Chief Executive Shin Young-seop, indicted on charges of providing illegal rebates worth billions of won to medical staff to sell more of JW Pharmaceutical's drugs, denied the charges at the first trial. Shin has already received a suspended prison sentence in another rebate case.
The Seoul Central District Court Criminal Division 5 single-judge panel (Presiding Judge Ryu Ji-mi, Director General judge) held the first hearing on the 12th for Shin and the JW Pharmaceutical corporation, who were indicted on charges including violations of the Monopoly Regulation and Fair Trade Act.
Shin and the corporation are accused of handing 2.1 billion won to medical staff over five years from February 2014 to December 2018. They are also accused of providing 900 million won to six medical professionals from 2017 to this year under the pretext of research clinical service fees. Prosecutors believe Shin and the corporation offered undue benefits to medical staff at hospitals and clinics nationwide to increase prescriptions of their own drugs and boost sales.
Shin's side denied the charges at the first hearing. Shin's attorney said, "They acted lawfully under the Pharmaceutical Affairs Act and the fair trade code," and added, "We ask the prosecution to clarify the purport of the indictment as to how a violation of the Fair Trade Act relates to a violation of the Pharmaceutical Affairs Act." When the court asked Shin if that aligned with his view, Shin answered, "Yes."
Meanwhile, Shin also received a suspended prison sentence in an appellate case on charges of violating the Pharmaceutical Affairs Act by providing economic benefits worth about 200 million won to 45 people, including medical professionals.
The Seoul Western District Court Criminal Appellate Division 1 (Presiding Judge Ban Jeong-woo, Director General judge) dismissed Shin's appeal on Jan. 1. Shin received the same sentence as in the first trial: 10 months in prison, suspended for two years. The 30 million won fine for the JW Jungoe Pharmaceutical corporation was also maintained. The ruling was finalized when Shin and the corporation did not appeal to the Supreme Court.
On the 6th, JW Pharmaceutical also received a three-month suspension of sales operations for 31 drugs, including Phospenem injection. The suspension runs until Aug. 5. The sales of the suspended items last year totaled 53.549 billion won. That is about 6.9% of the company's total sales on a consolidation basis last year.
However, for "Ncover solution," a patient nutritional supplement among the affected items, a penalty surcharge of 285 million won was imposed instead of a sales suspension. Article 81 of the Pharmaceutical Affairs Act allows a sales suspension to be replaced with a penalty surcharge in consideration of potential risks to public health or patient inconvenience.
JW Pharmaceutical said in a disclosure, "Quarterly sales may fluctuate, but we believe the impact on annual sales will be minimal."
A JW Pharmaceutical official said, "This lawsuit addresses the same facts as the matter currently in administrative litigation after the Korea Fair Trade Commission imposed a penalty surcharge," and added, "The company plans to fully clarify, through legal procedures, areas where there are differences in some facts and legal interpretation."