The Korean Fair Trade Commission (KFTC) has fined 10 pharmaceutical companies a total of US$22.2 million for unlawful kickbacks and pricing schemes to physicians, hospitals and wholesalers that sold their drugs. The fine is the result of an investigation initiated by the KFTC in October 2006 to respond to growing concern over improper incentives in the pharmaceuticals industry. These concerns culminated in a 2005 report by the Korean Independent Commission Against Corruption and Kickbacks, which estimated that between 10 and 15 percent of the cost of drugs used in Korea’s hospitals is attributable to unlawful kickbacks.

The 10 companies fined include Korea-based firms Dong-A Pharmaceutical, Hanmi Pharmaceutical and Yuhan Corp. These companies were found to have given physicians and hospitals incentives including cash, dinners, golf outings and overseas travel to give priority to their products. Certain companies investigated were found to have set wholesaler prices to artificially inflate drug costs. The KFTC estimated that the companies’ acts have cost Korean consumers approximately US$2.4 billion in damages and that incentives worth approximately US$576 million were distributed between January 2003 and September 2006. The KFTC indicated that it shared its findings with the National Insurance Corp., the Ministry of Health and Welfare and the National Tax Service.