The Korean Ministry of Health plans a major crackdown on rebates in the pharmaceutical industry. Rebates are essentially bribes — expensive meals, lavish parties, or rounds of golf — that pharmaceutical companies provide to doctors and hospitals who prescribe and purchase their drugs. Rebates are considered a major cause of high drug prices, a lack of competitiveness in the pharmaceutical industry, and unnecessary or ineffective prescriptions.
The practice of providing rebates is widespread among both domestic and foreign pharmaceutical companies in Korea. The Korea Health Industry Development Institute reported that pharmaceutical companies spend billions annually on rebates, with some companies spending over 50% of their yearly revenues on rebates alone.
On June 11, 2009, the Ministry of Health Sponsored a seminar titled “Towards Ethical Business Practices in the Pharmaceutical Sector.” At the seminar, Minister Jeon Jae-hee vowed to stop all pharmaceutical rebates in an effort to improve transparency and lower drug prices. Rebates are already illegal, but due to vague definitions and poor enforcement they remain prevalent. The Ministry of Health plans to release specific definitions and regulations on rebates in July 2009. It is expected that punishments for both the pharmaceutical companies offering rebates and the doctors who accept them will increase dramatically.
In some cases, the Ministry of Health has already begun cracking down on such practices. GlaxoSmithKline, Lilly, Pfizer, and other major pharmaceutical companies have already been fined approximately $15 million for providing rebates. Despite these fines, Korean pharmaceutical companies have accused the Ministry of Health of leniency toward foreign companies. That also is expected to change.