[New Wave] The Necessity of Regulatory Sandboxes in the Pharmaceutical and Bio Sectors

Jung Yuntaek, Director of the Pharmaceutical Industry Strategy Research Institute.

Several years ago, a global accelerator in the pharmaceutical and bio sector stated in a lecture that "Korea's regulations follow a positive system," arguing that "it is an ecosystem structure centered on government regulations, making innovation impossible, and thus it is difficult for quantum jump companies based on innovative technologies to emerge." He claimed that leading countries in technological innovation, such as the United States, operate under a negative system, where companies are largely allowed to proceed with advanced innovative technologies if they wish, but if problems arise, they can be held criminally and civilly liable based on stringent product liability laws ('PL laws').

Of course, from the public's perspective, most of Korea's regulations being government-led positive systems have the advantage that the state bears significant responsibility for approvals based on licensing authority, which provides reassurance. However, even looking at controversial cases like the humidifier disinfectant incident, entrusting national agencies entirely with licensing decisions on potential future safety issues can actually introduce various uncertainties.

Moreover, since the positive system requires government licensing reviews, a large number of administrative personnel must be deployed. In the era of the Fourth Industrial Revolution, where technological progress is accelerating, relying solely on government reviews inevitably makes it difficult to proactively prepare for advanced convergent innovative technologies. This results in a national competitiveness structure that is very vulnerable to exercising global leadership and preempting advances in cutting-edge science and technology.

However, recent changes have become visible with the inauguration of the new government. As part of the leap to become a global hub for bio and digital health, the creation of an innovation ecosystem through regulatory improvements such as the biohealth regulatory sandbox has been presented as a national agenda.

The regulatory sandbox began in the UK in 2016 and is currently operated in over 60 countries. It was introduced domestically in 2018. According to the Korea Health Industry Development Institute, the government has approved a total of 55 projects under the regulatory sandbox in the biohealth sector.

Representative issues related to the application of the regulatory sandbox in the biohealth field are largely connected to the Medical Service Act concerning telemedicine, the Bioethics and Safety Act, insurance reimbursement, and the Personal Information Protection Act. Most of these issues involve the Ministry of Health and Welfare and have been subjects of sharp conflicting interests since the past. Even when applying the regulatory sandbox, many matters are difficult to implement under current laws, limiting active acceptance and application by public officials and thus hindering activation.

However, it should also be considered that the pharmaceutical and bio industries are fields where applying the regulatory sandbox is challenging. Canada, for example, has implemented a centralized policy formulation coordinated and executed by federal agencies other than regulatory authorities, to apply the regulatory sandbox to Advanced Therapy Products (ATP). This involved limited consolidation of strong support from private companies including capital markets and broad participation from interest groups.

Recently, our Ministry of Health and Welfare is also contemplating directions to promote a health care-specialized regulatory sandbox including pharmaceuticals and bio. To this end, they plan to seek regulatory reform measures through cooperation with the National Health Insurance Service, the Ministry of Food and Drug Safety, and the Korea Disease Control and Prevention Agency. It is necessary to actively benchmark cases like Canada’s under the new government and implement reasonable regulatory improvements that create a foundation for innovative technologies linked to the market to generate global-level value based on safety.

Jeong Yuntaek, Director of the Pharmaceutical Industry Strategy Institute