Regulation of Pharmaceutical Industry Interactions with Health Care Professionals

Abstract

In October 2006, the Korean Fair Trade Commission (“KFTC”), the country’s antitrust and fair trade authority, began an investigation into illicit practices in the pharmaceutical industry. The investigation was unprecedented in terms of the number of companies investigated and found guilty (17 and counting), the scope of activities and volume of evidence reviewed, and the amount of fines ultimately imposed (no company that was investigated escaped fines, for a cumulative total of approximately USD 35 million) for violations consisting mostly of illicit benefits provided by companies to healthcare professionals or medical institutions, which the KFTC found to be “unfair customer solicitation” prohibited under the country’s fair trade laws. In the aftermath of KFTC’s successful enforcement actions, other governmental agencies jumped on the anti-kickback bandwagon. The framework of regulations which hitherto governed (or had failed to govern) kickbacks and other illicit benefits provided by industry to healthcare professionals was overhauled. The Korea Food and Drug Administration acquired powers to go after givers and takers of kickbacks related to the promotion of drugs, the Ministry of Health and Welfare could now unilaterally reduce, by up to 20%, the reimbursement price of any drug for which kickbacks or other illicit benefits were found to have been provided. For the first time, police and prosecutors acquired express statutory grounds to investigate and prosecute doctors who received benefits intended to influence their drug prescription decisions. Under increasing pressure from all sides to root out corrupt practices, the pharmaceutical industry trade associations undertook to overhaul their voluntary marketing guidelines, to show the world that they were serious about their efforts. The new guidelines were very broad in the scope of activities they covered and draconian in the monetary ceilings they adopted as well as the procedural requirements they imposed on member companies who wish to undertake any of these activities. As a result, these guidelines threaten to burden companies excessively without corresponding benefits in increasing transparency and eliminating corrupt practices, with negative effects on the industry overall.