Dong-A ST Takes a Breather... Injunction Granted to Suspend Drug Price Reduction Enforcement

Suspension of Salary Injunction, Main Lawsuit Remain Pending

[Asia Economy Reporter Lee Gwan-joo] Dong-A ST has temporarily put out the urgent fire as the court accepted its provisional injunction request to suspend the enforcement of the price reduction order issued by the Ministry of Health and Welfare. Since there is still a pending injunction request against the suspension of reimbursement and the main lawsuit is expected to begin in earnest, legal battles are anticipated to continue for the time being.

According to the pharmaceutical industry on the 18th, the Seoul Administrative Court accepted Dong-A ST's provisional injunction request to suspend the enforcement of the price reduction administrative order on the 16th. Dong-A ST plans to engage in similar legal battles regarding the suspension of reimbursement order. The decision on whether to accept the injunction for suspension of reimbursement is expected on the 2nd of next month.

The Ministry of Health and Welfare held the Health Insurance Policy Deliberation Committee on the 29th of last month and decided to reduce the prices of 122 items related to Dong-A ST's violation of the Pharmaceutical Affairs Act due to rebates. Subsequently, on the 4th of this month, it imposed a fine of 10,827,630,000 KRW and a one-month suspension of reimbursement for 72 prescription drug items. The deadline for paying the fine is April 30th of next year, and the suspension period for reimbursement is for the entire month of August. However, since the provisional injunction for the price reduction was accepted by the court, the suspension of enforcement will be maintained until 30 days after the first trial decision of the main lawsuit. In the case of suspension of reimbursement, the effect is temporarily suspended until the injunction acceptance is decided.

This administrative disposition against Dong-A ST is due to providing rebates amounting to approximately 5.47 billion KRW to promote sales of 162 items from August 2009 to March 2017. The penalty system implemented from 2014 to 2018 was the so-called ‘Rebate Two-Out System.’ If the detected rebate amount exceeded 5 million KRW, even the first violation would result in a one-month suspension of reimbursement. If the amount exceeded 100 million KRW, the suspension could last up to 12 months, and upon a second detection, permanent exclusion from reimbursement could be imposed.

However, during the actual implementation of the system, criticism arose that the suspension of reimbursement imposed a burden on patients and failed to consider reality. Consequently, from September 2018, the rebate sanctions were replaced by a mixed system of price reduction, suspension of reimbursement, and fines. Even if the rebate amount exceeds 100 million KRW, a 20% price reduction is applied for the first detection, 40% for the second, and only upon the third detection is reimbursement suspension enforced. Cases of three consecutive rebate detections are extremely rare, and even then, fines can substitute for suspension, so suspension of reimbursement is considered practically obsolete. A Dong-A ST official said, "We do not deny the violation," adding, "We judged this administrative disposition to be unreasonable and therefore filed the provisional injunction and administrative lawsuit."