Ministry of Health and Welfare Imposes Fine and Salary Suspension on Dong-A ST Five Days After Suspension Withdrawal... "Legal Action Against Unreasonable Measures"

[Asia Economy Reporter Lee Gwan-joo] It has been confirmed that the Ministry of Health and Welfare notified Dong-A ST of a fine in the hundreds of billions of won and suspension of insurance benefits following the price reduction measure related to Dong-A ST's violation of the Pharmaceutical Affairs Act due to rebates. Dong-A ST plans to take immediate legal action.

On the 4th, Dong-A ST announced through a public disclosure that it received a notification from the Ministry of Health and Welfare of a fine of 10.82763 billion won and a one-month suspension of insurance benefit application for 72 prescription drug items. The deadline for paying the fine is April 30 of next year, and the suspension period is for the month of August.

Earlier, on the 29th of last month, the Ministry held the 10th Health Insurance Policy Deliberation Committee (건정심) and implemented a drug price reduction measure for Dong-A ST's drugs violating the Pharmaceutical Affairs Act due to rebates. However, at that time, the committee conveyed to the Ministry that "the suspension of benefits and fine items should be examined more closely before implementation," so suspension and fine measures were not taken then.

However, just five days after the committee meeting, when the fine and suspension notifications were issued, Dong-A ST appeared to be taken aback. A Dong-A ST official said, "We consider this administrative measure unreasonable and plan to file for a provisional injunction to suspend execution and proceed with an administrative lawsuit."

The controversy over the suspension and fine items arises because the timing of the rebate detection and the current penalty regulations differ. This measure against Dong-A ST is due to providing rebates amounting to about 5.47 billion won to promote sales of 162 items from August 2009 to March 2017.

The penalty system implemented from 2014 to 2018 is known as the 'Rebate Two-Out System.' If the detected rebate amount exceeds 5 million won, even a first violation results in a one-month suspension of benefits. If the amount exceeds 100 million won, the suspension can last up to 12 months, and upon a second detection, permanent exclusion from benefits can be imposed.

However, criticism arose that the system did not consider practical realities during its implementation, and eventually, from 2018, rebate sanctions were replaced by a mixed system of drug price reduction, benefit suspension, and fines. Even if the rebate amount exceeds 100 million won, a 20% price reduction is applied for the first detection, 40% for the second, and only upon the third detection is benefit suspension enforced. Cases of three consecutive rebate detections are extremely rare, and even then, fines can substitute for suspension, leading to an evaluation that benefit suspension has effectively become obsolete.