Chief Executive Park Sang-hun of Korean Drug, who was brought to trial on charges of siphoning company funds to provide illegal kickbacks to medical professionals, was sentenced to three years in prison at the first trial. Two Korean Drug employees indicted with Park were also sentenced to two years and one year and six months in prison, respectively. However, the court did not detain them in court, considering that they acknowledged the charges.
The Criminal Division 33 of the Seoul Central District Court (Presiding Judge Lee Jin-gwan) on the 2nd sentenced Park to three years in prison on charges including embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes. Embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes is a charge that imposes heavier penalties than ordinary embezzlement when the amount of company funds siphoned off exceeds a certain threshold.
The court found that Park effectively directed Korean Drug's process of providing kickbacks. The court said Park "seized every step of the offense by instructing or approving the kickbacks," and "not only provided kickbacks but also raised funds through illegal means such as embezzlement over a long period." The embezzlement loss recognized by the court is about 4 billion won.
The fact that Park, as the company's chief executive, had a responsibility to lead compliance management but instead spearheaded illegal sales practices also worked against Park in sentencing. The court noted, "Park has a responsibility to adhere to corporate ethics and build a clean sales culture," adding, "Nevertheless, Park emphasized a sales approach involving payments such as promotional expenses at the company level and even instructed sales staff to engage in illegal kickback activities."
However, the court viewed as favorable circumstances that Park admitted the charges and cooperated with the investigation. It also considered that the profits gained from property crimes such as embezzlement were not used personally and that Korean Drug employees made efforts to improve, such as conducting regular training to break away from existing sales practices.
The court also said the social harm of pharmaceutical kickback crimes is significant. The court said, "When a pharmaceutical supplier provides economic benefits to medical professionals, it hinders the development of the related industry," adding, "The burden ultimately shifts to patients and the public who purchase the drugs, resulting in very large social harm."
The excessive competitive structure among pharmaceutical companies was also reflected in sentencing. The court explained, "The market is flooded with drug manufacturers and suppliers with little difference in price, ingredients, and efficacy," and "We considered that the kickback practice to win the choices of medical professionals with prescribing authority influenced the offenses in this case."
An executive of Korean Drug and a finance manager who were brought to trial with Park were sentenced to two years and one year and six months in prison, respectively. Korean Drug as a corporation was fined 10 million won. For the remaining 17 employees, including Korean Drug salespeople, the court handed down suspended sentences or fines.