[SME Regulation Site①] "Hiring More Staff Just to Attach Stickers?"... Unrealistic Medical Device Supply Reports

[Planning] Visiting the Regulatory Sites of SMEs
Costs Incurred to Create and Attach Unique Identification Codes, Entering Tens of Thousands of Product Details Manually is a Challenge
"Livelihoods at Risk... Concerns Over Mass Bankruptcies of Small Businesses and Setbacks in the Domestic Medical Device Industry"

Last month’s 'Small and Medium Enterprise Regulatory Reform Grand Debate' held at the Korea Federation of SMEs served as an opportunity to fully reveal the realities faced by our small and medium enterprises. It also reconfirmed the numerous regulations disconnected from the field. Referring to the 484-page 'Regulatory Reform Task Book' submitted by the Federation of SMEs to Prime Minister Han Duck-soo, we met with SME business owners. We hope this will be an opportunity for the government to respond to the desperate cries of entrepreneurs who say, "Isn't a single line in the enforcement decree or enforcement rule something the government can change anytime it wants?" [Editor’s Note]

Shin Dong-jin, President of the Korea Medical Device Distribution Association, expressing concerns about the inclusion of low-risk or nearly risk-free Class 1 and 2 items in the 'Medical Device Supply Details Reporting System.'

[Asia Economy Reporter Kim Jong-hwa] Between Jongno 3-ga and 6-ga, there are about 80 medical device retailers clustered together. Over 90% of these businesses are small-scale operations run by individuals, couples, or families, with monthly sales under 10 million KRW. Their net profit is around 2 to 3 million KRW per month, barely managing to make a living with 1 to 2 million KRW left after paying rent.

About 90% of domestic medical device distribution companies are similarly small-scale or slightly better, like those in Jongno. The Korea Medical Device Distribution Association has registered approximately 69,000 medical device distribution companies. Around 7,000 companies directly manufacture or import medical devices, while the remaining 62,000 are small-scale manufacturers, sellers, or rental companies mostly operated by individuals, couples, or families.

These small businesses are now facing a crisis. Since the Ministry of Food and Drug Safety (MFDS) implemented the 'Medical Device Supply Details Reporting System' in 2020, they must report the attachment of 'Unique Device Identification (UDI)' codes and sales prices for each product. The Medical Device Supply Details Reporting System mandates that every movement and supply of medical devices?from manufacturers and importers to distributors, agents, wholesalers, retailers, and medical institutions?must be reported to the MFDS.

The problem arises from the sheer number of products subject to UDI attachment and reporting. Reporting started with Class 4 devices in July 2020, and each year, one class has been added: Class 3 in 2021, Class 2 this year, and Class 1 next year. Class 4 includes 256 items such as pacemakers, which are highly hazardous medical devices; Class 3 includes 338 items like artificial joints and implants with potential hazards. Class 2, with lower potential hazards, includes 1,036 items such as thermometers and blood pressure monitors for general household use. Class 1, with almost no potential hazard, includes 588 items such as bandages, abdominal belts, and knee support bands.

The medical device industry argues that Class 1 and 2 devices, which have low or almost no hazard and can be easily purchased at pharmacies or convenience stores, should be excluded from the supply details reporting requirement. Small businesses mainly handle Class 1 and 2 devices, which total only 1,624 items, but each item comes in small and large sizes and various types depending on use and characteristics, resulting in at least 12,000 different products requiring UDI attachment and reporting. Each product requires a 30 KRW sticker to be attached, and every sale requires inputting supplier information, client, item, model name, supply date and time, quantity, price, and UDI number.

An employee is entering product information at a medical device distribution company in Jongno.
Photo by Kim Jonghwa.

Moreover, standardization of information across medical devices is insufficient. Even products of the same item circulating in the market have different UDIs, names, specifications, and units, causing frequent errors and confusion during reporting. The industry claims that without prior standardization of product information, reporting and aggregation cannot be accurate.

Shin Dong-jin, President of the Korea Medical Device Distribution Association, said, "To attach UDI stickers to numerous products and input various information into the system, additional personnel must inevitably be hired," expressing concern that "this could lead to the bankruptcy of small operators barely making a living and price increases, causing a regression in the domestic medical device industry."

Contrary to the MFDS’s intention to prevent irregularities such as reuse of medical devices by receiving supply details at each distribution stage, the reality is that small operators are being pushed into crisis. While drawing the big picture, the government failed to properly understand the reality of the medical device industry, which is run by couples or families earning less than 2 million KRW per month.

President Shin emphasized, "If public hearings had been held to gather voices from the field before the system was introduced, this disaster could have been avoided. Class 1 and 2 devices with no harmfulness should be excluded from reporting, and exceptions should be made for essential items. If the government sets its mind to it, changing a single line in the enforcement rules is not difficult." Regarding this, an MFDS official said, "We are carefully reviewing the supply details reporting system and will strive for reasonable amendments."