I INTRODUCTION

In Korea, pharmaceutical products are generally regulated by the Pharmaceutical Affairs Act (PA Act) and medical devices by the Medical Devices Act (MD Act) in terms of manufacture, importation, distribution and advertising. The pricing of pharmaceutical products and medical devices is governed by the National Health Insurance Act (NHI Act) and other applicable regulations.

The Ministry of Food and Drug Safety (MFDS) is the main administrative authority to enforce the PA Act and the MD Act, while the Ministry of Health and Welfare (MOHW) is authorised to enforce the NHI Act and the selective provisions of the PA Act and the MD Act. Competition issues arising out of the pharmaceutical and medical device sector are regulated by the Korea Fair Trade Commission (KFTC).

II THE REGULATORY REGIME

i Classification

The Supreme Court of Korea (the Supreme Court) has held that all substances recognised by or represented to the public as diagnosing, curing, mitigating, treating or preventing diseases in human beings or animals, or exerting a pharmacological action in human beings or animals (except for those that can be instantly recognised as food products), fall under the category of pharmaceutical products, regardless of whether any such recognition or representation is actually true.

The regulatory regime in Korea adopts the following classification of products in the pharmaceutical and medical device sector.

Pharmaceutical products

The PA Act defines pharmaceutical products as:

  1. products that are not identified as quasi-pharmaceutical products in the substances list issued by the Korean pharmacopoeia;
  2. any substance used for the purposes of diagnosing, curing, mitigating, treating or preventing human or animal diseases; and
  3. any substance (other than instruments, apparatuses or cosmetics) used for the purpose of exerting a pharmacological influence on the structures or functions of human beings or animals.

Quasi-pharmaceutical products

Among the following types of products, only those that are officially designated as such by the MFDS pursuant to the PA Act will be recognised as quasi-pharmaceutical products:

  1. any fibre or rubber products, or similar products that are used for the purpose of curing, mitigating, treating or preventing human or animal diseases;
  2. any products (other than instruments, apparatuses, appliances or other articles) that minimally affect or do not directly act upon the human body; and
  3. germicides, insecticides or any products used for sterilisation, killing or prevention of infectious diseases.

Functional foods

Under the Functional Foods for Health Act, functional foods are defined as manufactured food (including processed food) containing 'functional raw materials or ingredients' that are beneficial for the human body.

Medical devices

Medical devices are defined as instruments, apparatuses, appliances or other articles (excluding pharmaceutical products or quasi-pharmaceutical products) that are used, alone or in combination with other products, to:

  1. diagnose, treat, alleviate, cure or prevent diseases;
  2. diagnose, treat, alleviate or correct injuries or physical disabilities;
  3. examine, replace or modify the structure or the function; or
  4. contraception.

The MD Act is the governing law for medical devices.

Cosmetics

Substances intended to be applied to the skin for cleansing or beautifying, or applied to the skin or hair to maintain or enhance its condition, but that have minimal effects on bodily functions, are classified as cosmetics. Cosmetics are governed by the Cosmetics Act.

Prescription and over-the-counter drugs

Pharmaceutical products are generally categorised into prescription drugs and over-the-counter (OTC) drugs under Korean laws and regulations. Pharmaceutical drugs that meet any of the following criteria are recognised as OTC drugs by the MFDS in consultation with the MOHW:

  1. drugs that are unlikely to be overused or misused, and are expected to be used safely and effectively, even in the absence of a physician's prescription;
  2. drugs that can be used for the purpose of treating a disease without relying on the expertise of physicians or dentists; or
  3. drugs with minimal side effects to the human body from pharmacological action.

All other pharmaceutical products that are not classified as OTC drugs will fall into the category of prescription drugs.

Prescription drugs may be dispensed by a pharmacist only after an assessment of the patient's condition has been made by a doctor or a dentist and the patient has been educated about taking the drug by the pharmacist, whereas the dispensing or use of OTC drugs does not require any of these procedures. Prescription drugs and OTC drugs are also distinguishable in terms of their pricing and reimbursement mechanism.

Prescription and OTC drugs were both previously available in pharmacies only. However, since 15 November 2012, a few OTC products (fewer than 20 product types) that are frequently used and designated by the MOHW have been available at convenience stores registered with the relevant local government as a seller of OTCs, subject to requirements as stipulated by the PA Act.

