'Illegal Rebate Charges' Novartis Corporation Fined 40 Million Won... Former CEO Acquitted

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Dong-hoon] The court sentenced the Korean subsidiary of the multinational pharmaceutical company Novartis to a fine for providing illegal rebates worth tens of billions of won to doctors and others.

On the 17th, Judge Heo Myung-wook of the Seoul Western District Court Criminal Division 5 sentenced the Korean Novartis corporation to a fine of 40 million won for charges of providing tens of billions of won in rebates to doctors and others (violation of the Pharmaceutical Affairs Act). Former Novartis executive Kim was sentenced to one year in prison with a two-year probation, and former medical journal representative Lee was sentenced to eight months in prison with a two-year probation.

Former Novartis CEO Moon, who was charged with violating the Pharmaceutical Affairs Act, was acquitted, and the statute of limitations expired for some charges, resulting in dismissal. The medical journal representatives were sentenced to six to eight months in prison with a two-year probation. Other defendants were acquitted. Acts committed before July 2011 were dismissed due to the statute of limitations for all involved.

Earlier, the Seoul Western District Prosecutors’ Office Joint Investigation Team on Pharmaceutical Rebates began raids and investigations in 2016 on the Korean Novartis headquarters and medical journals for allegations of illegal rebate provision. As a result of the investigation, Novartis officials were indicted on charges of providing a total of 18.1 billion won as advertising fees to medical journals and academic journals, and then paying 2.59 billion won to doctors under the names of 'travel expenses,' manuscript fees, and lecture fees through these media.

Judge Heo explained, "Even if some defendants admitted to the crime, it is difficult to see that all defendants provided illegal rebates." He added, "We judged whether the defendants conspired to violate the Pharmaceutical Affairs Act," and "Of the total advertising expenses of 18.1 billion won by Novartis, the rebate amount was about 14%, approximately 2.5 billion won. It is unreasonable to think that 18 billion won was paid to provide rebates."

He also found that the involved parties did not recognize in advance that such acts were illegal. Judge Heo stated, "According to the testimony of a person related to Company A in March 2014, there were about ten pharmaceutical companies providing economic benefits to doctors," and "This sales method was quite widespread at the time, and the defendants testified that they did not know it was illegal."

Earlier, the prosecution requested prison sentences of six months to one year for former and current Novartis executives and medical journal officials. However, for some defendants who confessed, the prosecution also requested a two-year probation for the prison sentence, considering "the suffering endured over three years due to prolonged trials."

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