[Contribution] Choline drug withdrawal crisis, legal and medical warning to pharmaceutical industry

Serious questions are being raised about the sustainability of choline alposcerate preparations (hereinafter referred to as choline preparations) within the health insurance benefit system. Choline drugs, which have long been prescribed as brain function improvers, are having a huge impact on the entire pharmaceutical industry as they have recently faced clinical re-evaluation requests and reimbursement adequacy reviews from the Ministry of Health and Welfare and the National Health Insurance Service.

Choline drugs have been mainly used to improve symptoms of cognitive decline and mild dementia in the elderly. The explanation followed that pharmacologically, it acts as a precursor for acetylcholine and helps in the synthesis of neurotransmitters. However, contrary to these theoretical expectations, there has been continued criticism that large-scale studies that meet global clinical standards (GCP) to date lack significant results showing that choline preparations have a clear effect of improving cognitive function compared to placebo.

In particular, looking at the results of major clinical studies and meta-analyses conducted at home and abroad since 2020, choline drugs failed to demonstrate statistically significant differential effects in improving memory and suppressing the progression of dementia. This became a decisive basis for health authorities to request a reexamination of the clinical effectiveness of choline products. As a result, Health Insurance offered pharmaceutical companies to negotiate for reimbursement of drug costs billed as health insurance benefits, and some pharmaceutical companies signed reimbursement agreement agreements accordingly.

However, most pharmaceutical companies filed administrative lawsuits en masse, claiming the unfairness of the recovery measures. They argued that ‘the redemption negotiations were coercive and retroactive application was unfair.’ However, courts have consistently rejected pharmaceutical companies' claims. The court ruled that 'the recovery agreement is a contract based on the pharmaceutical company's free will, and the recovery measures to protect public finances are justified.' Furthermore, it was ruled that recovery is possible through a post-adequacy review even without going through the formal procedure of deleting benefits. This is a meaningful ruling that increases the likelihood that the government will side with the government in similar wage recovery disputes in the future.

Medically, the position of choline drugs is rapidly shaking. Pharmaceutical companies are pursuing new clinical studies to prove the efficacy of choline products in order to come up with self-help measures, but to date, they have not been able to produce results strong enough to convince academia or regulatory authorities. Ultimately, regardless of whether the refund is confirmed, there is a growing possibility that the removal or significant reduction in coverage of choline drugs will become a reality depending on the results of future clinical re-evaluation.

If, as a result of clinical re-evaluation, the choline agent does not prove sufficient efficacy in improving cognitive function, the health insurance benefit itself may be deleted, which will lead not only to the recovery of already claimed benefits but also to the fatal result of a collapse in sales base. Some pharmaceutical companies are already reflecting the expected refund in their financial statements as refund liabilities, which may lead to worsening financial structure, credit rating downgrade, and failure to attract investment.

This incident taught several important lessons to the entire pharmaceutical industry.

First, drugs without scientific basis can never survive for long within the insurance benefit system. In the past, there was a time when it was possible to maintain salaries by relying on ‘usage practices’ and ‘medical staff preferences’. However, currently, if clear clinical evidence and cost-effectiveness are not proven, benefits are reduced or deleted without mercy. This requires pharmaceutical companies to prepare global-level clinical strategies from the early research and development stage.

Second, the importance of legal risk management. As revealed in this lawsuit, the recovery agreement is not a simple negotiation but a legally binding contract. In the future, when entering into a refund negotiation with National Health Insurance, pharmaceutical companies will need to strengthen prior legal review of the refund conditions, scope of retroactive application, and objection procedures. It was clearly confirmed that if an unfavorable agreement is reached, it is virtually impossible to overturn it through post-facto litigation.

Third, there is a need to improve management structure. A structure that is overly dependent on sales of specific items can cause irreversible damage in a crisis. It shows that the choline drug withdrawal incident goes beyond a simple decline in sales and can shake the foundation of the entire company's existence. Now, pharmaceutical companies will have to make portfolio diversification, strengthening new drug development capabilities, and expanding global expansion as essential strategies to diversify risk.

The choline drug withdrawal situation is not just a controversy over one drug. This is a kind of 'warning letter' calling for strengthening the scientific evidence base, legal risk management, and sustainable management for the overall pharmaceutical industry in Korea. An era has arrived where we can no longer rely on past practices and become complacent.

The future of the Korean pharmaceutical industry will be determined by how the pharmaceutical industry learns from this incident.

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[Contribution] Choline drug withdrawal incident, legal and medical warning to pharmaceutical industry (link)