Controlled substances

Several prescription medicines that are controlled substances, such as narcotics (e.g., poppies, opium or coca leaves), psychotropic drugs and marijuana, are subject to stringent legal regulations owing to the high risk of misuse or illegal sourcing as opposed to other non-narcotic drugs. Before such controlled substances are imported into Korea or exported to a foreign country, the importing or exporting companies must obtain a licence from the MFDS, and the product itself must have a licence, issued by the MFDS. Naturally, the qualifications are stricter for obtaining a licence to import or export controlled substances than for non-controlled drugs. Once controlled substances are imported or exported, details related to the import or export transactions and commercial sales must be reported to the MFDS. Physicians are allowed to administer (or provide for administration) controlled drugs to a human body to treat an illness or an injury. The administering doctors regarding the administrated substances are required separately to keep a record of the following information: name, address, age, gender and disease of the patient; product name and quantity of the drug administered (or provided); and date of prescription.

ii Non-clinical studies

To conduct a non-clinical study, an investigating institution needs to be designated by the MFDS for non-clinical studies to be conducted. For an institution to qualify as a designated investigating institution, it must satisfy certain requirements in terms of personnel, facilities and equipment. All non-clinical studies must comply with MFDS guidelines for good laboratory practice (GLP).

An institution conducting testing on vertebrate animals must be registered with the MFDS as an animal testing facility under the Laboratory Animal Act. The governing legislation for the care of vertebrate animals used for research and testing are the Laboratory Animal Act and the Animal Protection Act.

iii Clinical trials

There are no qualifications imposed on a sponsor (the sponsor often hires a contract research organisation to administer the clinical trial), but the organisation undertaking clinical trials must be a qualified general hospital, a specialised hospital or another institution designated by the MFDS. The institution conducting clinical trials must submit a study protocol, an outline of the methods for recruiting subjects (including advertisements), consent forms to be received from recruited subjects and the data collection forms to its internal institutional review board for review. The clinical trials must be conducted in accordance with the standards under the Enforcement Rules of the PA Act (which is the good clinical practice of Korea) regarding various factors, such as the test methods, qualifications of the testing institution and testing supervisor, safety plan, progress report and preservation of relevant data. To enable the human subjects to give informed consent and to ensure that they do so, the details of the clinical trial, the potential adverse effects on health, and the compensation amount and method must be explained in advance. In 2013, the MFDS first introduced, and has since implemented, the Rules for Compensation of Clinical Trial Victims and Guidelines for Providing Compensation Procedures; these call for setting criteria in these matters, as well as any exceptions, and laying out the process for the application for and assessment of compensation, when regulations for compensating victims of clinical trials are being drawn up by sponsors. The MFDS introduced additional guidelines in 2014, such as the Guidelines for the Operation of the Institutional Review Board, to ensure the safety and efficacy of clinical trials.

iv Named-patient and compassionate-use procedures

As an exception to the rule that requires imported pharmaceutical products or manufactured or imported medical devices to be authorised prior to its manufacture or import, pre-launch use is permitted in the following circumstances, among others:

  1. when the Korean Orphan Drug Centre, a regulatory authority that governs named-patient supply and compassionate use of medicines, directly imports certain products into Korea;
  2. when the MFDS determines that certain products are urgently needed for the treatment of patients or the prevention of epidemic; or
  3. when the MFDS announces that certain products are necessary for self-treatment or self-aid.

v Pre-market clearance

Medicines

General procedures

For medicines manufactured in or imported into Korea, each product must have marketing approval from the Minister of the MFDS (product approval) prior to its commercial distribution. For products manufactured in Korea, a manufacturer with the intent to distribute the manufactured products must obtain approval for the manufacture and sale of the product. For products imported into Korea, an importer must obtain an approval for importation. In its review for product approvals, the MFDS mainly considers whether the requirements of safety, efficacy and quality have been satisfied.

Special procedures for follow-on products

Most generic and certain biosimilar pharmaceutical products are exempt from safety and efficacy evaluations, but data on their biological equivalency must be submitted to the MFDS.

