Sleeping Country Series 2. The Regulatory Capture in the National Health Insurance System of South Korea: Government failure leading to higher prices for generic pharmaceuticals

Since the days of the military government, NHIS has been operated by bureaucrats trained in an authoritarian system. Even if the democratic government took power, the NHIS was operated by the same health policy groups. They have limited the market by continuing to change the pricing policy while disclosing the upper limit price and going without abolishing the practice of Cronyism. Hospitals all have purchase companies such as pharmaceutical consumables. The owner also owns the hospital and medical school. NHIS is trying to cut down on the price of medicines, and patients cannot choose medicines on their own even if educated patients spend search costs to obtain price information because owners and doctors choose the most expensive and profitable medicines like dementia symptom-improving drugs well rather than choosing well-known old medicines. Clofazimine and Dapsone are orally bioavailable and comparatively cheap to manufacture and clinical candidates for treating Covid-19. Both require clinical researches at a cost, but no company can pay for researches because the price of Clofazimine and Dapsone was too low. It is necessary for all countries worldwide to establish public pharmaceutical companies that can produce WHO essential medicines, verify their various effects, and conduct economic evaluations.

Korean legal and economic terms use the term "drug expenses", but researchers in health policy and economics report "pharmaceutical expenditures" to the public through the National Health Insurance System (NHIS) and all hospitals.

We analyzed South Korea's Big Five hospitals: university hospitals A, B, C, D, and E. Hospitals A, B, D, and E have their pharmaceutical benefit management (PBM) companies; C did not have a PBM company but had a procurement consulting service (PCS) instead. If we observe similar scales of B and C according to the 2010-2019 time series, B dominates in the market-based actual transaction price (MATP) system, while C catches up after 2014 when MATP was abolished by Cronyism.

South Korea's NHIS, a single insurer system, is currently in a complete state of regulatory capture by bureaucrats, academics, wholesale distribution pharmaceutical companies, and financial companies. Thus, it is necessary to reconsider a single insurer's provision of medical services, which is also the topic of medical reform in the United States. The NHIS of South Korea might experience regulatory capture. 

For the NHIS in South Korea to escape regulatory capture, the NHIS must operate the PCS system with hospitals and reconstituting the MATP system and reevaluate the price of the WHO essential medicine for the SARS-CoV-2 pandemic. It is necessary for all countries worldwide to establish public pharmaceutical companies that can produce WHO essential medicines, verify their various effects, and conduct economic evaluations.