On one side, general anesthetics and narcotic medicines are trafficked illegally without controls; on the other, a shortage crisis spreads because children's fever reducers are out of stock. They may look like separate incidents, but drugmakers and experts say both stem from the "opacity of information" in Korea's pharmaceutical supply chain. Even when production increases, medicines vanish from the field—an irony rooted in a distorted distribution structure where more than 3,500 wholesalers are crowded together and tie up inventory. We interviewed former and current industry insiders for an in-depth report on the structural gaps and solutions in Korea's festering drug distribution system. [Editor's note]
#On Mar., the Ministery of Food and Drug Safety's Busan Regional Office arrested a man in his 40s, identified as A, and five others including a wholesale representative, on suspicion of violating the Pharmaceutical Affairs Act for illegally distributing prescription drugs. They are accused of selling 4.4 billion won worth of the general anesthesia inducer etomidate—known as the "second propofol"—and muscle-enhancing steroids 12,155 times over four years. Etomidate alone amounted to 1,600 boxes, enough for 320,000 doses.
#In Nov., as flu and colds spread and pediatric respiratory patients increased, pediatric fever and pain relievers remained out of stock for a month. The government rolled out measures such as boosting production and approving imports, but the problem recurs every year.
At first glance, one is an illegal distribution crime and the other is a drug supply issue, but drugmakers and experts say both phenomena have the same "root": the drug distribution structure. Illegal distribution and widespread drug shortages are exploiting structural loopholes that are multilayered, tangled, and hard to trace.
Kim Dong-suk, a professor in the Department of Health Administration at Kongju National University who led HIRA's commissioned study "Research on improving the distribution system for advanced pharmaceutical distribution," assessed, "The essence of Korea's drug distribution problem is the opacity of information."
Rep. Baek Jong-heon of the People Power Party, a member of the National Assembly's Health and Welfare Committee, said, "Even as thefts and losses involving narcotic medicines continue to rise, management systems are inadequate across distribution, including hospitals, wholesalers, and pharmacies," noting, "In particular, there are blind spots in inventory management, storage, and transportation."
◇From 700 to 3,500… policy swelled the wholesalers
Korea's drug distribution is a multistage structure running from drugmakers to numerous wholesalers to pharmacies.
After the separation of prescribing by doctors and dispensing by pharmacists, distribution in Korea rapidly reorganized around wholesalers. As drugmakers found it harder to transact directly with pharmacies, the share of wholesale transactions expanded from 45.1% in 2001 to 89.5% in 2022.
In particular, as entry regulations for wholesale operations were eased, the number of wholesalers surged. Pharmaceutical wholesalers, which numbered around 700 in 2000, grew to more than 3,500 after deregulation.
After deregulation, reinstatement, and relaxed standards, today's licensing criteria for drug wholesalers are set at "165 square meters (50 pyeong) of warehouse space, 500 million won in assets, and employment of a supervising pharmacist." However, if logistics are consigned to a wholesaler with a warehouse of at least 800 square meters, they can operate without their own warehouse. These are the so-called "consignment wholesalers."
According to a HIRA-commissioned report, as of 2022 Korea had 3,987 pharmaceutical suppliers, of which 3,503 were drug wholesalers.
As wholesalers proliferated, distribution became more complex. General wholesalers that supply pharmacies, in-house wholesalers dedicated to hospital delivery, as well as exclusive wholesalers and item-specific wholesalers, are intertwined. Exclusive wholesalers supply a specific hospital monopolistically; to deliver to that hospital, one effectively must go through that wholesaler. Item-specific wholesalers secure distribution rights for particular products from particular drugmakers and supply them.
◇Drugs go round and round… tracking system breaks
With wholesalers crowded and resales among wholesalers—so-called "wholesale-to-wholesale" trades—repeating, it is difficult to know at which stage and how much inventory exists.
An industry official who requested anonymity said, "In the past, drugs traveling from the manufacturer to the final pharmacy sometimes went through seven to eight stages of transactions among wholesalers," adding, "The more stages there are, the more middle-margin gets added, and the harder it is to track where inventory sits."
The person said, "Accountability for drug spoilage or damage also becomes unclear," adding, "Even when a drugmaker clearly ships normal product, there is ultimately no way to confirm what went wrong during intermediate distribution."
