Cleanup Drive to Sweep Pharm Industry

A woman enters a pharmacy in Jongno, central Seoul. Illegal rebates between drug makers and pharmacists or doctors have been blamed as the main reason for high drug prices.

/ Korea Times File

Gov’t Seeks to Revise Laws to Punish Rebate Takers, Givers

By Bae Ji-sook
Staff Reporter

The government will step up its fight against chronic illegal rebate practices whereby doctors and pharmacists receive money from drug makers in return for prescribing or recommending their products.

The wholesalers who receive such de-facto bribes will be sanctioned, the Ministry for Health, Welfare and Family Affairs said Tuesday.

A relevant bill has been submitted to the National Assembly to establish the legal grounds to suspend the licenses of doctors who take the money for up to one year.

Under the new rules to make more transparent the way pharmaceuticals are distributed to consumers, all parties ― doctors, pharmacists, wholesalers and retailers ― who give or take rebates will be subject to sanctions.

Two-Way Sanctions

Pharmaceutical firms have long called for the legislation of laws that stipulate doctors and pharmacists be punished for such acts. They say if doctors are not disciplined, the vicious circle will never end.

The companies have proposed to invest the money saved from the elimination of illegal rebates into research and development. The health ministry, which had been reluctant to act, has decided to accept the proposal.

On Tuesday, the Korea Pharmaceutical Manufacturers Association (KPMA) and the health ministry held a conference on the future of the industry. KPMA President Auh June-sun said drug makers would invest 10 percent of their profits into research and development on the condition that illegal rebates are rooted out by the ``punishment for all'' system.

``Among 781 domestic drug makers, 50.2 percent make less than one billion won in annual profits, which drives them into the illegal action,'' the association spokesman said.

According to the Korea Independent Commission Against Corruption, the rebates account for 15-25 percent of drug prices.

The inappropriate liaison between drug makers, pharmacists and doctors has been chronic and widespread. A doctors' association asked pharmaceutical firms to sponsor its campaigns without verifying the sponsor last year.

Since 2007, more than 17 manufacturers including Pfizer, GlaxoSmithKline, Daewoong, SD, Eli Lilly and Company, Jeil Pharm and Otsuka Pharmaceuticals were fined more than 40 billion won for the illegal provision of rebates to hospital procurers, pharmacists and doctors.

Another Round of Inspections

The Fair Trade Commission has also started an inspection of seven to eight domestic and international pharmaceutical firms to verify whether they are engaged in any unfair deals.

However, not a single doctor was punished in a previous probe, which increased complaints, an industry insider said.

The pharmaceutical industry is expected to be the one of the most competitive markets and a next generation cash cow once the Korea-U.S. free trade agreement is put into effect, many analysts say.

The government has been trying to boost research activities for the development of innovative drugs combined with world-class clinical skills to produce more than 10 percent growth each year.

Ending the rebate practice should be the first step to enhance the image of Korea in the world market to attract foreign firms to build test and manufacturing lines here and encourage domestic makers, experts say. ``We are expecting a business that could involve 299,000 jobs and 29 trillion won in sales in 10 years. We are not going to let old illegalities spoil it,'' a ministry official said.

The government will also provide tax and other regulatory incentives if pharmaceutical firms join the cleanup campaign in earnest, he added.

bjs@koreatimes.co.kr

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