'JW Jungwoo Hit with Record-High Rebate Fine'... "Will File Administrative Lawsuit"

Fair Trade Commission Uncovers Rebate Practices from 2014-2018
Using Methods Like 'Treasure Map' and '100 to 100'
Imposes 29.8 Billion KRW Fine and Files Charges Against CEO Shin Young-seop

JW JoongWai States "Unfair Fine Calculation"
"Regrets Some Employee Misconduct"

The Fair Trade Commission imposed a record-high fine of 29.8 billion KRW on JW Pharmaceutical for illegal rebates and decided to refer JW Pharmaceutical and CEO Shin Young-seop to the prosecution. However, JW Pharmaceutical stated that it plans to take legal action, including administrative litigation.

According to industry sources on the 20th, JW Pharmaceutical said, "Not only is this unfair, but there is also sufficient room for legal dispute," and added, "We plan to respond through administrative litigation after carefully reviewing the details upon receiving the decision from the Fair Trade Commission," indicating a strong response to the administrative measures.

The Fair Trade Commission announced the previous day that JW Pharmaceutical "provided economic benefits worth about 7 billion KRW to more than 1,500 hospitals and clinics nationwide from February 2014 to October last year to maintain and increase prescriptions for 62 pharmaceutical products it manufactures and sells," and "imposed corrective orders and a provisional fine of 29.8 billion KRW, and referred the corporation and its CEO to the prosecution." The Commission also added that JW Pharmaceutical used various means such as cash and goods provision, golf entertainment, and support for participants in overseas academic conferences, and concealed these illegal acts by disguising the details as internal staff gatherings to prevent exposure. In this process, JW Pharmaceutical created a so-called 'treasure map' selecting rebate targets based on existing prescription volumes of hospitals and clinics and conducted customized rebates. They also used methods like '100 to 100,' where entertainment was provided equivalent to the prescription amount if many new or fostered products were prescribed.

The Fair Trade Commission emphasized that this constitutes "an act of unfairly inducing competitors' customers to trade with themselves (unfair customer inducement)," and stated, "We are imposing the highest fine ever in a pharmaceutical rebate case for the organized and comprehensive rebate activities conducted at the headquarters level by the pharmaceutical company, and taking strict disciplinary action."

Koo Sung-rim, Director of the Knowledge Industry Monitoring Division at the Korea Fair Trade Commission, announced on the 19th at the Government Complex Sejong in Sejong City that JW Pharmaceutical Co., Ltd. has been fined 29.8 billion KRW for providing rebates to increase sales of its products, and that JW Pharmaceutical and CEO Shin Young-seop will be reported.
[Photo by Korea Fair Trade Commission]

However, JW Pharmaceutical appealed, "We made every effort to faithfully demonstrate that these were normal corporate activities inherent to a pharmaceutical company during the investigation and deliberation process, but the results were ultimately not accepted."

In particular, they argued that considering all additional research and development (R&D) support after product launch as rebates is an excessive measure. The total amount of rebates provided by JW Pharmaceutical is about 7 billion KRW. However, the fine was set at 29.8 billion KRW, which is 4.3 times that amount, because the Fair Trade Commission regarded investigator-initiated trials (IIT) and post-marketing observational studies conducted after product launch as rebates, and thus used the sales of products with additional R&D as the basis for calculating the fine.

JW Pharmaceutical claims this is an excessive fine calculation. The company explained, "It is unfair to judge clinical trials and observational studies contracted before 2018 but with costs paid after 2019 as illegal acts, even though the problematic acts occurred before 2018." They also pointed out that the pharmaceutical and bio industries inherently require continuous R&D for additional indications and therapies even after product launch, so it is problematic to criticize this aspect. On the other hand, the Fair Trade Commission stated, "It is an established precedent to calculate the relevant sales amount as the total sales of the pharmaceutical product for rebate activities conducted according to the headquarters-level promotion plan," and insisted that the overall sales of products with R&D support to date should be used as the basis for calculating the fine.

Regarding direct product rebates, JW Pharmaceutical said, "The Fair Trade Commission emphasizes that promotion plans at the headquarters level were established for 18 pharmaceutical products," but drew a line by stating, "The promotion plans themselves were not established or executed with illegal content; rather, some deviations by certain employees were confirmed." Regarding concealment suspicions, they emphasized, "On the contrary, the documents were created as a result of internal compliance strengthening efforts to check the status," and said, "The purpose has been distorted."

A JW Pharmaceutical official said, "We regret that despite many efforts, controversy arose due to the deviant behavior of some employees," and added, "We will strive to strengthen CP and improve various systems within the company to establish a normal and lawful business environment." They also added, "We plan to respond through administrative litigation after carefully reviewing the details upon receiving the decision from the Fair Trade Commission."

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