THE SECRETARY OF COMMERCE
Washington, D.C. 20230

His Excellency
Kim Won-Gil
Minister of Health and Welfare
of the Republic of Korea
Seoul

Dear Mr. Minister:

I would like to express my serious concern regarding Korea's proposed modifications to its pharmaceutical pricing system, part of its recently announced Comprehensive Plan for stabilizing the National Health Insurance Program. The U.S. Government strongly supports Korea's efforts to bring high quality, cost-effective health care to its people. However, we are concerned about the discriminatory effect the proposed changes to the pharmaceutical pricing system would have upon our products. If not addressed appropriately, this issue is likely to develop into a serious trade dispute.

Under the reference pricing system proposed in the Plan, patients would incur a co-payment for certain pharmaceutical products within a given therapeutic category based upon the cost of those products. Research-based, innovative pharmaceuticals are often more expensive than generics and other products; therefore, it is mainly these products that would be subject to a co-payment requirement. Requiring patient co-payments for only some products within a therapeutic category would create a distinctive for patients to use these pharmaceuticals, regardless of their effectiveness. Innovative pharmaceuticals, most of which are imported or manufactured in Korea by foreign-based companies, would thus be impacted disproportionately by reference pricing. This system would also decrease the quality of health care in Korea by making the most advanced, effective medicines available only to those able to afford the co-payment, leading to a two-tier health care system.

While shifting some of the financial burden to patients is appropriate, we believe there are ways to accomplish this without disproportionately impacting manufacturers of innovative pharmaceuticals, and without providing different levels of care to Korean citizens.

We are also concerned that the decision-making process for changes to Korea's health care system is not sufficiently transparent, and is occurring within too short a time frame for full consideration of the views of stakeholders. For example, the public comment period on this proposal closed before information on the changes under consideration was made public. This made it impossible for interested parties to provide meaningful comments. Before final decisions are made, it is important that your government consult and fully and substantively with interested parties, including foreign research-based pharmaceutical manufacturers, as well as with our government. Taking the time now to gather informed opinions from all parties affected by the proposed modifications may help avoid unwanted outcomes in the future.

In recent years, the U.S. Government and industry have engaged in a productive dialogue with Korean health care policy makers. I hope that the agreements reached through this cooperative process will not be undermined as a result of decisions that have not been fully discussed and mutually agreed upon. The United States has considerable expertise and experience in health care financing matters, and we look forward to the opportunity to work with you to find ways to bring high-quality health care to the Korean people in a fiscally prudent and equitable manner.

Warm regards,

Donald L. Evans

c.c: Hwang Doo-yun, Minister of Trade