By Kim Tae-gyu
A total of 17 local drug makers were caught last year for having offered illegal rebates of nearly 100 billion won to doctors and pharmacists between 2006 and 2010.
The Fair Trade Commission (FTC) said Sunday that the 17 players including Sanofi-aventis Korea, Yansen Korea and Novartis Korea combined to present 97 billion won in unlawful kickbacks.
More than 8,500 hospitals and pharmacies across the country were found to have pocketed such payments and few believe all of the violators have been investigated by the anti-trust watchdog.
``On average just a couple of cases were probed a year before 2010 but a host of cases appeared on our radar last year thanks to the new policy of rewarding whistle-blowers,’’ an FTC official said.
``However, I think that the 17 drug producers are just the tip of the iceberg. We have dropped so many probes due to a lack of material evidence despite firm belief of their wrongdoings.’’
Drug companies employed various ways to encourage doctors or pharmacies to prescribe or sell their brand of medicines.
On top of providing under-the-table cash or gift certificates, some treated doctors or pharmacists at expensive restaurants, financially sponsored golf games and bought them computers or TVs.
A company paid around 5 million won to a doctor for delivering lectures each of nine times. The doctor read drafts for some 10~20 minutes at restaurants in front of a few people before dining. All of this is paid for by the company.
The anonymous FTC official declined to estimate the total amount of rebates but market observers predict that trillions of won were spent every year in such manner.
``The market norm of rebates is known to be about 20 percent of the price of the drug. Yet, some latecomers suggested even 25 to 30 percent in order to gain market share,’’ an insider at a domestic drug firm said.
``Because the overall size of the Korean medicine market is approximately 16 trillion won, the consensus is that trillions of won is channeled toward rebates every year. Some put the figure at 3 trillion won.’’
Indeed, the medicine industry spends up to 35 percent of its revenue on marketing or related activities, which is way above the average 12 percent of other businesses. A substantial portion of these expenses is believed to be connected to the rebates, according to the insider.
In order to weed out the problematic practice, the FTC phased in the policy of rewarding whistle-blowers in 2010 and started punishing both rebate providers and recipients last year.
Previously, merely providers were subject to punishments, thus exempting doctors or pharmacists from any legal responsibilities no matter how much they received.