U.S. Medical Device Industry Consultations in Korea, April 2001

Summary:

From April 21-25, 2001, U.S. Department of Commerce industry staff led representatives of U.S. medical device industry associations to Seoul for meetings with agencies responsible for product regulation and healthcare reimbursement in Korea. This visit by a joint government-industry delegation, organized and led by the Department of Commerce in response to U.S. industry urging, was a success in enabling leading U.S. medical device industry representatives to engage officials in Korea on the paramount market access issues of regulation and reimbursement. We received verbal commitments for consideration of several policy changes advocated by U.S. industry, and brought stepped-up commitments from these officials to take U.S. industry views into account in the course of modifying their policies. Through these meetings, we were able to express the considerable importance which we attach to Korea's ongoing participation in multilateral regulatory harmonization fora for the medical device industry, particularly the Global Harmonization Task Force and the Asian Harmonization Working Party. It is also likely that we have catalyzed a somewhat more regular interactive approach by local U.S. medical industry representatives to regulatory and reimbursement policy issues of common interest.

The U.S. Department of Commerce wishes to acknowledge the support of the Advanced Medical Technology Association, Medical Device Manufacturers of America, National Electrical Manufacturers Association and Medical Device Committee of the American Chamber of Commerce in Korea in planning and conduct of these meetings.

Health Insurance Review Agency and Ministry of Health & Welfare's Insurance Benefit Div.

On April 23, the U.S. delegation met with representatives of HIRA and the branch of the Health Ministry that oversees HIRA to discuss Korea's reimbursement policies, which have become stricter as Korea's healthcare finance system has moved further into deficit. We voiced concern over the adverse impact of Korea's sharp downward revision of reimbursement rates on sales of currently-marketed products, and on the ability of new medical technologies to find a place in the Korean market, given that reimbursement prices are mostly genericized at current-technology levels. While acknowledging the Korean government's interest in examining questionable product markups in the distribution chain and promoting transparency in the medical supply process, we argued that Korea's Actual Transaction Price system should not be used to mandate repeated downward revision of prices for the same products. Our delegation also stressed the importance of recognizing product differentials instead of grouping products in broad categories at generic price levels based automatically on the lowest-cost technology in the group. We cautioned that the system's failure to recognize the long-term value of technology could actually lead to higher healthcare costs and deny Korean citizens access to advanced medical technology.

HIRA's Hahn Oh-Serk acknowledged that low prices pose barriers to new technologies, and that HIRA's recently-formed task force on reimbursement pricing includes industry representation in order to ensure that such concerns are adequately considered. However, he countered that not every innovation necessarily merits a higher price, and advised companies to seek support from Korean medical practitioners. Mr. Hahn agreed that Korea's reimbursement system needs to be transparent and that in principle, prices should reflect technology value differentials. A constraint on more favorable pricing, noted the Health Ministry's Jun Byung Yool, is that Korean patient co-payments account for only 3-4% of costs, compared to 7-10% in Japan and Taiwan and 18% for Europe; and efforts to boost this level in Korea have met stiff political resistance.

The Korean reps reacted favorably to a U.S. proposal that HIRA establish some clear, detailed criteria regarding what threshold of cost-effectiveness, and what sorts of data, would justify reimbursement at a given level, and promised to follow up on this proposal. A HIRA-led task force may be open to industry input in establishing such criteria.

Korean Food & Drug Administration

In a courtesy call on Director-General Kim of KFDA's Medical Device Division on April 23, the U.S. delegation was briefed on outlines of the draft Medical Devices Act now under development in Korea. Mr. Kim assured us that KFDA would send representatives to the next Asian Harmonization Working Party on medical device regulation. He commented that although KFDA would continue to require type testing of medical devices, it may offer quality-system certification as an alternative. However, his remark to the effect that this may be done on a product-by-product basis raised concerns with our delegation about how Korea would implement a quality systems approach.

