The Fair Trade Commission announced on the 7th that it has decided to impose a correction order and a fine of 240 million won on JW New Drugs that provided unfair rebates to hospitals and clinics for the purpose of increasing prescriptions.
Rebate means that when a hospital or clinic prescribes a product, in return, it gives economic benefits such as sales incentives to the hospital or clinic.
JW New Drug, an affiliate of JW Group, is a mid-sized company operating in the pharmaceutical manufacturing industry. JW New Drug handles a total of 18 obesity treatments, including Pentermi. Pentermy alone generates sales of around 1 billion won per year.
In the market as a whole, products such as Novo Nordisk’s Saxenda (42.6 billion won), Daewoong Pharmaceutical’s Dietamine (9.5 billion won), and Huons’ Hughtermin (6.2 billion won) are the top sales.
JW New Drug provided unfair rebates worth 800 million won to 90 hospitals and clinics nationwide from January 2014 to April 2017. This is to increase or maintain the prescription of obesity treatment drugs manufactured and sold by the company.
Looking at the method, a prescribed amount of prescription was signed with each hospital and clinic, and in return, cash and supplies equivalent to 20-35% of the contracted prescription amount were provided in advance.
To this end, the sales representative in charge conducted the pre-support business and posted a draft, and the head of the sales division reviewed and approved it. After that, the sales manager in charge performed the preliminary support, and the amount of preliminary support was delivered to the sales staff.
JW New Drug also showed careful scrutiny to check whether the financial cost of the support in advance has actually resulted in prescription. If hospitals and clinics did not prescribe according to the agreement, they were encouraged to prescribe by delaying the signing of a new agreement or lowering the rate of prior support.
The FTC explained that JW New Drug’s actions were deemed to attract competitors’ customers by providing unfair profits and decided to impose a fine along with an order to prohibit them.
The Fair Trade Commission said, “We will continue to strengthen surveillance on behaviors that hinder competitive order through rebates in the pharmaceutical market, and if violations of related laws are detected, we plan to severely sanction them in accordance with the principle.”