[2020 National Audit] The Two Faces of 'Masks' That Contributed to K-Quarantine... MFDS Faces Dilemma Over Accumulated Inventory

Public Mask Distributors "Government Should Buy Back"... Opposition Party Pressures "Supply Management Failure"

On the 15th, when the public mask 5-day rotation system is in effect, a notice regarding the implementation of the public mask 5-day rotation system is posted at a pharmacy in Jongno 5-ga, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Seo So-jeong] The Ministry of Food and Drug Safety (MFDS), which had put great effort into the public supply of health masks to avoid the 'mask crisis' caused by the COVID-19 pandemic, now finds itself in a difficult position due to accumulated stock after the end of public mask distribution.

Public mask distributors, the GeoYoung consortium and Baekje Pharmaceuticals, are demanding that the MFDS come up with solutions as their management difficulties worsen due to mask inventory piled up in logistics warehouses. The opposition party is pressuring the MFDS, claiming that the 43 million public mask stocks are due to the MFDS's failure to properly manage supply and demand.

According to the Korean Pharmaceutical Association on the 13th, the public mask stock amounts to 33 million masks (31 billion KRW) for GeoYoung and 9.6 million masks (9 billion KRW) for Baekje, totaling 42.6 million masks. Since being designated as public mask distributors at the end of February under the government's 'Emergency Mask Supply Adjustment Measures,' they have supplied public masks to pharmacies nationwide until distribution ended on July 11.

However, with the end of public mask distribution and the increase in mask supply, low-priced health masks have started circulating, and the two companies are currently paying about 10 million KRW per month in storage costs as they keep unsold public mask inventory in warehouses.

GeoYoung Vice President Ahn Hee-seok said, "We purchased masks at the government-designated purchase price under the government's emergency supply policy, which was about 940 KRW per mask on average," adding, "Currently, due to excess mask supply, the price of health masks has dropped to 700-800 KRW on home shopping channels, which is lower than the purchase price, making it difficult to handle the inventory."

The company explained that they have explored options such as exports to manage the inventory but found it challenging. Vice President Ahn said, "For health masks, only 50% of production can be exported, and this restriction applies to manufacturers," adding, "GeoYoung is a distributor, not a manufacturer, and overseas mask prices have also fallen, so we cannot find export routes." Ultimately, to handle the inventory, they would have to sell at a loss below the government purchase price, so they are keeping the stock piled up.

Market Prices Fall Due to Oversupply of Masks... Difficulties in Handling Inventory
MFDS: "5% of 700 Million Masks Are Stock; Discussing Consumption Measures"

The MFDS understands the difficulties faced by public mask distributors but finds it hard to find a clever solution. To resolve the issue, the government would have to repurchase at the purchase price, but mask prices have dropped by several hundred KRW in the meantime. According to the MFDS, at the beginning of this month, the price of KF health masks was in the 1,000 KRW range, and droplet-blocking masks fell to the 600 KRW range.

An MFDS official said, "Of the 700 million public masks, about 5% remain as stock, which is not a large amount, and we have been continuously consulting with related ministries to consume these," adding, "If the companies bring export plans, we will actively support them."

The National Assembly is also engaged in disputes over public mask stock. Nam In-soon, a member of the Health and Welfare Committee from the Democratic Party, said, "Despite the efforts of the GeoYoung consortium and Baekje Pharmaceuticals, designated as public sales outlets for pharmacy supply, the government's failure to devise measures to resolve the stock is irresponsible," and added, "The government should actively prepare resolution measures such as expanding government reserves or prioritizing stock disposal when providing overseas mask aid."

The opposition party pointed out that the accumulation of tens of millions of public masks is due to the MFDS's failure in supply management. Kim Mi-ae, a member of the Health and Welfare Committee from the People Power Party, summoned GeoYoung CEO Cho Sun-hye as a witness at the MFDS audit that day. However, CEO Cho submitted a medical certificate and a letter of absence, so GeoYoung President Kim Jin-tae appeared instead.

Rep. Kim said, "The MFDS allowed GeoYoung to distribute public masks without a separate contract procedure," adding, "However, due to poor supply management, the stock reached 120 million masks in May, and tens of millions of masks remain in stock, so the damage ultimately falls on the public."

In response, MFDS Commissioner Lee Ui-kyung said, "We are making efforts to deplete the stock of public sales outlets," adding, "We resolved the issue when 120 million masks remained and are currently brainstorming solutions."

The Korean Pharmaceutical Association, which had been involved in public mask sales, said, "The MFDS has been trying to resolve the inventory problem of distributors for three months after the end of public mask distribution, but there seem to be parts difficult to solve by the MFDS alone," adding, "The government should recognize the contribution of public masks to supply stabilization and build a consensus that our society should compensate for unavoidable losses."

This content was produced with the assistance of AI translation services.