Drug Makers Fined $22 Mil. for Illicit Rebates

By Ryu Jin
Staff Reporter

The country’s corporate watchdog said Thursday that it has imposed a combined 19.9 billion won ($22 million) in fines on 10 local pharmaceutical companies for unfair trading practices, including the provision of illegal rebates to hospitals and wholesalers.

The Fair Trade Commission (FTC) said that it also plans to refer five out of the 10 companies that profiteered the most from the unfair trading, soon to prosecutors.

Those involved are Yuhan Corporation, Dong-A Pharmaceutical, BMS Pharmaceutical Korea, Ilsung Pharmaceuticals, Han All Pharmaceuticals, Kukje Pharma, Green Cross, Choongwae Pharma Corporation, Samil Pharm and Hanmi Pharm.

According to the antitrust regulator, they have provided both hospitals and individual doctors with various sweeteners including rebates, contributions and payments of expenses for overseas trips for using their products.

“Rebates and other kickbacks given by the 10 firms amounted to 522.8 billion won,’’ an FTC spokesman said. “It is not a matter that can be sufficiently dealt with by administrative measures such as fines. We have decided an investigation by the prosecution is necessary.’’

Other FTC officials said that in some cases money was given to doctors and hospital staff in the form of so-called “post-market surveillance,’’ while free dinners and special trips were also commonly provided.

Some companies effectively set prices for wholesalers so that prices of certain drugs would not fall below certain levels, according to the commission. It estimated that the illegal practices have caused damage worth about 2.18 trillion won to consumers.

On Monday, FTC Chairman Kwon Oh-seung indicated that his commission could scrutinize major hospitals nationwide in relation to the illegal business practices by the pharmaceutical industry.

Kwon said in a radio interview that it would be “problematic’’ if the hospitals were left untouched at a time when pharmaceutical companies are punished for unfair business practices.

“It could be a problem of institution or policies, or just a scandal. I don’t think that it is a matter to be dealt with simply by fines,’’ he said. “So we are thinking of ways to make the industry more competitive institutionally.’’

The FTC has been investigating 11 domestic pharmaceutical firms, six foreign companies and six wholesalers for about a year since last October. Critics have often suggested that hospitals should also be investigated.

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