Easy cuts, easy rebound: Drug expenditures with massive price cuts in Korea

Since 2012, the Korean government has introduced 46.5% price cut for off-patent medicines in order to reign everescalating drug expenditure. This study sought to appraise the impact of the price cut measure (in the context of Korean National Health Insurance system).

We employed Korean National Health Insurance database from January 2007 until December 2016 for 120 month period. An interrupted time series analysis with segmented regression analysis was conducted to estimate the impact of price cut on overall drug spending.

Drug spending significantly dropped with the price cut by 186.22 billlion Korean Won (KRW) (p < 0.0001) and the trend after the price cut has also significantly decreased by 1.33 billion KRW (p = 0.002). However, it was predicted that total expenditures showed an increasing trend and bounced back to the original level. Quantity prescribed had no significance with the price cut. Unit price had a substantial drop (β = -41.68, p < 0.0001) with the price-cut, but the trend after the intervention has increased (β = 0.16, p = 0.656) with no significance.

Although the price cut has successfully countered the everescalating pharmaceutical expenditures in Korea, the impact was temporary. A lack of demand-side measures resulted in an ineffectiveness and unsustainability of policy effect. Thus, more aggressive demand-side measures should be introduced in the Korean context,and both the demand and supply-sides should be balanced.