Local pharmaceutical law had been amended to require the government to disclose which doctors receive money from which drugmakers, how much they received and for what reasons. It has two more months to take effect.

However, the government recently moved to amend its implementation regulation to serve the interests of the pharmaceutical and medical device industries, and the medical community. Due to this additional amendment, the law is at risk of being undermined.

Since late 2018, the Korea Center for Investigative Journalism (KCIJ)-Newstapa has been reporting on cases of improper ties between the pharmaceutical/medical device industries and the medical community, such as illegal kickbacks. Newstapa also has called for improvement in the so-called ‘K-Sunshine Act’ – Article 47 (2) of the Pharmaceutical Affairs Act and Article 13(2) of the Medical Devices Act, which went into effect in January 2018.

In the current legal system, drug/medical device makers and distributors are allowed to provide financial support to physicians worth only up to a certain amount permitted by law. 

The companies can give financial support in conferences held in and outside Korea and covering transportation and lodging costs for physicians traveling to the conferences. It's also not illegal to invite doctors to a product briefing seminar, pay for their travel and meals, or give souvenirs. The U.S., Europe, Japan, and other countries have similar legal buffers for the industry to offer financial support to medical specialists, albeit on a different scale.

The drug and medical device industries promised in its fair competition agreement that the provision of such economic benefits must be for the purpose of "conveying scientific and educational information and maximizing patient benefit," and it must not "interfere with the guaranteed independence of decision-making of healthcare professionals when prescribing medicines (or selecting medical devices for use in medical practice)." 

Despite the agreement, illegal kickback cases are still appearing in the news and in court.

Named after the original American version of the ‘Physician Payments Sunshine Act,’ the so-called ‘K-Sunshine Act’ was enacted in January 2018 to curb illegal kickbacks that threaten health insurance finances and undermine transparency in the medical community. 

With this law, drug and medical device makers were obligated to prepare and keep copies of ‘Expenditure Report on Economic Benefits Offered to the Healthcare Professionals.’ However, the companies didn’t have the obligation to disclose the report. Unlike similar laws overseas, it was a half-hearted implementation.

In the United States, for example, the federal government's Center for Medicare & Medicaid (CMS) – the equivalent of Korea's Health Insurance Review and Assessment Service (HIRA) – operates a database website Open Payments. The website discloses financial relationships between the industry (drug and medical device makers, and the purchasing agencies) and the healthcare providers such as physicians and teaching hospitals. 

The purpose of disclosure is to "provide the public with a more transparent healthcare system." Anyone can search the database to see the amount and purpose of money exchanged between doctors and companies. Real names of doctors and their organizations are also publicly available.

In Japan, the private sector discloses the provision of economic benefits. The associations representing the pharmaceutical and medical device industry have introduced their own transparency guidelines. On their website, member companies disclose records of the financial support they provided to healthcare providers each year. The records include R&D expenses, funding for academic research, and manuscript and lecture fees. 

The Japan Pharmaceutical Manufacturers Association explains that they disclose the records to ensure its members "not influence the judgment of medical institutions and doctors by providing them with financial support in exchange for commissioned work." 

"The more active these collaborative activities become, the more deeply involved medical institutions and healthcare providers may become with certain companies and products,” the association added. “The possibility of influencing the judgment of medical institutions and medical personnel cannot be ruled out."

Newstapa has been reporting on overseas policies that have served as models for the ‘K-Sunshine Act,’ emphasizing the need for Korea to amend its law to require disclosure of the expenditure reports. 

In October 2020, Newstapa obtained and analyzed for the first time some of the expenditure reports that had not been publicly disclosed since the law was implemented. As a result, it was revealed that drug and medical device makers have been making unfair sales activities, by providing expensive meals to doctors under the guise of legitimate events such as product briefing seminars, and that the companies have been preparing their expenditure reports hastily.