Special procedures for accelerated approval of products for unmet medical needs

For orphan drugs, drugs for the treatment of certain lethal diseases (e.g., AIDS, cancer) or incurable diseases, the MFDS may grant accelerated approval and permit the earlier sale of drugs prior to the submission of certain documents (which can be later submitted post-marketing).

Fees

Fees range from 154,220 won to 6,828,150 won, depending on whether the filing is an application for approval or a report, the safety and efficacy evaluations are required, or the evaluations on data for medical product equivalency tests are required.

Requirements for sponsor location

Product approval must be acquired and held by an entity with an address in Korea.

Requirements for appointment of a local agent

A local agent does not need to be appointed. However, because of the address requirement imposed on a sponsor, it is common practice for manufacturers based outside Korea to appoint and authorise a local entity to acquire and hold a product approval on its behalf.

Medical devices

General procedures

The general procedures for the pre-sale approval of medical devices are similar to those for medicines. However, under the amended MD Act, which became effective in July 2015, for certain medical devices with very low risk (classified as Class I medical devices) or low risk (classified as Class II medical devices), the manufacturer or importer will not be required to obtain product approval for each and every product. Instead, it is sufficient to obtain a simple reporting requirement for Class I medical devices, and a product certification from the Medical Device Information and Technology Assistance Centre for Class II medical devices.

Special procedures for follow-on products

Certain Class II follow-on medical devices are exempt from the submission of data for clinical trials and technical documents (this is concluded based on the fact that similar follow-on medical devices were approved for exemption in at least three occurrences). Most follow-on Class II, III and IV medical devices are exempt from the submission of data for clinical trials. However, data for clinical trials and technical documents must be submitted for Class I medical devices.

Special procedures for accelerated approval of products for unmet medical needs

Certain state-of-the-art and rare and in vitro devices, as determined by the MFDS, are entitled to accelerated approval.

Fees

Fees range from 57,000 won to 1,108,000 won, depending on whether the filing is an application for approval or a report and whether the evaluations on data for clinical trials or technical documents are required.

The requirements for the sponsor's location and the appointment of a local agent are substantially similar as those for medicines.

vi Regulatory incentives

Owing to the recent introduction of the product approval patent linkage system, it is believed that patent protection for original pharmaceutical products in Korea was heightened as a result. In March 2015, the PA Act was amended to prepare the ground to support a link between the drug approval system and the drug patent system. Under the amended system, if a party that has obtained product approval for a new drug wants its information be placed on the patent list, the party must request the MFDS to do so within 30 days of product approval. Thereafter, once a generic manufacturer submits an application for generic drug approval, the generic manufacturer must notify the relevant patent holder with a detailed statement demonstrating that the listed patent is invalid or the generic manufacturer's product does not infringe the patent (this only applies to generic manufacturers that seek product approval for the launching of a product during the term of the listed patent and does not apply to generic manufacturers that intend and indicate that the product will be launched after the listed patent has expired). The patent holder may file a legal action against the generic manufacturer if the patent holder believes that the generic drug infringes its patent. The generic product approval will be put on hold for nine months upon the patent holder's filing of a legal action, which should be submitted within 45 days of the notice from the generic manufacturer.

Under the amended PA Act, the first company to submit an application for a generic drug, and win in a legal action against the patent holder to invalidate the related patent rights, shall be granted an exclusive right to sell the generic product for nine months from the date of the judgment by preventing other competitors of that generic drug from entering the market. The first company will be entitled to recoup the costs it has incurred in legal proceedings through this exclusive right to sell the generic drug for a limited period.

vii Post-approval controls

The product approval holder must appoint at least one person to be responsible for pharmacovigilance or device vigilance (there are no infrastructure requirements required for post-approval controls) to undertake post-marketing surveillance activities, such as post-approval testing and adverse reaction reporting. If any matter that was reported to the MFDS in the product approval process was altered or modified, the product approval holder must apply for an amendment of the product approval (if the product approval holder is replaced during the transfer of ownership of the product approval through a private transaction, an amendment must be made within one month of the date of the replacement of the product approval holder). Product approval will be valid for five years (this validity period took effect on 1 January 2013) and the product approval holder must apply for reissuance of the approval no later than six months prior to the expiry date of the validity period.

viii Manufacturing controls

To engage in the manufacture and distribution of pharmaceutical products or medical devices in Korea, several licences must be obtained in advance. The product must receive a licence called a product approval (see Section II.v). Additionally, the companies that are involved in the stages of the manufacture and distribution of the products should be licensed entities by fulfilling the requirements below.

