Thirteen pharmacies near a university hospital in Busan are suing to cancel the business registration of a newly opened pharmacy, A Pharmacy. The dispute began in Aug. last year when A Pharmacy opened in a building owned by the university hospital's corporate entity. After three months, the 13 existing pharmacies filed suit to cancel A Pharmacy's registration, arguing it could "monopolize the hospital's prescriptions."
The lawsuit drew attention when the existing pharmacies retained BAE, KIM & LEE LLC, a major law firm in Seoul. An industry official told ChosunBiz on the 20th that "competition over the right to make a living is so intense that when a newly established pharmacy suspected of being linked to a university hospital or general hospital appears, existing pharmacies even bring in high-fee law firms to fight in court."
◇ Court: "If a pharmacy opened inside a hospital monopolizes prescriptions, its registration will be canceled"
The case is currently on appeal. In the first-instance trial, for which a ruling was handed down on the 11th, the existing pharmacies lost. The court said, "The spot where A Pharmacy is located was operated by another pharmacy for 18 years, from 2007 until mid last year," adding, "That pharmacy received only about 3% of the university hospital's total prescriptions in the three years before it closed." It continued, "It is hard to see A Pharmacy as monopolizing the hospital's prescriptions." The existing pharmacies appealed, sending the case to the second instance.
There are also many cases where existing pharmacies prevail. It was found that five pharmacies that newly moved into a building owned by a university hospital foundation in Daegu in 2019 drew 75% of that hospital's prescriptions. The existing pharmacies filed a suit to cancel the new pharmacies' registrations. In 2022, the Supreme Court ruled that "the registrations of the five pharmacies newly opened in the hospital foundation's building must be canceled." In this case as well, BAE, KIM & LEE LLC represented the existing pharmacies.
Also, it was found that two pharmacies opened inside a university hospital in Changwon, South Gyeongsang Province, in 2017 accounted for 90% of the hospital's prescriptions for nearly three years. In this case, the Supreme Court ruled in 2020 that "the two pharmacies in question cannot be regarded as located in places independent of the hospital and are monopolizing prescriptions," adding, "the registrations of the two pharmacies must be canceled." Article 20 of the Pharmacist Act stipulates that "registration is not granted to pharmacies that seek to open inside or on the premises of a medical institution." In this lawsuit as well, the existing pharmacies retained BAE, KIM & LEE LLC.
◇ Pharmacy industry: "Competition over the right to make a living"… Supreme Court: "Existing pharmacies have standing to sue"
Whether existing pharmacies have standing to bring a lawsuit seeking the cancellation of a new pharmacy's registration has also become a point of contention. There have been cases where the appellate court and the Supreme Court reached different conclusions.
In 2020, a new pharmacy moved into a space that had been used as B Hospital's skin care room. Existing pharmacies nearby filed a suit to cancel the new pharmacy's registration. Article 20 of the Pharmacist Act stipulates that "registration is not granted to a pharmacy opened by modifying part of a hospital's facilities."
The first and second instances reached different conclusions. The first-instance court found that the existing pharmacies had standing to sue to cancel the new pharmacy's registration. It then held that the new pharmacy's registration should be canceled.
By contrast, the appellate court said the existing pharmacies lacked standing to sue in the first place. The court said, "It is hard to see the existing pharmacies' main sales as coming from B Hospital, and only a very small portion of B Hospital's prescriptions go to the new pharmacy," adding, "It is difficult to see the existing pharmacies' business rights as being infringed."
However, on the 11th the Supreme Court said, "Existing pharmacies also have standing to sue," adding, "because the existing pharmacies also received prescriptions from B Hospital, it can be expected that the emergence of the new pharmacy affected their sales." The case was remanded to the Seoul High Court, the appellate court.
The existing pharmacies, the plaintiffs in this case, said in a call with ChosunBiz, "As B Hospital's prescriptions flowed to the new pharmacy, the existing pharmacies' sales fell by more than half," adding, "we had no choice but to sue."
Nam Ki-jung, managing attorney at Law Firm Kanghan, said, "There are cases where a newly established pharmacy is promised a certain percentage of a particular hospital's prescriptions," adding, "existing pharmacies may find themselves in a situation where they must wage a legal battle for survival."