Provision of Gift Certificates and Appliances Worth 13 Million Won
to a Gwangju Hospital Between 2015 and 2019
The Korea Fair Trade Commission has once again drawn its sword against the entrenched rebate practices that have long plagued the pharmaceutical market. Gukje Yakpum has been caught providing money and favors to a hospital in order to increase prescriptions of its own drugs, and will be subject to a corrective order and a surcharge.
On the 18th, the Korea Fair Trade Commission announced that it had decided to impose a corrective order and a surcharge of 3 million won on Gukje Yakpum Co., Ltd. for providing unjust economic benefits worth approximately 13 million won in total, on seven separate occasions between 2015 and 2019, to a hospital in Gwangju for the purpose of promoting sales and maintaining transactions of its own pharmaceuticals.
Gukje Yakpum's rebate scheme was both routine and elaborate. During the hospital year-end party season, it directly handed over department store gift certificates worth about 8 million won, or paid on behalf of the hospital for small home appliances such as rice cookers and blenders worth about 2 million won and had them delivered. In particular, it even won favor by covering the rental fee, worth about 3 million won, for a "Movie Day" group screening event for hospital staff. These rebate details were carried out so systematically that they were fully recorded and managed in the hospital planning office's internal ledger.
The "black money" used to provide these unjust benefits was created through accounting manipulation. Gukje Yakpum paid activity expenses to its sales representatives in proportion to the prescription performance of the target hospital. To raise cash, the sales representatives inflated their travel expense claims or used corporate cards for fictitious payments and then received cash refunds, a method commonly known as "corporate card cashing," thereby creating rebate funds of unknown origin.
The Korea Fair Trade Commission defined these practices as "unfair customer inducement," which distorts the choice of pharmaceuticals based on the size of the rebate rather than on price or quality. It determined that this significantly harms consumer interests, for example by preventing patients, the final consumers, from being prescribed the drugs that are most suitable for them.
The Korea Fair Trade Commission stated, "We will continue to monitor rebate practices in order to establish a fair trading order in the pharmaceutical market," adding, "We expect that this sanction will help create an environment in which consumers can purchase appropriate medicines based on their efficacy and quality."
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