90 Million Won 'Bribe' and 5.4 Billion Won Loss... Jungwoe Pharmaceutical Forced to Halt Sales Due to Rebates [Seocho-dong Legal Story]

"Although JW Pharmaceutical Corporation was acquitted due to insufficient evidence, the benefits from the rebates provided by the sales representatives belonged to the company, so the suspension of sales for the company's pharmaceuticals is justified." (Second trial court)

Fourteen prescription drugs from JW Pharmaceutical, including indigestion treatments, antibiotics, and prostate treatments, have been suspended from sale from the 30th of last month until September 30th following a Supreme Court ruling. This is because the Supreme Court dismissed JW Pharmaceutical's appeal against the suspension order filed with the Daejeon Food and Drug Safety Administration at the end of last month. Accordingly, the Daejeon Food and Drug Safety Administration immediately enforced a three-month sales suspension on 14 items, including Ganakan, Ribecan, and Truepass, which were involved in the rebate case.

This action stems from the 'hospital rebate' case uncovered in 2020. A JW Pharmaceutical sales representative was caught paying 9 million KRW for electronic equipment purchases used by a hospital in exchange for the hospital prescribing the company's drugs. The prosecution issued a suspended indictment against the sales representative for violating the Pharmaceutical Affairs Act, and JW Pharmaceutical was cleared due to insufficient evidence and was not prosecuted.

However, the Daejeon Food and Drug Safety Administration suspended sales of 14 JW Pharmaceutical drugs. JW Pharmaceutical, contesting this through administrative litigation, argued that "the company provided education prohibiting rebates, but the sales representative acted independently," and "the company cannot be penalized for the sales representative's illegal actions." JW Pharmaceutical also claimed, "The rebate provided by the sales representative was 9 million KRW, but the expected loss from the sales suspension is 5.4 billion KRW, which is excessively harsh."

The first trial court ruled in favor of JW Pharmaceutical. The first trial court stated, "The scale of the rebate provided by the sales representative is not significant, and the disadvantage to JW Pharmaceutical is relatively large."

On the other hand, the second trial court overturned the first trial's ruling, stating, "The reasons for the Daejeon Food and Drug Safety Administration's sales suspension order are recognized and clear, and interpreting the Pharmaceutical Affairs Act as only prohibiting rebates provided by the corporation would effectively allow rebates by affiliated sales representatives." The second trial court added, "The effect of rebates provided by pharmaceutical company employees should be attributed to the company."

The second trial court further stated, "Although JW Pharmaceutical was acquitted by the prosecution due to insufficient evidence, the sanctions imposed by the Daejeon Food and Drug Safety Administration for the sales representative's violation of the Pharmaceutical Affairs Act are governed by different principles," and "The court is not bound by the prosecutor's decision not to indict, so JW Pharmaceutical cannot deny the grounds for the administrative sanction solely because it received a non-prosecution decision from the prosecutor."

The second trial court also noted, "The supply of pharmaceuticals is a special structure with a high degree of public interest directly related to public health, and public interest is much more emphasized compared to general consumer goods. Therefore, the need for public regulation is also significant," adding, "Providing rebates to promote pharmaceutical sales is not only a direct violation of the Pharmaceutical Affairs Act but also an act that severely undermines sound social order and is highly condemnable."

The Supreme Court also agreed with the second trial court's judgment.

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