Medicines

Qualifications for a licence to manufacture

A manufacturer should be equipped with the following:

  1. a manufacturing facility;
  2. a laboratory to control the quality of ingredients, materials and products;
  3. a storage facility for ingredients, materials and products; and
  4. facilities and equipment necessary for maintaining quality and manufacturing products.

In addition, at least one pharmacist or herb pharmacist must be stationed at the manufacturing facility for quality control, subject to certain exceptions.

Good manufacturing practice

Manufacturers must act in compliance with the standards of good manufacturing practice (GMP) to ensure that high-quality products are produced. GMP inspections, including review of documents and on-site investigation, are performed by the MFDS.

The MFDS updated its GMP to be in compliance with the quality standards of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme after becoming a member on 1 July 2014.

Transfer of ownership of manufacturing facilities

In the event that manufacturing facilities are transferred through a merger or business transfer, the transferee takes on the rights and obligations of the transferor (transferring manufacturer). If an administrative sanction has already been imposed on the transferor, the transferee will also be subject to that sanction for one year from the date of the sanction, but if an administrative sanction has not yet been imposed and is pending, the relevant administrative body may seek to impose a sanction against the transferee. The foregoing does not apply, however, if the sanction or violation at the time of the merger or business transfer was unknown to the transferee.

Medical devices

Qualifications for a licence to manufacture

The qualifications are substantially similar to those for medicines, but the person stationed at the manufacturing facility for quality control does not necessarily have to be a pharmacist or a herb pharmacist.

ix Advertising and promotion

Advertisements for pharmaceutical products and medical devices are subject to the regulations enforced by the MFDS and to self-regulation carried out by prior review and approval by the Korea Pharmaceutical Manufacturers Association (KPMA, for medicines) and the Korea Medical Devices Industry Association (KMDIA, for medical devices). In general, advertising materials for pharmaceutical products or medical devices must not contain false or exaggerated information regarding the product's name, manufacturing methods, its effects or results.

x Distributors and wholesalers

The distribution or wholesale of medical products is subject to the following laws and regulations.

Medicines

Qualifications for a licence to distribute or wholesale

To distribute pharmaceutical products, a licence issued by the governor of the municipal government must be obtained.

To qualify as a licensee, the distributor or wholesaler must have a sales facility and a minimum storage space of 165 square metres.2

The licensed distributor or wholesaler must employ a pharmacist at the sales facility for the management of sales activities.

Distribution via the internet

The distribution of medicines via the internet is prohibited.

Others

To prevent unfair trade practices between distributors and healthcare professionals, a distributor or wholesaler is prohibited from, directly or indirectly, selling pharmaceutical products to its affiliates (e.g., an entity or hospital controlling the distributor or wholesaler by possessing 50 per cent or more of its securities, or an executive of the distributor or wholesaler).

Medical devices

Qualifications for a licence to distribute or wholesale

To distribute or lease medical devices, a report must be filed with the municipal government. A licence is not required.

Distribution via the internet

The distribution of medical devices via the internet is permitted.

xi Imports and exports

The authorisations required for the import and export of pharmaceutical products and medical devices to and from Korea are set out in the following table.

Medicines

Medical devices

Import

Export

Import

Export

Licence to conduct import or export business Required* Not required (but subject to the laws of the importing country) Required Not required (but subject to the laws of the importing country)
Product approval for import or export Required Required (but the submission requirement of biological equivalency materials may be exempted) Required Required (but the submission of certain application dossier/GMP materials may be exempted)

* Under the PA Act (effective from 29 September 2015), anyone who intends to engage in the business of importing drugs or quasi-drugs must file a report to the MFDS for the import business, in addition to the product licence for the individual product.

Certain MFDS approvals are required for the import or export of medicines containing ingredients derived from endangered animals or plants pursuant to the Convention on International Trade in Endangered Species of Wild Fauna and Flora.