After the Newstapa reports, progress has been made. In December 2020, Rep. Ko Young-in of Democratic Party of Korea, a member of the National Assembly's Health and Welfare Committee, introduced a bill to amend the Pharmaceutical Affairs Act and the Medical Devices Act to add an obligation to disclose the expenditure reports. Six months later, in June 2021, the amendment passed the plenary session of the National Assembly and was promulgated on July 20 of the same year. 

However, implementation of the amended K-Sunshine Act has been postponed for two years. It’s scheduled to take effect on July 21 this year.

The amended Act stipulated the actual format of the expenditure report disclosure system, as well as the scope and method of the disclosure, which will determine its success, were to be determined by implementation regulations – the Rules on the Implementation of the Pharmaceutical Affairs Act, and the Rules on Maintaining the Orderly Distribution and Sale of Medical Devices. 

However, the Ministry of Health and Welfare announced the proposed amendments to the two regulations only on April 28, at a time of less than three months before the implementation deadline.

According to the Regulatory Impact Analysis Report of the proposed regulation amendment, 72,000 companies in the pharmaceutical and medical device sectors will be required to disclose their expenditure reports following the implementation of the revised Pharmacy Act and Medical Device Act. In the pharmaceutical sector, 302 drug makers, 181 importers and 3,332 wholesalers are subject to the disclosure obligation. In the medical device sector, 4,246 medical device makers, 3,031 importers and 61,040 distributors are required. 

The Korean Health Ministry has opted for a U.S.-style disclosure system. Like the CMS, the Korean counterpart HIRA will operate the ‘Expenditure Report Management System.’ Drug and medical device makers and distributors will input numbers from the expenditure reports to the system, and the numbers will be disclosed for five years. 

The first disclosure will be made on January 1, 2024, but the actual disclosure is expected to happen in mid-2024, as the law requires that the expenditure report be completed within three months after the end of the fiscal year. (March 31 of the following year, if a company adopts the January-December fiscal year.)

However, the Health Ministry's belatedly proposed amendments include a fatal loophole that undermines the purpose of the Act itself.

First, the Health Ministry newly introduced a poison pill clause that hinders transparency of  information disclosure in both the Pharmaceutical Affairs Act and Medical Devices Act. These provisions state that "the Minister of Health and Welfare may decide or take measures to un-disclose or de-identify certain information in the expenditure reports." 

Information below is applicable to the closure.

These clauses are likely to be abused to the benefit of the healthcare industry and physicians, by de-identifying names of the healthcare providers and institutions from the system. 

In fact, the healthcare industry is most concerned about revealing the identities of doctors, who are the target clients and the ultimate beneficiary of the material benefits the industry provides. 

Contrary to the industry's wishes, the key to the expenditure report disclosure is to allow citizens to see which doctors have financial relationships with which companies, and let them decide for themselves whether the relationship is appropriate. If the identification of doctors is not there, the disclosure system will lose its power. 

The proposed amendment to the regulations may also undermine the purpose of the parent laws, as it gives a single person, the Health Minister, the authority to arbitrarily and comprehensively withhold information.

These concerns have grounds. There are already signs that the Health Ministry is not feeling comfortable disclosing the numbers of the expenditure reports, being aware of the industry and medical community. 

Ahead of the implementation of the revised Act, the ministry will conduct its first survey on expenditure reports writing in July. The survey will be "proceeded in consideration of the protection of personal and business information contained in the expenditure reports," the ministry announced. Since the Act was enacted in 2018, this is the first time that the ministry has officially declared its intention to exercise its oversight powers to give the industry some leeway.

Disclosure of the industry’s expenditure reports expands patients’ choice and autonomy. As described above, the CMS-operated database provides all information, including physicians’ personal information, and leaves it up to the public to decide. It does not leave the judgment of the value and necessity of information disclosure to the head of a single regulatory agency. 

"All information available on the Open Payments database is open to personal interpretation and if there are questions about what the data means, patients and their advocates should speak directly to the health care provider for a better understanding,” CMS wrote on the database website.

