On one side, general anesthetics and narcotic medicines are trafficked illegally without control; on the other, children's fever reducers run out, triggering a wave of sold-out notices. They may look like separate incidents, but drugmakers and experts say they 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 system where more than 3,500 wholesalers crowd the market and tie up inventory. We conducted an in-depth investigation with current and former industry insiders into the structural loopholes of Korea's festering drug distribution system and possible fixes. [Editor's note]
Case 1. On Mar. in Busan, the regional office under the Ministery of Food and Drug Safety arrested a man in his 40s, identified as A, and five others including a wholesale chief 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—dubbed 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.
Case 2. In Nov. last year, as influenza and colds spread and pediatric respiratory patients increased, children's fever and pain relievers remained out of stock for a month. The government has 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 a supply issue, but drugmakers and experts say both have the same "root": the drug distribution structure. Illegal distribution and drug sellout waves are exploiting structural flaws 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 the Health Insurance Review & Assessment Service (HIRA) commissioned study "Research on improving the distribution system for advanced pharmaceutical distribution," said the essence of Korea's drug distribution problem is "information opacity."
Baek Jong-heon of the People Power Party, a member of the Health and Welfare Committee, said, "Despite the steady rise in theft and loss incidents involving narcotic medicines, management systems across the distribution chain—including hospitals, wholesalers, and pharmacies—remain inadequate," noting, "In particular, there are blind spots in inventory control, storage, and transportation."
◇ From 700 to 3,500… policy swelled the wholesalers
Korea's drug distribution is a multistep chain from manufacturers → many wholesalers → pharmacies.
After the separation of prescribing by doctors and dispensing by pharmacists, the so-called "separation of prescribing and dispensing," distribution rapidly reorganized around wholesalers. As direct transactions between manufacturers and pharmacies became difficult, the share of wholesale transactions expanded from 45.1% in 2001 to 89.5% in 2022.
In particular, as entry regulations for wholesalers were eased, the number of wholesalers surged. Drug wholesalers, which numbered around 700 in 2000, increased to more than 3,500 after deregulation.
After deregulation, reinstatement, and relaxed standards, today's licensing criteria for drug wholesalers are "warehouse space of 165㎡, assets of 500 million won, and employment of a supervising pharmacist." However, if logistics are outsourced to a wholesaler with a warehouse of at least 800㎡, a company can operate without its own warehouse. These are the so-called "outsourced wholesalers."
According to a commissioned study by the Health Insurance Review & Assessment Service (HIRA), as of 2022 there were 3,987 pharmaceutical suppliers in Korea, of which 3,503 were wholesalers.
As wholesalers crowded the market, the distribution chain grew more complex. General wholesalers supply pharmacies; "GANAP" wholesalers handle hospital deliveries; and there are also exclusive wholesalers and item-specific wholesalers. Exclusive wholesalers supply certain hospitals on a monopoly basis, meaning deliveries to those hospitals effectively must go through them. Item-specific wholesalers secure the distribution rights for particular products from certain drugmakers and supply them.
◇ Pills going in circles… tracking system cut off
With wholesalers proliferating and repeated resales among wholesalers—the so-called "wholesale-to-wholesale" trades—it has become difficult to determine at which stage and how much inventory exists.
An industry official who requested anonymity said, "In the past, there were cases where transactions among wholesalers reached seven to eight steps as drugs moved from manufacturers to final pharmacies," adding, "The more steps there are, the more middleman margins get added, and the harder it is to track inventory locations."
The official said, "Responsibility for drug spoilage or damage also becomes unclear," lamenting, "Manufacturers surely ship properly, but there is ultimately no way to confirm what went wrong in the middle of distribution."
On these issues, Professor Kim Dong-suk said, "As outsourced or paper-based distributors that do not physically store or deliver medicines have increased, a structure has formed in which real logistics functions and distribution responsibility can be weakened."
Kim Hyeong-sik, president of the Pharmaceutical Society of Korea and a professor at Sungkyunkwan University's College of Pharmacy, said, "Even in terms of market size, fewer than 500 domestic drugmakers operate in Korea, but there are 3,500 wholesalers—far too many, with a large share of small operators—making the structure distorted," explaining, "This not only lowers distribution efficiency but can also distort order through side effects such as rebates."
The government introduced a serial number system and stage-of-supply reporting to build tracking from production through wholesale. But the most important records at medical institutions and pharmacies—what is actually prescribed and dispensed (actual usage)—are not reported. As a result, practical inventory tracking is not happening.
Because of this, cases occurred in which authorities could not ultimately confirm which patients received distributed drugs, such as during the 2018 "valsartan incident." Even with serial numbers, tracking breaks at the pharmacy when units are split during dispensing.
◇ Stockpiled and tied to bundles… why isn't it on the shelf?
Illegal sales, proxy prescribing, and unlawful procedures that exploit 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, without a resident pharmacist, even the sedative anesthetic "propofol" and psychotropics were taken out by ordinary employees. In effect, anesthetics and psychotropics were distributed without control.
An analysis by the office of Health and Welfare Committee member Baek Jong-heon of data submitted by the Ministery of Food and Drug Safety found that from 2020 to 2024, 56,718 units of medical narcotics were reported stolen or lost. The drug that disappeared most often was diazepam, used for anxiety. It was followed by alprazolam, lorazepam, and the sleep aid zolpidem—psychotropics with high risks of misuse.
Notably, incidents are soaring not only at hospitals but also at wholesalers and pharmacies—the "intermediate distribution and dispensing stages." At drug wholesalers, narcotics incidents jumped 73%, from 153 in 2020 to 265 in 2024, while at pharmacies they rose 69%, from 88 to 149 over the same period.
Industry officials said the recurring drug shortages each year cannot be explained by production shortfalls alone. During spikes in demand, inventory can be preempted at the wholesale stage or tied up by transaction terms, they said.
An industry official said, "In peak pediatrics seasons when demand concentrates on certain products, pharmacies or hospitals may find it hard to receive only what they want even if they place orders with wholesalers," adding, "Sometimes the deal is contingent on ordering above a certain quantity." For example, if a pharmacy orders 300 fever reducers, the wholesaler may bundle them with other slow-selling medicines—so-called "tying" sales.
Even when manufacturers ramp up production and supply, pharmacies sometimes still cannot secure the drugs. A drugmaker official said, "Even if we run the plant at full capacity to release stock, it gets blocked somewhere at the wholesale stage," adding, "It creates the ironic impression that supply went out, but the product vanished on the ground."
Returns are also criticized as inefficient. Returned drugs from pharmacies go back to manufacturers via wholesalers, but many sit in warehouses for long periods and are discarded after expiry.
A wholesaler official said, "Because return policies differ by manufacturer, inventory worth billions to tens of billions of won can pile up in warehouses."
Experts say the distribution system must be overhauled and information transparency strengthened. Professor Kim Dong-suk said, "Even though Korea was the first in the world to introduce drug serial numbers, the complex distribution chain is distorting inventory flows," analyzing, "Inventory imbalances from wholesale-to-wholesale layers amplify the sense of shortages."
He added, "Drugs discarded due to failed inventory management and returns are a social waste and an urgent issue to fix for health insurance finances and the environment."
Baek Jong-heon of the People Power Party, a member of the Health and Welfare Committee, said, "To prevent medical narcotics incidents and theft, we must strengthen management systems across the entire supply chain," stressing, "Comprehensive measures such as expanding training for handlers and building a rapid incident-response system are also urgent."