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KMID : 1170320200260010001
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Korean Journal of Health Economics and Policy
2020 Volume.26 No. 1 p.1 ~ p.39
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Study on Impacts of the Korean Government’s Drug Price Reform and Support for Innovative Pharmaceutical Firms
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Shin Kwang-Soo
Park Kyo-Joon
Park Ha-Young
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Abstract
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The Korean government implemented a policy in 2012 to bring structural changes to the pharmaceutical industry whose dependence on generic drugs was high and innovation capacity to develop new drugs was low. The policy was comprised of two parts, price reduction of generic drugs and supports of selected innovative pharmaceutical firms with tax credits, higher drug prices, and various managerial benefits. The objective of this study was to assess the impacts of the policy by examining firm level responses in internal research and development (R&D) investment and effort to acquire external R&D resources through strategic alliances and merger and acquisitions (M&As). The study also examined innovation outputs (numbers of patent registration and clinical trials) which are results of R&D inputs and the final financial outcome (revenue). The study collected data for 46 publicly listed firms on the KOSPI and KOSDAQ markets during 2009-2016, 20 selected innovative firms and 26 non-selection firms, and compared the study variables of the two groups to estimate the impacts with differences-in-differences (DD) and panel regression DD with control variables. Results indicated that selected innovative firms were superior to their couterpart firms in R&D inputs, innovation outputs, and financial outcome in the first place, and the government supports strengthened their superiority in internal R&D investments, alliances and M&As, and patent registration. However, the policy did not have any influence on the number of clinical trials and revenue, and the reduction of drug prices did not have statistically significant impacts on the study variables either. The study contributed in providing policy makers and firm managers with directions for the advancement of the Korean pharmaceutical industry despite the limitation of short data period and the generalizability problem.
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KEYWORD
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Pharmaceutical industry policy, drug price reform, government support of innovative firms, policy analysis, differences-in-differences
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