Posted : 2013-01-10 17:33
Updated : 2013-01-10 17:33

Dong-A Pharm accused of kickbacks to doctors

Prosecutors of a joint investigation team load documents seized from the headquarters of the Donga-A Pharmaceutical into a car in Dongdaemun-gu, Seoul, Thursday. The pharmaceutical company was searched after it was found to have given huge kickbacks to hospitals and clinics in return for using their products. The prosecution indicted the company under charges of violating the fair trade law. / Yonhap

By Yun Suh-young

Seven former and incumbent executives of Dong-A Pharmaceutical were indicted Thursday for providing 4.8 billion won in kickbacks to hospitals and clinics.

The prosecution said it found the nation's top pharmaceutical company gave the kickbacks to 1,400 hospitals and clinics across the nation in return for using their products.

It indicted two Dong-A vice presidents with physical detention for violating the fair trade law, while five former executives were indicted without detention.

It also arrested and indicted the chiefs of four agency firms working for Dong-A for helping the latter offer kickbacks to the hospitals and clinics.

This is the first case of its kind involving such a huge sum of money for illegal transaction between pharmaceutical companies and hospitals since 2010 when the law on punishing pharmaceutical companies and hospitals providing and receiving kickbacks was passed.

The collective investigation team was launched in 2011 to halt the illegal practice of kickbacks, otherwise called "rebates" as an industrial term. Officials from seven government departments apart from the prosecution ― including the Ministry of Health and Welfare, the National Police Agency, the Korea Food and Drug Administration, National Tax Service, National Health Insurance Corporation, and the Health Insurance Review & Assessment Service ― are part of the investigation team.

"This case shows that the pharmaceutical and medical industries are still not free from the practice of providing and receiving kickbacks. Even the leading pharmaceutical company which should serve as an example has disappointed the industry," said an officer from the investigation team.

"The team will continue to conduct thorough investigation on kickbacks to root out the illegal practice."

Dong-A Pharmaceutical used crafty methods to evade regulation.

It provided goods and services to the hospitals instead of providing money by cash or card like many pharmaceutical companies did in the past.

The goods included 11 million won worth of luxury watches and 16 million won worth audio of equipment. The company also paid language study fees for the children of hospital directors or paid for their family trips abroad.

In terms of service, the company paid for the hospital's interior renovation through an agency or created the Internet webpage of the hospitals for free.

The illegal practice seems difficult to eradicate.

According to the Fair Trade Commission, in 2011, Sanofi-Aventis Korea was found to have paid 18.6 billion won in illegal rebates from 2006 to 2010, followed by Janssen Korea with 15.4 billion won and PacificPharma Corp. with 15.2 billion won. Pharmaceutical companies were ordered to pay 14.3 billion won in fines only in 2011 for offering nearly 97 billion won in illegal rebates to over 8,000 doctors and pharmacists from 2006 to 2010.

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