopment.un.org/sdg3 - 6 - I. Background A. Epidemiology of rare diseases in Korea 1. Definition of rare disease and orphan drugs Rare diseases refer to diseases that affect only a small percentage of the population; orphan drugs, medicines to treat those diseases. Yet, specific definition of rare diseases and orphan drugs differs across countries. In Korea, rare diseases refer to diseases with 20,000 patients or fewer. (Ministry of Health and Welfare, 2015) Currently, 1,017 diseases are designated as rare diseases. (Kim, 2019) The complete list is available in Appendix I. By the Rare Disease Management Act, the Ministry of Health and Welfare compiles requests for rare disease designation and annually updates the list. (Ministry of Health and Welfare) Orphan drugs are defined as drugs for treating rare diseases or diseases without available treatment. (Korean Food and Drug Administration, 1998) To meet the legal definition of orphan drugs, for domestically produced drugs, the annual total production cost should be five-billion KRW or lower; for imported drugs, the annual total sales should be five-million USD or lower. (Korean Food and Drug Administration) There are 256 orphan drugs designated in Korea,
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