Why Daewoong Pharm files so many lawsuits?

Prosecutor-turned-chairman prefers taking legal action

By Park Jae-hyuk

Daewoong Pharmaceutical has recently been in the spotlight for its involvement in various lawsuits, amid a growing number of legal disputes among Korean drug makers over their shares in the small domestic market.

The country’s third-largest pharmaceutical company has been embroiled in legal battles with not only its rivals, including Chong Kun Dang Pharmaceutical, Korea United Pharmaceutical and Medytox, but also regulatory bodies, such as the Ministry of Food and Drug Safety.

The company said Thursday that its subsidiary, Daewoong Bio, has filed an administrative litigation against the ministry’s designation of Chong Kun Dang’s Gliatilin as a comparator of choline alfoscerate, an agent launched by a multinational company, Italfarmaco that is used to moderate Alzheimer’s dementia. A comparator is a drug used as a standard for comparison with a placebo.

The right to produce the agent in Korea was given from Daewoong to Chong Kun Dang last year. Before the handover, Daewoong launched a generic choline alfoscerate named Gliatamin, making it the No. 1 product in the market.

Daewoong claimed one of the ministry’s criteria for designating comparators is illegal, saying multinational drug makers have excessive control over the designation, by signing contracts with different Korean companies after their previous deals expire.

In addition to the case, Daewoong filed a lawsuit against Korea United, claiming the latter’s digestive medicine, Gastiin CR Tab, infringed on its patents, but the Intellectual Property Trial and Appeal Board ruled in favor of the latter last month.

The medicine is an improved version of Gasmotin, the original medicine made by Japan’s Dainippon Sumitomo Pharma. Daewoong, which imported Gasmotin to Korea, tried to develop a new drug, after its patent expired in 2011. The company stopped developing the drug because of marketability, but obtained various patents during the process.

When Korea United launched the new drug a few years later, Daewoong sued the company for alleged infringement. The two firms are still embroiled in civil action over the issue.

Daewoong is also in a legal battle against Medytox over its botulinum toxin strain. Medytox, the nation’s largest botulinum toxin producer, filed a lawsuit against Daewoong, alleging it stole the strain and manufacturing know-how in developing Nabota, Daewoong’s botulinum toxin that is set to debut on the U.S. market.

Daewoong’s multiple lawsuits have been attributed to Chairman Yoon Jae-seung’s preference for legal action.

Penny wise and pound foolish?

Yoon, a son of Daewoong founder Yoon Young-hwan, previously served as a prosecutor, after graduating from Seoul National University in 1985 and passing the bar exam in 1984. The chairman has worked for the company since 1995.

According to industry officials, the company is known as a pharmaceutical firm specializing in lawsuits and taking advantage of loopholes in the law. After the chairman took control of the company, Daewoong has intensified its strategy to actively take legal action. Also, the company reportedly beefed up its in-house legal department.

However, Daewoong employees apparently do not welcome the chairman’s aggressive management policies. Its salespeople have complained of their performance-based salary and a large number of executives have moved to rival companies, since the chairman’s inauguration.