III PRICING AND REIMBURSEMENT

At the core of the national health system is insurance under the NHI Act. Any Korean citizen with an income must subscribe to national health insurance and make insurance payments based on his or her level of income. A foreign national residing in Korea who meets certain requirements can become a subscriber, a dependant of a subscriber or a beneficiary of national health insurance.

If the insured party contracts a disease, he or she receives insurance proceeds under the NHI Act until full recovery, regardless of the number of payments he or she has made. The funds administered under the NHI Act consist of a government subsidy and premiums received from the insured.

Generally, the price of medical products is not directly restricted or regulated by law, but the reimbursement prices of medical products are strictly regulated if the costs of the products are reimbursed under the NHI Act. Reimbursement ceilings are negotiated by the medical product producer and the National Health Insurance Service (NHIS). Medical product prices are generally set at the reimbursement ceilings as listed and announced by the MOHW.

The insurance proceeds are reimbursed to the medical institutions and pharmacies that provide medical products to insured patients. The medical institutions and pharmacies:

  1. buy medical products from the pharmaceutical companies or medical device companies to treat insured patients;
  2. administer or provide these medical products to insured patients, in exchange for a limited amount paid by the insured patient under the NHI Act; and
  3. subsequently receive reimbursements in the form of insurance proceeds from the NHIS within the limit set under the NHI Act.

IV ADMINISTRATIVE AND JUDICIAL REMEDIES

i Enforcement

The MFDS has the authority to enforce the PA Act and the MD Act, while the MOHW oversees and enforces the PA Act, the MD Act and the NHI Act. The MFDS, the MOHW and the governors of the municipal government have the authority over medical institutions or pharmacies, manufacturers, importers and distributors to order the submission of documents and other necessary information, and to investigate, interrogate personnel or staff and collect necessary items from their places of business, when there are activities or signs that trigger any suspicion of violations of the relevant regulations. The MFDS is authorised to impose the following sanctions in the event of a violation:

  1. issue a corrective order to the offending party or parties to immediately cease all prohibited activities;
  2. order the disposal or recovery of medical products that are a part of the violation;
  3. order the implementation of a recall campaign;
  4. suspend operation of the business or cancel a licence or product approval; or
  5. impose an administrative fine.

The MFDS is required to refer cases of serious violations to the prosecutors for indictment, criminal investigation and imprisonment or fining of the offending party (in such cases, the offending party's company may also be subject to a fine).

ii Administrative and judicial remedies

A decision rendered by healthcare authorities can be appealed through an administrative appeal or administrative litigation.

According to the Administrative Appeals Act, the administrative appeal system allows parties whose legal rights or interests were infringed or who have experienced any injustice by government administrative agencies (i.e., disposition or non-feasance) to file appeals. The objective of the administrative appeal system is to enable the government agencies to self-manage the appeals in an efficient and expeditious manner without having to go through the longer process of administrative litigation. Decisions made in administrative appeals can be appealed again by filing a lawsuit in the administrative court. However, it is not a precondition to have filed an administrative appeal prior to filing an administrative litigation. In cases of infringement of legal rights or interests caused by the illegal actions of administrative agencies, disputes may be settled through administrative litigations directly.

V FINANCIAL RELATIONSHIPS WITH PRESCRIBERS AND PAYERS

The PA Act, the MD Act and the Medical Service Act, which were amended and became effective on 28 November 2010, prohibit and criminally penalise the givers as well as the takers of economic benefits for the purpose of promoting sales (i.e., illegal rebates). Medicines involved in illegal rebates are subject to the 'two-strike out rule' (effective from 2 July 2014), under which a heavier sanction, such as suspension of insurance payments, will be imposed. Punishments are more severe for repeat offenders. For instance, the maximum administrative sanction for a first-time violation is a 12-month suspension of insurance payments, but a second-time offender may be permanently barred from receiving insurance payments for the medicine it deals in, if the amount of the illegal rebates provided in relation to the medicine is 100 million won or more. A third-time offender would be subject to the same sanction regardless of the amount of the illegal rebates provided.

