"IPC certification can be revoked even after pharma clears charges"

If individual employees are found liable for illegal rebates

MOHW, "An administrative procedure to evaluate whether policy incentives should be maintained, independent of criminal punishment…not an excessive or redundant measure"

"Regarding illegal rebates, a corporate entity is still held responsible…companies with administrative sanction histories will be included for review"

The Ministry of Health and Welfare (MOHW) announced that even if a pharmaceutical company is cleared of charges in an illegal drug rebate investigation and only individual employees are found liable for violations, the company remains subject to review for the revocation of its Innovative Pharmaceutical Company certification.

The MOHW states that because revoking Innovative Pharmaceutical Company certification is an administrative procedure to evaluate whether policy incentives should be maintained, independent of criminal punishment, it is not an excessive or duplicate sanction.

On the 1st, the MOHW responded to written inquiries from Representative Mi-hwa Seo of the Democratic Party of Korea on the National Assembly's Health and Welfare Committee.

The MOHW explained that when pharmaceutical companies are found providing illegal rebates, the ministry decides whether to revoke Innovative Pharmaceutical Company certification by comprehensively evaluating administrative sanction histories and accountability for disrupting market order, regardless of any criminal penalties imposed on the company.

The rationale is that revoking Innovative Pharmaceutical Company certification due to distribution order violations, such as rebates, functions as a regulatory governance mechanism to determine whether it remains appropriate to grant and sustain qualification and preferential policy benefits, distinguishing it from criminal penalties or statutory administrative sanctions under the Pharmaceutical Affairs Act or the National Health Insurance Act.

In practice, when reviewing certification revocations, the MOHW determines whether to revoke status through deliberation·resolution by the Pharmaceutical Industry Promotion and Support Committee, based on criteria such as rebate amounts (whether under KRW 5 million), violation frequency (fewer than two instances), and the violation period (excluding violations that occurred more than five years prior).

The MOHW clarified that even if a company is cleared of charges due to an employee's individual fault, corporate accountability cannot be detached once fair market order has been compromised.

Under the 'Special Act on the Promotion and Support of the Pharmaceutical Industry' and related regulations, receiving an "administrative sanction" under the Pharmaceutical Affairs Act or the Monopoly Regulation and Fair Trade Act renders a company subject to disqualification and revocation review.

Of the four cases reviewed over the past five years involving judicial dispositions and corporate liability, it was confirmed that one company had its certification revoked and another voluntarily surrendered its certification despite operating a Compliance Program (CP) and receiving non-indictment (cleared of charges) dispositions for the corporate entity. The remaining two cases were disqualified from certification renewal due to factors such as failure to submit documentation.

The MOHW also dismissed concerns that imposing certification revocation alongside existing administrative measures, such as drug price reductions and administrative fines, constitutes excessive sanctioning.

The MOHW stated, "The Innovative Pharmaceutical Company framework is a system designed to give accredited benefits to companies capable of leading the industry based on ethical responsibility," adding, "Because it is a regulatory measure to assess the validity of maintaining certified status, it does not constitute duplicate or excessive sanctioning."

However, the MOHW does not currently operate explicit statutory reduction provisions for proactive corporate compliance activities (operating CP or establishing ISO 37001).

The MOHW stated, "During committee evaluations, members consider corporate compliance efforts and attributable liability," and explained, "The MOHW will gather feedback from experts and stakeholders on establishing detailed review criteria that reflect substantive corporate liability and preventive efforts as mitigating factors."

In response to concerns that a substantive review process is necessary to examine who is responsible for and the extent of charges during revocation proceedings, the MOHW responded that "We are currently evaluating prior notices, formal hearings, and deliberations by the Pharmaceutical Industry Promotion and Support Committee, considering the motives, background, severity, and degree of intent or negligence behind the violation."

The MOHW further stated, "Even if a company is cleared of charges, corporate and individual liability cannot be separated once an employee's illegal rebates disrupt fair market order," and concluded by adding, "Considering the high level of criticisims from the society associated with rebates and the necessity to actively eradicate them for the sound development of the pharmaceutical industry, it is necessary to re-evaluate whether to maintain government-accredited Innovative Pharmaceutical Company status."