Asia-Pacific Update: South Korea the Latest Country to Enact Transparency Legislation

By Jennifer Bang

South Korea recently joined the global transparency wave and enacted the Korean “Sunshine Act”. It requires pharmaceutical and medical device companies operating in Korea to prepare an aggregated expenditure report if they have provided certain economic benefits to healthcare professionals (HCPs) as well as persons employed at medical institutions during a given fiscal year. The scope of the Korean Sunshine Act is much broader than its US counterpart in terms of both the types of the covered recipients and the level of granularity companies are required to record in their expenditure report. However, the biggest difference between the Korean transparency law and the US Sunshine Act is that the new Korean law does not require companies to submit the report and the supporting documents to the government, unless it is determined necessary by the Minister of the Ministry of Health and Welfare of Korea. Accordingly, the manufacturers collected data will not be made public.

The applicable law, Article 47-2 of the Pharmaceutical Affairs Act and Article 13-2 of the Medical Devices Act of Korea will take effect on June 3, 2017. However, companies are not required to collect and keep their expenditure reports until 2018. Companies are required to prepare an expenditure report along with the supporting documents within three months after the end of their 2018 fiscal year. For example, if Company A’s fiscal year ends in March, Company A is required to prepare an expenditure report by the end of June 2019. If Company B’s fiscal year ends in December, then Company B is required to prepare the report by the end of March 2019. Additionally, companies must keep the reports and supporting documents for five years.

As mentioned earlier, the covered recipients for Korean Sunshine Act are very broad in scope, and can be categorized into four groups – 1) pharmacists, 2) herbalists (including persons working for the relevant pharmacy), 3) “medical personnel”, which includes physicians, dentists, acupuncturists, midwives, nurses), and lastly, 4) medical institution founders (including the representative, director and other employees of a juristic person) or persons working for the relevant medical institution for the purpose of sales promotion, such as adoption of drugs or inducement of prescription.

Types of reportable economic benefits are as follows:

  • Product samples
  • Academic conference sponsorships
  • Honorarium provided to a covered recipient for conducting post-marketing surveillance (PMS) (equivalent to phase 4 clinical trials in US)
  • Funding of clinical trials
  • Food and beverages and other “freebies” (such as pens, notepads, etc.) provided at the product presentations
  • Discounts on drug or medical device sales made with certain payment methods

The Ministry of Health and Welfare of Korea held an information session on the new law for manufacturers on March 15, 2017. According to the tentative expenditure report template shared with the attendees during the session, the format of the expenditure report has not been finalized yet, but the level of details to be provided for each transaction is expected to vary depending on the expenditure type.

If you have concerns or questions regarding Korea’s new Sunshine Law and how that may impact your business, please contact Polaris to learn more about our innovative consulting and technology solutions.