Draft Medical Devices Act: Following the brief session with Mr. Kim, the delegation met at length with staff of the Medical Device Division. Describing the provisions of the draft Medical Devices Act, Lee Sang-Yeul cited its major provisions as being designed to accomplish the following:

• adjusting and clarifying the definition of products subject to regulation as medical devices;
• bringing medical software under KFDA's regulatory purview;
• adding specific provisions regarding used devices and leasing of devices;
• moving from a 3-tier to 4-tier risk classification scheme (based on GHTF guidance documents); and
• instituting new post-market surveillance.

Post-Market Surveillance Plans:Lee explained that post-market provisions would cover three areas of activity, including (1) "re-review" (re-registration), which he emphasized would not be a standard practice for all devices, but rather would be limited only to those devices whose initial registration was made subject to subsequent review at a later date; (2) "re-evaluation," which he also described as being applied only in cases where adverse incidents and suspicion of serious problems with a device safety warrants; and (3) recalls, for cases where a device is deemed to have serious safety problems demanding its removal from the market. KFDA has not yet established the criteria which it will use to judge whether a device should be subjected to re-review or re-evaluation, and this seems to be another aspect of the Act (along with the type-testing issue raised with Mr. Kim earlier) on which industry will want to comment.

Third-Party Reviews: KFDA is considering whether to introduce third-party reviews for determining substantial equivalence of lower-risk devices. (This would be done for resource allocation reasons, as KFDA hopes to reduce its average review times from 59 to 30 days). It has been reported that the Korean Medical Device Association is being considered for a role in conducting third-party reviews, sparking concerns over confidentiality of registration data and impartiality of the review process. These concerns were voiced previously in a February 15, 2001 letter from AmCham/Korea to KFDA Commissioner Yang, and our delegation mentioned them again during the meeting. Mr. Lee professed that KFDA fully appreciates that a third-party review system must be established with transparency, without conflict of interest and with consideration for the safeguarding of proprietary information.

Clinical Trials: U.S. representatives pointed out that Korea is one of a few countries that refuses to permit clinical trials on devices that are not yet approved for sale in their country-of-origin. Mr. Lee reported that KFDA was considering liberalizing this requirement via the draft Medical Devices Act, although he noted that this was a politically-sensitive issue.

Type Testing: Discussion focused on whether Korea's requirements for biocompatibility test data accord with ISO 10993 standards, and whether Korea would continue to require type testing prior to registering Class II and III devices. On biocompatibility, Lee Hai-Kwang asserted that KFDA strictly adheres to the ISO standard and that it requires extra data only in instances when companies seek exemptions from documentary evidence which KFDA requests. U.S. industry reps replied that they are reluctant to provide some proprietary documents (or in some cases, are unable to provide documents as a practical business matter because the documents pertain to their contract suppliers' proprietary information). No resolution was reached on this issue. On the broader question of future type testing (DG Kim's earlier comments notwithstanding), KFDA expressed intention to continue requiring such tests, and showed no near-term interest in an arrangement similar to that between the U.S. and Japan under which Japan waives type testing for USFDA-approved devices.

Product Registration Transfer Rights: The U.S. side advocated easing of the requirement for prior approval for foreign medical device registrants to switch domestic distributors (who alone can legally hold registrations in Korea). Lee Hai-Kwang noted that this requirement helps protect the distributors whose efforts secure an initial product registration. The U.S. reps suggested that compensation for these efforts is built into the contractual relations between the foreign manufacturer and the Korean distributor. Mr. Lee noted that this issue is covered in the Medical Devices Act, and invited U.S. industry to mention this in its forthcoming comments on the draft.

Ministry of Health & Welfare / Health Policy Bureau

In this April 24 meeting with Lee Jae-Hyun of the Ministry's Health Policy Bureau (which has oversight responsibility for submission of the draft Medical Devices Act), the U.S. delegation reiterated interests and concerns previously expressed to KFDA. Neither Mr. Lee nor the KFDA staff with whom we met the previous day held out much hope that the comment period for the draft Medical Devices Act could be extended beyond the 20 days stipulated. Thus, AmCham/Korea members will need to be prepared to react quickly when a draft is released as expected later this spring. Mr. Lee, however, did assure the U.S. delegation that Korea was very interested in receiving U.S. comments on the draft, and that such comments would be given serious consideration.