South Korean pharmaceutical expenses to American drug costs reportedly stand at a ratio of 1:4.
In a recent report published by KoreaBIO's Bio-Economic Research Center, South Korea has been confirmed as one of the most affordable countries in the world for pharmaceuticals. The report, based on a February 2024 study by the RAND Corporation, compared prescription drug prices across 33 Organisation for Economic Co-operation and Development (OECD) member countries in 2022.
According to the report, on average, drug prices in the US are 3.9 times higher than in South Korea. This price disparity is particularly noticeable for biologics, which cost over 5.7 times more in the US compared to South Korea. Among the top 60 revenue-generating medicines in the US, prices are 8.4 times higher than in South Korea.
For brand-name drugs, the price gap between the US and South Korea grows to 7 times. Koreans pay 25.6 percent of what Americans pay on average for the same medicines.
The report confirms what many in the industry have long suspected about South Korea's affordability for pharmaceuticals. This affordability is primarily due to strong government price controls, drug re-pricing policies, and a regulatory environment that limits excessive pricing.
South Korea uses actual-transaction-price audits and enforces volume caps that cut list prices after market launch, keeping prices restrained. The Korean government also implements risk-sharing agreements and complex rebate negotiations to moderate drug prices, particularly for high-cost innovator and orphan drugs.
In contrast, drug prices often remain high in the US due to weaker price regulation and high original drug prioritization. South Korea encourages competition through the adoption of biosimilars and enforces policies that compress profit margins of innovator drugs. These controls keep pharmaceutical spending per capita in South Korea significantly lower than in the US, though it has been increasing steadily over the last two decades.
The report does not specify if the price premiums were calculated for a specific set of medicines or for all prescription drugs in the US and other countries. It also does not mention if the price premiums were compared with the prices in countries outside the OECD, such as India or China.
The report was published following US President Donald Trump's letters to 17 global pharmaceutical firms, demanding they lower US prices to match the lowest price charged in any OECD country. The companies have been given a 60-day deadline to respond to the US President's demands. However, the report does not discuss the potential implications of these demands on the pharmaceutical industry or on patients in the US and other countries.
In Turkey, US drug prices are more than 10 times higher than those in Turkey, showing the greatest disparity. The report does not provide details on how the prices in other countries were determined or if they were adjusted for factors such as currency exchange rates, government subsidies, or population size.
Despite these findings, South Korea's prescription drug prices remain among the lowest in the developed world, providing a model for other countries to consider in their efforts to control prescription drug costs.
- In the realm of health-and-wellness, South Korea's effective drug pricing strategies, rooted in robust government price controls, drug re-pricing policies, and strict regulations against excessive pricing, have made it a beacon for affordable medical-conditions treatment, even compared to less costly alternatives in countries like Turkey and India.
- The finance sector, particularly the business of pharmaceuticals, could take cues from South Korea's success, as the affordability of life-saving medicines in the country is not only advantageous for its citizens but could potentially represents a lucrative opportunity for financial investment, given the steady yet controlled growth in pharmaceutical spending.