Although the Enforcement Decree for these healthcare laws provides 'safe harbour provisions' outlining promotional activities that are exempt from the general prohibition of rebates, the MOHW and the Prosecutor's Office tend to interpret and enforce the new regulations strictly. In practice, however, voluntary industry codes adopted by industry associations governing promotional activities in the pharmaceutical and medical device sector are often relied on by the authorities in the enforcement of healthcare laws with respect to promotional activities. The KPMA, the Korea Research-Based Pharmaceutical Industry Association (KRPIA) and the KMDIA, which are the NGOs and trade associations in the pharmaceutical and medical device sector, have revised their respective voluntary codes reflecting recent amendments to the PA Act, the MD Act and the Medical Service Act. The KPMA Code, the KRPIA Code and the KMDIA Code (the Codes) are substantively similar and have become the benchmark codes for all companies in the relevant sectors. If the healthcare laws are silent on a particular issue, the MOHW or the Prosecutor's Office will refer to and follow the rule under the Codes. In other words, it is likely that compliance with the Codes will to some extent determine the legality of conduct.

Further, Korean fair trade laws prohibit private commercial interests from influencing and interfering with physicians' discretion and professional judgement based on the perception that this conduct unavoidably results in the unfair solicitation of customers away from competitors. The KFTC has in the past reviewed and approved the Codes, and although the Codes are not legally binding, they are considered good practice models, which can fill in the gaps on issues where the fair trade laws are silent. If the fair trade laws are silent on a particular subject, the KFTC will refer to the applicable rules of the Codes in determining healthcare violations in acts related to that subject.

The PA Act and the MD Act have been further amended (effective from 28 June 2017) and now impose on manufacturers, importers, wholesalers and distributors of pharmaceutical products or medical devices the obligation to keep records of any economic benefit provided to healthcare professionals. These records must be prepared within three months of the end of each fiscal year and must be maintained (with their supporting materials) for five years. These 'expense reports' must be submitted to the MOHW upon the regulator's request.

VI SPECIAL LIABILITY OR COMPENSATION SYSTEMS

Claims for compensation by persons injured by defective medicine or medical devices can be made based on the Product Liability Act. Prior to the enactment of the Product Liability Act on 12 January 2000, claims for damages from defective pharmaceutical products and medical devices were solely based on general tort or contract principles, in which liability is predicated on negligence. As a result, the burden to prove the existence of the defect and the injury, the causation of the defect and the injury, and the intentional misconduct or negligence on the part of the manufacturer, were all borne by the claimant. Furthermore, since claims based on a breach of contract can be made only when a contractual relationship exists between the parties, consumers and patients were generally barred from bringing claims against manufacturers or importers because of the lack of contractual relationship. However, the Product Liability Act imposes strict liability on the manufacturers and importers of defective products, which lifts the burden of proving the manufacturer's intentional misconduct or negligence from the injured party. Moreover, Korean courts tend to further relieve the burden of proving the defect of the product and the injury-defect causation in product liability cases considering the difficulties customers typically face in establishing the existence of a product defect or the causation between the defect and the injury; and the fact that product manufacturers are in a better position than customers to have extensive knowledge about the product.

The Product Liability Act is also distinguished from the general principles of contract in that the plaintiff does not necessarily have to be in privity to a contract to file a claim. Product liability claims can be brought against manufacturers, which include persons engaged in the business of manufacturing, processing or importing a product, and persons who represent or misrepresent themselves to be those engaged in this business by putting their name, trade name, trademark or any other identification on a product. The PA Act (effective from 19 December 2014) was amended to enable the MFDS to impose charges against manufacturers, product approval holders and importers of pharmaceutical products dealing with certain medicines for potential adverse drug events (ADEs), to raise funds as compensation for victims of ADEs.

VII TRANSACTIONAL AND COMPETITION ISSUES

i Competition law

During an investigation in 2011, the KFTC found that a multinational originator and a domestic generic manufacturer had been working in collusion to induce generic entry delay by agreeing on a pay-for-delay settlement during a patent dispute. The KFTC reviewed the pay-for-delay settlement agreement, applying the legal theory of cartels, and determined that the arrangement was a market allocation arrangement (i.e., withholding generic entry from the relevant market and, thus, allocating the entire relevant market to the originator) and an arrangement interfering with the business activities of another company. The defendants appealed the case to the Supreme Court, but the Supreme Court upheld the KFTC's view that a pay-for-delay settlement potentially constituted a violation of competition laws.

