Korean National Assembly Passes Amendments for 
Pharmaceutical Affairs Act & Pharmaceutical Industry Act

On November 27, 2018, the National Assembly of Korea passed the main legislative amendments for the 「Pharmaceutical Affairs Act」 and the「Special Act on Fostering and Support of Pharmaceutical Industry」 (the “Pharmaceutical Industry Act”). The contents of the amendments are summarized below.

1. Amendments to the Pharmaceutical Affairs Act

According to the amendment to the 「Pharmaceutical Affairs Act」, in order to import drugs or quasi-drugs that are designated under the 「Regulations for the Safety of Pharmaceuticals, etc.」, the name and address of the overseas manufacturer must be registered in advance with the Ministry of Food and Drug Safety (the “MFDS”). In addition, the MFDS may conduct on-site inspections of overseas manufacturing facilities through consultation with the government of the exporting country in order to prevent possible harm from imported drugs or quasi-drugs. Furthermore, if the overseas manufacturing facility refuses the on-site inspection without good reason or if the on-site inspection reveals any concern for the possibility of harm, the MFDS may impose measures such as suspending importation of the subject drug.

Pursuant to the amendment to the 「Pharmaceutical Affairs Act」, sponsors of clinical trials are now required to obtain insurance for compensation or indemnification for possible health injury of clinical trial subjects. Sponsors must also evaluate, record, and store information regarding the safety of the clinical trial drug. Furthermore, the number of clinical trials a person may participate in is limited to two per year.

2. Amendments to the Pharmaceutical Industry Act

The Ministry of Health and Welfare (the “MHW”) establishes a comprehensive plan to foster and support the pharmaceutical industry every 5 years in order to promote the industry’s further development and strengthen its international competitiveness. Under the Amendment to the 「Pharmaceutical Industry Act」, the comprehensive plan now includes a plan to support the development of new drugs using artificial intelligence (AI). The MHW announced that it will allocate a 7.5 billion won budget to establish a platform for the development of new drugs using AI, a project which will be jointly carried out with the Ministry of Science and ICT until 2021.  

Innovative pharmaceutical companies are currently provided special benefits such as priority participation in national R&D projects, tax exemption, benefits in research facility construction, and exemption of various expenses. With the amendment of the 「Pharmaceutical Industry Act」, additional benefits will be offered such as increasing the upper limit of the reimbursement price for drugs manufactured by innovative pharmaceutical companies.

Meanwhile, a new amendment has been proposed for the 「Pharmaceutical Industry Act」 on introducing a ‘fast-track’ program which will expedite the evaluation of new drugs developed by innovative pharmaceutical companies. As the MHW and MFDS have both submitted their opinions supporting the enactment of the bill, there is increased possibility that this amendment will be passed in the plenary session in the near future

Once these amendments are promulgated, subordinate statutes and notifications will also be revised accordingly. It will be necessary to carefully review the amendments for their applicability and continue to monitor the progress of subordinate statute revisions and the issuance of relevant notifications.