Old habits die hard. The latest kickback scandal involving the country’s oldest pharmaceutical company and hundreds of medical doctors demonstrates that even strict laws can fail to prevent wrongdoings if the perpetrators enjoy a history of benefiting from the illegal activities and if they believe they will not be caught.
DongWha Pharmacy, the country’s first pharmaceutical company founded in 1897, is suspected of having provided rebates worth more than 5 billion won to 923 hospitals and clinics around the country between January 2010 and December 2012. The doctors are said to have received payments in cash, gift certificates and high-end wallets for prescribing DongWha Pharmacy products. One doctor was paid in the form of rent for his studio apartment for eight months, totaling 4 million won.
The prosecutors have indicted a DongWha Pharmacy official in charge of sales as well as heads of the advertising agencies involved in the elaborate scheme. Also indicted are 155 doctors who received 3 million to 30 million won in cash.
The practice of pharmaceutical companies providing financial rewards to doctors who prescribe their products apparently evolved to hoodwink the authorities, their tactics growing in sophistication as increasingly stringent laws were enacted against it.
According to the prosecutors, the pharmaceutical company handed over to advertising agencies the list of doctors who were to be given kickbacks as well as the money. The advertising agencies, in turn, paid the doctors for having responded to surveys and for translation works.
The Fair Trade Commission, in December 2013, had fined DongWha Pharmacy’s 900 million won for providing kickbacks. In fact, the prosecutors say, the company continued to pay rebates even as it was under investigation by the corporate watchdog.
The latest scandal is the largest of its kind since the law against illegal rebate for pharmaceutical products went into effect at the end of 2008. According to the prosecutors, the company spent about 5 percent of its total annual sales of 80 billion to 90 billion won in illegal kickbacks to the doctors.
The money that is offered in rebates is borne by the patients and the National Health Insurance Service. The authorities should punish the offenders ― both the pharmaceutical companies and the doctors ― to the fullest extent of the law. Such kickbacks may have been customary in the past, but they are clearly illegal now. Both the givers and the receivers should realize that they are violating the law and make a clean break from old customs that break the rules of the market and ultimately hurt both.
