Dong-A ST, Daewon Pharmaceutical and Boryung, among other major Korean drugmakers, have lost a string of lawsuits challenging the government's decisions to cut drug prices.
The reasons varied, including penalties for illegal rebates and price adjustments following the launch of generics, but the courts uniformly sided with the government.
There is also criticism of the pharmaceutical industry's "stalling practice" of dragging cases through three trials to delay price cuts and preserve revenue.
◇ Supreme Court: "Dong-A ST's drug price cut over illegal rebates is justified"
Dong-A ST's conviction for illegal rebates was finalized, and the Ministry of Health and Welfare moved to cut prices for 122 drugs. The rationale was that economic sanctions were necessary because the rebate scheme disrupted the order of pharmaceutical distribution. Dong-A ST filed an administrative suit to contest the decision, but the Supreme Court finalized a loss in November last year.
Dong-A ST and its employees were convicted by the Supreme Court in Dec. 2016 for violating the Pharmaceutical Affairs Act by providing 4.4 billion won in rebates to hospital directors and doctors nationwide from 2009 to 2012. Including this case, Dong-A ST was indicted three times on illegal rebate charges and received guilty verdicts.
In 2022, the ministry notified Dong-A ST to cut the prices of 122 products by an average of 9.63%. Dong-A ST filed an administrative suit in April that year to overturn the adjustment of the maximum reimbursement amount, but lost in both the first and second trials. The Supreme Court's Second Division also dismissed the case without a hearing in November last year. A dismissal without a hearing means the court judged it was not subject to appeal and rejected it without separate review.
Dong-A ST argued that the scope of drugs subject to the price cut was too broad. The first trial court said, "Medical staff are well aware of a drug's efficacy, so consumers effectively cannot exercise a choice of medicines," adding, "If rebate practices sway medical staff's drug choices, the expense is passed on and could burden the health insurance finances." The second and third trials also found the lower court's ruling to be correct.
A Dong-A ST official said, "While proceeding with the main lawsuit, we separately filed for an injunction to stay the execution of the price cut disposition," noting, "After the injunction was dismissed in the first trial, we cut prices for the related items in Aug. 2024."
◇ Price cuts after generics launch… respond with lawsuits?
After the launch of generics, the government issues administrative dispositions to lower prices of new drugs that lose exclusivity. In such cases, drugmakers that developed the originals sometimes defend themselves through lawsuits. Daewon Pharmaceutical and Boryung are representative examples. Daewon Pharmaceutical recently lost in the Supreme Court. Boryung lost in the first trial but appealed.
Daewon Pharmaceutical's anti-inflammatory analgesic Pelubi was approved as a domestically developed new drug by the Ministery of Food and Drug Safety in 2007. In 2021, ahead of the launch of Pelubi generics, the ministry issued a price cut disposition, and Daewon Pharmaceutical pushed back, filing an administrative suit in August that year. Daewon Pharmaceutical lost in the first and second trials. The Supreme Court's First Division dismissed the case without a hearing in April.
Boryung Pharmaceutical is also pursuing a second-trial lawsuit against the ministry to overturn the price cut for its hypertension drug Kanarb. In June last year, ahead of the launch of generics, the ministry notified a cut in Kanarb's price from 439 won to 307 won based on the 30 mg dose. Boryung filed suit to contest the decision, lost in the first trial in February this year, and the second trial is now underway.
◇ Delaying the timing of price cuts by even seeking stays of execution
Pelubi and Kanarb have one thing in common: they are strong sellers. In the first quarter of this year, Daewon Pharmaceutical posted 11.352 billion won in sales from antipyretic anti-inflammatory analgesics including Pelubi. That is 7% of total sales, the second-highest after expectorant antitussives (10%). In the first quarter of this year, Boryung's Kanarb product family recorded 33.266 billion won in sales, accounting for 13% of total sales.
Some say drugmakers are delaying price cuts through lawsuits. Under the ministry's notice, Daewon Pharmaceutical should have cut the price of Pelubi tablets starting in September 2021. Daewon Pharmaceutical pursued litigation and, after the three trials ended, cut the price of Pelubi tablets from 180 won to 96 won early this month. The timing of the price reduction was pushed back by years.
Some drugmakers also file for injunctions to stay execution, separate from the main lawsuits contesting price cuts. If the court accepts, they do not have to lower prices until the trial ends. An industry official said, "Even if a loss is finalized in court, at least until the outcome comes, it effectively allows them to maintain profitability."