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DongSung Pharmaceutical (Photo courtesy of DongSung Pharmaceutical). |
[Alpha Biz= Kim Jisun] DongSung Pharmaceutical has been found by the antitrust regulator to have provided rebates to medical professionals at four hospitals and clinics in the Seoul metropolitan area over a period of more than nine years in exchange for prescriptions of its pharmaceutical products.
The Korea Fair Trade Commission (KFTC) said on Tuesday that it has issued a corrective order, including a cease-and-desist directive, against DongSung Pharmaceutical for providing cash payments to the four medical institutions as consideration for prescribing its drugs.
According to the KFTC, DongSung Pharmaceutical provided approximately 2.5 billion won ($1.8 million) in cash-equivalent rebates between October 2010 and April 2019 to expand prescriptions of its products.
From October 2010 to June 2014, the company used its affiliate, DongSung Biopharm, to channel the rebates. Sales representatives at DongSung Biopharm submitted monthly prescription data from each medical institution to DongSung Pharmaceutical’s sales management division, which then aggregated the data and purchased gift certificates in amounts proportional to prescription volumes. The gift certificates were transferred to DongSung Biopharm, where sales staff converted them into cash and delivered the funds to the medical institutions.
From July 2014, DongSung Pharmaceutical fully outsourced its prescription drug sales to third-party sales agencies. Under this arrangement, the company paid commissions that included rebate costs, and the sales agencies used these funds to provide cash payments to medical institutions in amounts linked to a fixed percentage of prescription performance. Although the payment structure changed, the provision of economic benefits continued until April 2019.
The KFTC determined that the conduct constituted the provision of improper economic benefits inconsistent with normal commercial practices. The regulator said the rebates amounted to an “unfair customer inducement,” as they encouraged physicians to prescribe specific products, undermined fair competition in the pharmaceutical market, and ultimately caused significant harm to consumer interests.
The KFTC imposed corrective measures on DongSung Pharmaceutical. However, it fully waived administrative fines, taking into account that the company was undergoing court-led rehabilitation proceedings as of the date of the decision.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