There is another crucial flaw in the regulation amendments. The implementation regulation now excluded certain types of expenditures from mandatory reporting. 

Japan's Fuso Pharmaceutical Industries paid 907,460 yen (approximately USD 6,228) to Masaki Abe, an associate professor at Nihon University of Medicine, for seven lectures in 2021. Robert Alpern, an American orthopedic surgeon, received a consulting fee 

of USD 260,794 from medical device maker Abbott on March 29, 2021. These are all facts that can be easily found on each country's expense report database. 

Records of speaking fees clearly show which drug or medical device makers pay special attention to and maintain close relationships with which opinion leaders in each area of research and clinical practice.

Korean doctors also receive lecture fees and consulting fees from pharmaceutical and medical device companies. This is allowed based on the fair competition agreement signed by members of the pharmaceutical and medical device industry associations, not the law. 

Written based on the Fair Trade Act, the Fair Competition Agreement was established after a review of the Korean Fair Trade Commission. To revise each line, another review and permission is required from the Commission. It means, the agreement has the same regulatory power as the law. 

In the industry, the agreement limits the scope of money and goods that can be provided to healthcare providers. Lecture fees and consulting fees are regulated by the agreement. 

According to the agreement, if a company asks a doctor to give a lecture, it can pay them up to KRW 500,000 (USD 373) per hour, up to KRW 1 million (USD 747) per day, and up to KRW 5 million (USD 3,737) a year. Advisory fees can be paid up to KRW 500,000 every time and up to KRW 3 million for the year. Not a small amount of money go back and forth.

Oddly enough, these lecture fees and consulting fees have been excluded from the list of reporting categories under the original version of K-Sunshine Act’s implementation regulation. The official report form for lectures and consulting fees were also missing in the regulation. The inconsistency made staff at drug and medical device makers confused as to whether or not they were required to report lectures and consulting fees. 

The Ministry of Health and Welfare has officially informed that lecture fees are not subject to reporting in its ‘Guidelines for Preparing Expenditure Reports' brochure distributed to the industry. It means that the Health Ministry was well aware of the fact that companies give lecture and consulting fees to doctors, but it treated the reality as if such giving didn’t exist. Rather than correcting the error by amending the implementation regulation, the ministry left the blind spot in the regulation.

The problem is that the Health Ministry hasn’t made corrections in its recent amendment. 

The industry exploits these blind spots. In 2020, a global medical device maker gathered doctors from across the country at a Jeju resort for an overnight product briefing seminar. Newstapa followed through the seminar schedule. (Related article: Why doctors gathered at a Jeju resort) 

Part of the seminar consisted of lectures by famous doctors, but Newstapa found that their lectures didn’t even last the allotted time. Later, these doctors were still paid hundreds of dollars for the lecture. 

According to the current version of the Act, lecture fees from a product briefing seminar held within the country are not subject to mandatory writing and keeping expenditure reports. The legal system officially allows the industry to avoid public scrutiny.

There are more expenditure categories exempted from reporting. Food, beverages, gifts, and expenses within KRW 100,000 (USD 74) provided to healthcare providers in compensation for participating in market research are also not mandatory to reporting under the current implementation regulation. 

Donations to medical institutions, and exhibition and advertising expenses on medical conferences and on publications from medical institutions are also not required to be reported. These items are again left out in the recent amendment.

If all these categories are excluded from reporting and disclosure, it is almost impossible to identify the full extent of the economic benefits that flow from the industry to healthcare providers.

The Health Ministry is accepting comments on the proposed amendments to the Pharmaceutical Affairs Act Implementation Regulation and the Rules for Maintenance of Order in Distribution of Medical Devices by June 7. Anyone can submit their opinions on the Citizen Participation Legislation Center website. 

Newstapa will continue to monitor whether the expenditure report disclosure system is working properly to provide transparent information to citizens after the implementation of the K-Sunshine Act amendments.