On these issues, Professor Kim Dong-suk assessed, "As consigned or paper-only distributors that do not directly store or deliver drugs have increased, a structure has formed in which the substantive logistics function and distribution responsibility can be weakened."
Kim Hyeong-sik, president of the Korean Pharmaceutical Society and a professor at Sungkyunkwan University's College of Pharmacy, said, "Even by market size, fewer than 500 domestic drugmakers face an excessively large 3,500 wholesalers, with many being small-scale—an abnormality," adding, "This not only reduces distribution efficiency but can distort order in distribution through side effects such as rebates."
The government introduced a drug serialization system and supply-stage reporting to build tracking from production through wholesale. But what is actually prescribed and dispensed at medical institutions and pharmacies (actual usage) is not linked to the supply-chain tracking system. As a result, there are limits to tracing which patient received a specific medicine through which distribution channel.
In fact, during the valsartan incident in 2018, authorities could not fully confirm which patients ultimately received the recalled drugs. Although drugs are managed by serial numbers in production and distribution, the tracking chain broke when they were split into individual units during pharmacy dispensing.
◇Stockpiled and bundled… why is it missing on site
Illegal sales, proxy prescribing, and illicit procedures exploiting these blind spots in tracking and management continue to surface.
In Jan. 2023, a drug wholesaler in Goyang, Gyeonggi Province, was found to have illegally borrowed a pharmacist's license to distribute medicines. Investigators found that even without an in-house pharmacist, a general employee took out the sedative anesthetic "propofol" and psychotropics. In effect, anesthetics and psychotropics circulated without controls.
An analysis by Rep. Baek Jong-heon's office on data submitted by the Ministery of Food and Drug Safety to the National Assembly's Health and Welfare Committee found that from 2020 to 2024, a total of 56,718 units of medical narcotics were reported stolen or lost over five years. The drug most frequently missing was "diazepam," used for anxiety. It was followed by "alprazolam," "lorazepam," and the sleeping pill "zolpidem," psychotropics with high risks of misuse.
Notably, the sharpest increases were in "intermediate distribution and dispensing stages" such as wholesalers and pharmacies, not just hospitals. Incidents involving narcotics at drug wholesalers jumped 73% from 153 in 2020 to 265 in 2024, while pharmacy incidents rose 69% from 88 to 149 in the same period.
Industry officials also said the recurring out-of-stock crises cannot be explained by production shortfalls alone. During spikes in demand, inventory can be preempted at the wholesale stage or tied up depending on transaction terms.
An industry official said, "When demand for certain items clusters, as in the pediatric peak season, pharmacies or hospitals may find it hard to receive only the items they want even if they order from wholesalers," adding, "Deals sometimes come with conditions requiring orders above a certain volume." For example, when a buyer orders 300 fever reducers, the wholesaler may bundle in other, slower-moving drugs—a practice known as "bundled selling."
Even when drugmakers increase production and supply, pharmacies sometimes cannot secure the medicines. A drugmaker official said, "Even when we run plants at full capacity and release volume, it gets stuck somewhere at the wholesale stage," adding, "You get the ironic situation where supply has been made but it looks as if the drugs have disappeared on the ground."
The returns process is also inefficient, observers say. Returned drugs from pharmacies go back to manufacturers via wholesalers, but many cases sit in warehouses for long periods and are discarded after expiration.
A wholesaler official said, "Because return policies differ by drugmaker, tens of billions to hundreds of billions of won in inventory can pile up in warehouses."
Experts say the drug distribution system needs overhauling with stronger information transparency. Professor Kim Dong-suk said, "Even though Korea was the first in the world to introduce drug serialization, the complexity of the distribution structure distorts inventory flows," adding, "Inventory imbalances caused by wholesale-to-wholesale structures heighten the perception of shortages."
She added, "Drugs discarded due to inventory mismanagement and returns are a social waste and an urgent issue for national health insurance finances and the environment."
Rep. Baek Jong-heon said, "To prevent medical narcotics incidents and thefts, we must strengthen management systems across the entire supply chain," emphasizing, "Comprehensive improvements such as expanded training for handlers and building rapid incident response systems are urgent."