This case may be an indication that the KFTC may be leaning towards applying higher scrutiny to collusive behaviour in the pharmaceutical sector in the future. Accordingly, if parties enter into a settlement agreement of a patent dispute that is likely to cause undue delay to one of the parties in the entry of a market, and thereby impair competition in the relevant market, that agreement is likely to be viewed as a violation of competition laws. The KFTC has recently commenced an investigation into pay-for-delay arrangements in the pharmaceutical sector.

Furthermore, the KFTC has been investigating (illegal) rebates in the medical device sector, which has resulted in its probe into nine companies (including KMDIA) in 2013 alone. However, it appears that there is no other result from these investigations except minor dispositions (i.e., corrective orders) for two companies as a result of the provision of small amounts of rebate to healthcare professionals.

ii Transactional issues

In May 2014, the KFTC abolished its Guideline on Fair Trade Practices in the Pharmaceutical Sector, as it determined that there were other existing guidelines that were sufficient for the purpose of regulating unfair trade practices in the pharmaceutical sector.

VIII ANTI-CORRUPTION LAW

The Prohibition of Improper Solicitation and Receipt of Money or Valuables, more commonly known as the Kim Young-Ran Act, became effective on 28 September 2016. This Act prohibits improper solicitation, and provision and receipt of money or valuables between any person and public officials. Accordingly, this Act will apply to all healthcare professionals:

  1. of national and public university hospitals;
  2. who hold faculty positions at private university hospitals; and
  3. who are members of committees advising the government.

Under the Kim Young-Ran Act, public officials shall not receive, request or be promised any money or valuables worth more than 1 million won at a time or more than 3 million won during a fiscal year from one person, regardless of whether the money or valuables are related to their duties or not. No money or valuables, even if worth less than 1 million won, should be provided or received if they are provided or received in relation to their duties. Certain exceptions are set out by the presidential decree to the Kim Young-Ran Act.

IX CURRENT DEVELOPMENTS

As mentioned previously, healthcare professionals who receive illegal rebates are subject to sanctions. Until April 2013, the MOHW only imposed administrative sanctions (e.g., suspension of a licence) on healthcare professionals who received economic benefits worth 3 million won or more; however, the MOHW has been implementing stronger enforcement since May 2013 by imposing sanctions on healthcare professionals regardless of the amount of the economic benefits received.

The MOHW is also seeking to expand insurance cover for orphan drugs to ease patients' accessibility to such drugs. The MOHW plans to permit insurance payments even in the absence of the efficiency studies that are required for insurance cover, citing the difficulty of conducting such studies because of a limited number of patients. The MOHW will make references to practices in France, Germany, Italy, Japan, Switzerland, the United Kingdom and the United States, and in lieu of the studies when permitting insurance payments in respect of orphan drugs.

The PA Act and the MD Act will be further amended, effective from June 2017. The amended Acts will enforce tracking responsibilities on manufacturers and importers of pharmaceutical products or medical devices, and an obligation to keep records of any economic benefit provided to healthcare professionals. These records must be prepared within three months of the end of every fiscal year and maintained (with their supporting materials) for five years. These reports must be submitted to the MOHW upon the MOHW's request.

Under the newly amended PA Act, manufacturers and importers of pharmaceutical products or quasi-drug products must list each and every ingredient of the product on its package. This requirement is applicable to any product newly manufactured or imported after 3 December 2017.

Under the newly amended MD Act, manufacturers, importers and distributors of medical devices must submit details of their product supply to the MFDS. The effective date for this obligation will be set out in the Enforcement Rule of the MD Act, which has not yet been announced.


Footnotes

1 Jung Min Jo is a partner at Bae, Kim & Lee LLC.

2 However, the minimum space requirement for storage of imported pharmaceutical products, reagents or active ingredients is lower, at 66 square metres. Storage of traditional herbal pharmaceutical products, high-pressure medical gas or radioactive pharmaceutical products is not subject to a minimum space requirement.