A series of sweeping reforms to the pharmaceutical industry in South Korea succeeded in cutting down on prescription drug abuse, but also resulted in higher prices for brand-name drugs and increased national health spending, according to research conducted by the Yale School of Public Health (YSPH).
While the goal of the reforms was to reduce medically unnecessary prescriptions, thereby reducing both the abuse and misuse of prescription drugs and restraining overall health spending, the law had a series of unintended consequences, said Jennifer Prah Ruger, Ph.D., and an assistant professor at YSPH who studied the reform effort with Dongguk University in Seoul.
The South Korean government crafted legislation in 2000 to separate the pharmaceutical and medical professions. Physicians were prohibited from dispensing drugs, while pharmacists were prohibited from writing prescriptions.
A positive aspect of the legislation was an apparent decline in the misuse of prescription drugs. On the negative side, overall health care spending increased more rapidly after the reforms and prescriptions also were being written for higher–priced drugs, the research showed.
Health care spending as a percentage of the South Korean gross domestic product (GDP) increased from 4.8 percent to roughly 6 percent of GDP after the reforms were enacted. One reason for the spending increase was that Korean physicians had threatened to shut their clinics if the reforms went through as originally proposed. In response, the government authorized a 72 percent increase in physician consultation fees for outpatients and a five–fold increase in prescribing fees for the year 2000.
Another factor contributing to increased costs was that hospitals reacted to the loss of their drug–sales income by increasing the amount of services they provided that were not covered by South Korea’s national health insurance. These uninsured services offered higher profit margins because they were not regulated.
“South Korea’s experience with health care reform is an example for other countries considering changes to their own systems,” said Ruger. The case study also shows how powerful political and economic forces in health care undermine reform efforts. The South Korean government has since taken steps to curtail the distortions that occurred after the legislation was first passed.
Details of the study appeared in the May 28 issue of the online journal Health Affairs.