Sunshine Act Takes Effect in South Korea

08.01.17 | By Darren Jones and Jennifer Bang

As highlighted in our March 29th, 2017 blog post, the South Korean Ministry of Health and Welfare enacted the nation’s “Sunshine Act” on June 3rd, and consequently published a reporting template on June 28th. Under Article 47-2 of the Pharmaceutical Affairs Act and Article 13-2 of the Medical Devices Act of Korea, all pharmaceutical and medical device companies doing business in the country are required to establish and maintain an expense reporting system that collects and reports all economic benefits provided to HCPs and/or HCOs.

The resulting report, along with supporting documentation, must be kept for five (5) years. The report and documentation will only need to be submitted to the Ministry if requested.  Accordingly, the collected data will not be made public.

Companies will be required to begin collecting expenditure information starting January 1st, 2018.  The report and supporting documentation must then be prepared within three (3) months following the end of the 2018 fiscal year. For example, if Company A’s 2018 fiscal year ends December 2018, then the report must be prepared by March 2019. If Company B’s 2018 fiscal year ends in March 2019, then the report must be prepared by June 2019.

Reportable recipients under the Korean Sunshine Act are much broader than the U.S. counterpart. In addition to physicians and dentists, the new Korean law includes traditional Korean medicine practitioners, midwives, HCPs unique to Korea, as well as some non-HCPs such as founders and employees of medical institutions, in its definition of the reportable recipients. The legislation defines a reportable recipient as any of the following:

  • Pharmacists
  • Traditional Korean medicine pharmacists (including persons working for the relevant pharmacy)
  • Medical Personnel (e.g. physicians, dentists, traditional Korean medicine doctors, midwives, nurses)
  • Medical Institution Founders (including the representatives, directors, and other employees of a juristic person)
  • Employees of the relevant medical institutions

The Ministry also released seven templates for the Report for all reporting categories:

  • Provision of samples – including institution, product information, and date of provision
  • Sponsorship to academic conferences – including conference info and support funds amount
  • Support for clinical trials – including trial information, contact, joint investigator’s info, and support details (TOV amount, number/volume of product supported, contracting date). Reportable clinical trials include both the trials which require approval from Minister of the Ministry of Food and Drug Safety and those that do not
  • Product presentations:
    • Presentations held for multiple medical institutions: product info, HCP info (HCP name and HCP’s medical institution), TOV amount including travel, lodging, food and beverages, and other “souvenirs” or giveaways (e.g. pens, notepads, etc.)
    • Presentations held at a single medical institution: product info, medical institution info, HCP info (HCP name), TOV amount (food and beverages) and date
  • Post-market surveillances (PMS) – including product info, HCP info, and support details
  • Price discounts based on payment conditions – including medical institution info, contracting date, and discount rate

For the product presentations, the reporting threshold for food and beverages, as well as other “souvenirs” or giveaways is 10,000 won (about $9 USD). For all other types of transfers of values, there is no minimum threshold amount triggering the reporting obligation, and they should all be recorded in the applicable reporting template.

Spend caps are governed by both Article 44-4 of the Enforcement Regulation of the Pharmaceutical Affairs Act (applies to all reportable recipients) and the Improper Solicitation and Graft Act of Korea (applies only to those recipients who are also a government official). If a reportable recipient is a government official (which, by definition, includes but is not limited to, a physician working at a public hospital, or a professor of medicine at a private university), then the maximum amount of food and beverages he/she can receive from a manufacturer is 30,000 won (about $27 USD) per day. However, if he/she is not a government official, then the spend cap on food and beverages per day is 100,000 won (about $90 USD). Other types of TOVs, such as giveaways, consulting fees, market research, and PMS, also have certain spend caps, the cap varies depending on the reportable recipient’s place of employment.

There has been much speculation and concern as to whether the new law would require manufacturers to obtain each HCP’s signature for every incident of TOV, as well as whether the manufacturers would be required to collect and disclose HCP’s licensure information in the report. The finalized reporting template, however, requires neither. In addition, reportable recipients can request manufacturers to provide details of benefits they received from each manufacturer as recorded in the report, and the manufacturers would be required to disclose that information upon receiving a request.

With the varying spend caps and reporting templates, the new Korean Sunshine law poses a unique set of challenges for the pharmaceutical and medical devices companies on aggregating and maintaining the data. The companies are not only required to capture correct information in an appropriate template, but also to keep track of the spend caps at an individual level, and be ready to present the details of benefits provided to the authorities or an HCP upon request. Fulfilling these obligations is especially difficult since HCPs’ licensure information is not a required field in the reporting template, and South Korean HCPs oppose providing this information for privacy reasons. As such, life sciences companies currently operating or looking to enter into South Korea will need to establish a clear and efficient process and system. For example, the companies will need to establish a process for assigning a unique identifier to each reportable recipient in their system, so that they can better manage the data, while ensuring that they are compliant with the new law.

South Korea is just one of the latest countries to enact new transparency legislation. It is part of a larger global trend toward more stringent regulations. Polaris has over 15 years of experience helping life sciences companies manage their compliance obligations in a practical and sustainable way.  Our team of global consultants, combined with the leading technology for managing Global HCP Engagements and Transparency Reporting has made us the trusted compliance partner for many manufacturers.  Our team continues to monitor the shifting global compliance landscape so we can advise our clients and provide best in class technology solutions.

Polaris’ STAR (Spend Tracking Analytics and Reporting) solution was developed to help life sciences companies meet the ever-evolving challenges they face in adhering to global regulations. Polaris’ industry experts are currently adapting STAR to seamlessly create reports that adhere to South Korea’s new regulations as well as other new regulations as they are enacted.

For more information about STAR or how Polaris’ innovative technology and consulting solutions can make your compliance efforts effective and efficient, contact us.