[Open Forum] The “Volume–Price Linkage System” Causes More Harm Than Good and Must Be Reformed Quickly

Disruptions are occurring in the supply and distribution of pharmaceuticals. This is because the resurgence of COVID-19 has sharply increased the number of patients receiving at-home treatment, boosting demand for over-the-counter medicines such as cold remedies and antipyretic analgesics. In response, the government even asked domestic pharmaceutical companies to increase production of cold medicine, but the industry has been reluctant to do so. This is because companies are concerned that rising sales could actually lead to falling profits.

When sales of a drug surge, pharmaceutical companies become subject to regulation under the Price-Volume Agreement (PVA). This is because the PVA is a system under which, when the usage volume of a drug rises beyond a certain level, its price is reduced through negotiations between the pharmaceutical company and the National Health Insurance Service.

The PVA was introduced to prevent an increase in insurance expenditures caused by pharmaceutical companies’ excess profits. However, as a wide range of drugs has come under PVA regulation, it has produced many side effects. To reduce these side effects, it is necessary to closely examine the PVA’s adverse effects from the perspectives of regulators, the pharmaceutical industry, and consumers.

First, the PVA weakens pharmaceutical companies’ incentive to produce. As seen in the recent wave of cold medicine shortages, even if pharmaceutical companies increase production, the result they face is a price cut. From the companies’ perspective, there is no need to accept a semi-permanent price reduction caused by a temporary increase in cold medicine sales. Because the structure lowers prices the more a company sells, pharmaceutical firms are not inclined to actively increase output and generate profits.

Second, the PVA can be said to have a negative impact on the growth of the domestic pharmaceutical industry. Many experts say that the PVA restricts competition among firms and encourages the irrational outcome of forcing competitive products to lower their prices. As a result, domestically produced drugs, which are subject to relatively heavier regulation, fall behind not only in the domestic market but also in competition in the global market.

Lastly, the PVA harms consumers by disrupting the supply and prescription of medicines. There are also 전망 that, in the future, the prices of antipyretics, painkillers, and gastrointestinal medicines—whose prescription volumes have increased along with cold remedies—will also be included under PVA regulation. Ultimately, if drug production declines, patients suffer the harm of being unable to receive prescriptions. The PVA, which was implemented to supplement the National Health Insurance system’s goal of guaranteeing the health of the entire population, is instead coming into conflict with that very purpose.

In this way, the PVA is a system that entails different side effects from the standpoint of pharmaceutical companies, the pharmaceutical industry, and consumers. To solve these problems, the government must listen to their voices and ensure that the PVA reflects reality. It should move in the direction of easing the PVA by reducing the number of drugs subject to it and broadening the criteria to take into account exceptional circumstances such as COVID-19. It is now urgent to come up with improvements that can reduce the side effects of the PVA as soon as possible.

Gaeun Kim, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 득보다 실 많은 ‘사용량-약가 연동제도’ 하루빨리 개선해야

Author: Ga-eun Kim

Date: 2022-08-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=8&idx=24910