By Jung Min-ho
Dong Wha Pharm, Korea’s oldest drug manufacturer and more than 900 doctors are implicated in the nation’s largest-ever pharmaceutical kickback scandal.
Prosecutors at the Seoul Western District Prosecutors’ Office said Sunday that they indicted a sales department head at the pharmaceutical company as well as two officials at its PR agency on charges of giving 5 billion won ($4.5 million) to 927 doctors and other officials at 923 hospitals across the country in exchange for prescribing its product to patients.
Of the doctors, 155 who received a large sum of money are facing charges of accepting bribes of between 3 and 30 million won. And prosecutors are looking to investigate three other doctors who are currently overseas.
This is the biggest scandal in the pharmaceutical industry since authorities began conducting crackdowns on such illegal practice in December 2008.
The kickback scandal came to light after the Fair Trade Commission (FTC) reported illegal trades made from January of 2010 to December of 2012, to the prosecution at the end of last year.
“Dong Wha tried to cover up their crimes by pretending that the bribes were just payments for doctors’ services such as participation in surveys and translation,” said a prosecutor.
Dong Wha’s sales department allegedly made a list of “doctors to bribe” and the products it wanted to sell through them. Once their requests were met, its PR agencies wired the money to the doctors’ bank accounts.
In addition to cash, the company allegedly provided the doctors with brand-name wallets, gift vouchers and even a free place to live.
“Considering the company’s annual sales are 80-90 billion won, we believe that the company spent about 5 percent of the sales for bribing doctors, that eventually increased the medical expenses of consumers,” said the prosecutor said.
The prosecution requested the Ministry of Health and Welfare and the Ministry of Drug and Food Safety to suspend the licenses of the hospitals and doctors in question.
In response, the health ministry said it would take administrative action against them, including canceling licenses or imposing fines.
The ministry said it would also cut the maximum price of drug products in question by up to 20 percent as a penalty for the company.
“We will continue to work hard to eradicate the culture of bribery in the pharmaceutical industry, in cooperation with prosecutors,” the health ministry said in a statement.
The practice of giving and receiving kickbacks is deeply embedded in the pharmaceutical industry.
Before it became illegal to bribe doctors in return for selling their products in 2008, some pharmaceutical companies even paid for doctors’ health insurance and overseas training fees as well as their children’s study expenses, according to industry sources.
Experts say it will be difficult to root out the illegal practice with the leniency of the punishment.
Last year, prosecutors found that former and present executives of Dong-A Pharmaceutical offered 4.8 billion won in bribes to 1,400 doctors at hospitals and clinics nationwide.
The appeals court recently sentenced Dong-A’s four officials to a suspended jail term of eight months to two years. Most of the doctors avoided criminal charges.