American pharmaceutical company Merck and Johnson & Johnson. /Reuters

The Pharmaceutical Research and Manufacturers of America (PhRMA) has identified Korea as a country that artificially lowers the prices of exported pharmaceuticals, harming the United States. It urged the U.S. government to leverage ongoing trade negotiations to compel Korea to improve its drug pricing policy.

On the 3rd, the domestic pharmaceutical industry expressed reactions of “it was bound to happen” and offered a pessimistic outlook, stating, “If the prices of U.S. new drugs rise, the burden on health insurance finances will increase.” Previously, on the 27th, the Pharmaceutical Research and Manufacturers of America submitted an opinion letter containing this information to the U.S. Trade Representative (USTR).

The association identified Korea, along with Australia, Canada, France, Germany, Italy, Japan, Spain, the United Kingdom, and the European Union (EU), as the countries with the most serious drug pricing issues, asserting that the U.S. government should prioritize addressing these high-income countries with significant drug consumption.

The pricing issue highlighted by the Pharmaceutical Research and Manufacturers of America has continually emerged from global pharmaceutical companies that have entered the Korean market. There are claims that Korea’s healthcare system does not adequately recognize the value of new drug development. It is said that new drugs, which are developed with substantial investment, have their prices set excessively low. However, the U.S. administration has never negotiated this issue with the Korean authorities.

The domestic pharmaceutical industry expresses concern that if the U.S. raises drug prices in trade negotiations, it could become difficult for health authorities to balance the financial burden on health insurance and the demands of patients for new drug introductions. If U.S. demands are fully accepted, the already warning-stricken health insurance finances could deteriorate further, and if Korea continues to refuse, U.S. pharmaceutical companies may exclude Korea from new drug launches.

An executive from a foreign pharmaceutical company noted, “The U.S. pharmaceutical industry has requested the Korean government to improve its drug pricing system, but if tensions between the two countries escalate, it could make the introduction of new drugs in Korea more challenging.”

On April 2, 2025, in the Rose Garden of the White House in Washington D.C., U.S. President Donald Trump holds up a document signing an executive order imposing tariffs on imports at the ‘Make America Wealthy Again’ trade announcement event. /AFP

◇The drug pricing evaluation body that became a ‘Wailing Wall’

In Korea, the Ministry of Food and Drug Safety (MFDS) decides on the approval of new drug products, while the Health Insurance Review & Assessment Service (HIRA) and the National Health Insurance Service evaluate the appropriateness of benefits and set the prices.

Pharmaceutical companies regard the ‘health insurance benefit listing’ by HIRA as an important gateway. This is because prescriptions in Korea can increase and revenue from pharmaceuticals can rise only if the insurance benefit applies.

The benefit listing and pricing are determined by the government officials and medical experts who comprehensively consider comparisons with existing drugs and their efficacy, innovation value, and economic evaluations. Global pharmaceutical companies have expressed dissatisfaction, as the limited health insurance finances in Korea tend to prioritize stable financial management over the innovation of new drugs during evaluations.

In particular, high-priced cancer drugs have been regarded as facing more arduous processes for insurance benefit listing and price negotiations. Global pharmaceutical companies operating in Korea refer to the review committees of HIRA, which are essential for cancer drug insurance listing, as a ‘Wailing Wall.’

Merck's (MSD) immuno-oncology drug, Keytruda, has received approval for a total of 18 cancer types and 34 indications in Korea. Among these, only 7 out of 4 cancer types, including non-small cell lung cancer, Hodgkin lymphoma, melanoma, and urothelial carcinoma, are covered by health insurance.

Korea MSD has challenged the insurance benefit listing for other indications of Keytruda, but has repeatedly faced setbacks. The review application submitted to HIRA in 2023 went before the cancer review committee a total of five times over a year and a half, but was met with a ‘re-discussion’ judgment each time. In the industry, this re-discussion judgment is interpreted to mean that the expansion of benefits is impossible unless the corporation presents a lower price.

Korea MSD has once again challenged for the expansion of Keytruda’s benefits this year, and at the cancer review committee held last February, benefit criteria were established for 11 out of 17 applied indications. This marks a success after 5 attempts. The next gateway is the drug evaluation committee, and negotiations with the National Health Insurance Service are expected to finalize the application of benefits.

In Korea, the re-challenge of new drug benefits is common. AbbVie’s cancer drug, Imbruvica, was blocked by the cancer review committee last December, only to pass the review last month. Johnson & Johnson’s multiple myeloma treatment, Teclistamab, failed to pass the cancer review committee again last June, following its first attempt in November of last year.

U.S. pharmaceutical companies claim that the drug prices set by Korean authorities affect not only Korea but also sales in other countries. An industry insider stated, “When other countries negotiate drug prices with U.S. pharmaceutical companies, they reference prices set in Korea, which leads to significant dissatisfaction regarding Korea’s price defense.”

ChosunDB

◇Health insurance finances struggle between costs and patient harm

The industry believes that if the Trump administration accepts and implements the opinions of the U.S. pharmaceutical industry, the calculations for the government and health authorities will inevitably become more complicated. Ultimately, it’s a money issue. To align with the drug prices desired by U.S. pharmaceutical companies, the burden on health insurance finances and the rising medical costs will inevitably harm the public. For example, the annual health insurance claim amount for Merck's cancer drug Keytruda exceeds 400 billion won.

However, health authorities cannot continue to lower new drug prices solely based on health insurance finances. If negotiations with U.S. pharmaceutical companies become prolonged or fail altogether, patients will be adversely affected. Recently, as groundbreaking treatments and innovative new drugs emerge, the petitions and demands from patients for guaranteed benefits have also increased.

Kim Guk-hee, head of the Drug Management Division at HIRA, stated, “As of 2023, the price increase rate for cancer drugs reached 26%” and “We are pondering whether health insurance finances can sustain the coverage for the influx of high-priced new drugs and combination therapies.”

He added, “As more combination therapies and more expensive cancer drugs will emerge, there are concerns about whether (health insurance finances) will remain sustainable if we provide support for them, and I believe that a separate system related to high-priced cancer drugs is necessary.”

The industry is also concerned about a strong confrontation. If negotiations break down, the supply of U.S.-made new drugs in Korea could be halted. An executive from a U.S. pharmaceutical company expressed concern, stating, “We will have to monitor the situation of future trade negotiations, but there is a possibility that the headquarters may deprioritize the Korean market, potentially leading to delays or reluctance in new product launches, resulting in a phenomenon known as Korea passing.”