Court Rules "'Illegal Rebate' Dong-A ST Drug Price Reduction Justified"

Pharmaceutical company Dong-A ST, which was convicted of rebate charges, filed a lawsuit claiming that the Ministry of Health and Welfare's price reduction order on pharmaceuticals was unfair, but lost the case.

Seoul Administrative Court.

According to the legal community on the 6th, the Seoul Administrative Court Administrative Division 5 (Chief Judge Kim Sun-yeol) ruled against Dong-A ST in the lawsuit filed against the Minister of Health and Welfare seeking cancellation of the adjustment order on the maximum drug price.

Previously, Dong-A ST executives and employees were confirmed guilty by the Supreme Court in December 2016 for providing rebates worth approximately 4.4 billion KRW over 3,433 instances from February 2009 to October 2012 to nationwide hospital and clinic founders and workers to promote drug sales. In January 2013 and July 2014, they also provided rebates totaling 120 million KRW and were found guilty of violating the Pharmaceutical Affairs Act by the Busan District Court East Branch in February 2017. Furthermore, in July 2019, the Supreme Court confirmed their guilt for rebate provision charges from 2007 to 2017.

Based on the ruling, the Ministry of Health and Welfare announced in September 2018 a drug benefit list and maximum benefit price table that lowered the maximum prices of 130 drugs, confirmed to have disrupted distribution order, by an average of 6.54%. Dong-A ST filed an administrative lawsuit against this and ultimately won at the Supreme Court in April 2021.

In response, the Ministry of Health and Welfare initiated a re-disposition procedure. In April 2022, the Ministry announced a drug benefit list and maximum benefit price table that reduced the maximum prices of 122 drugs by an average of 9.63%. Dong-A ST filed another administrative lawsuit, arguing that “certain drugs are unrelated to rebates and should be excluded when calculating unfair amounts.”

The court sided with the Ministry of Health and Welfare. The ruling stated, “It is practically impossible to scientifically quantify the impact of rebates on price determination or the selection of individual pharmaceuticals,” and “The guideline to select adjustment target drugs based on all pharmaceuticals handled by the related pharmaceutical company when specific drugs are not identified has sufficient rationality and validity.”

The court further stated, “Dong-A ST systematically and deliberately provided rebates worth about 6 billion KRW to hundreds of medical institutions over approximately five years, making the need for sanctions very significant,” and “Although the drug price reduction rate is set at a maximum of 20%, the average reduction rate applied to the drugs in this case is 9.63%, so the disposition cannot be considered excessively harsh compared to the plaintiff’s responsibility.” It added, “The public interest in achieving reasonable drug price adjustment and eradicating rebates through the disposition outweighs the disadvantages claimed by the plaintiff, so there is no violation of the principle of proportionality.”

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