1. Mandatory Establishment of Expense Reporting System
On June 3, 2017, Korea's version of the "Sunshine Act" will go into effect.
Article 47-2 of the Pharmaceutical Affairs Act and Article 13-2 of the Medical Devices Act of Korea require all pharmaceutical and medical device companies to establish and maintain an expense reporting system to collect and report on economic benefits provided to healthcare professionals ("Expense Reporting System"). Under this newly required Expense Reporting System, pharmaceutical and medical device companies are now required to collect and keep records of any economic benefit provided to a medical institution or healthcare professional and prepare an expense report on such economic benefits within three (3) months of the end of each fiscal year. The generated expense report, along with supporting documentation, must then be kept for five (5) years.
In addition to keeping the expense report and supporting documentation, if requested by the Minister of the Ministry of Health and Welfare (the "MOHW"), such expense report and supporting documentation must be submitted to the MOHW, which may then use such expense report and supporting documentation to investigate whether the relevant parties have been involved in any illegal kickback scheme.
This Expense Reporting System, however, differs from the "Open Payments System" of the United States, which publicly discloses the "Open Payments Data," including information on both the provider and recipient of the economic benefit, on its website each year. Under Korea's Expense Reporting System, the generated report and related information is not intended to be made public.
2. Reporting Template for Expense Report of Economic Benefits
In preparation for this newly introduced Expense Reporting System, the MOHW is preparing a draft reporting template, which will soon be introduced through an Enforcement Decree of the Pharmaceutical Affairs Act and Medical Devices Act.
The template is expected to have the following seven (7) reporting categories: (i) samples; (ii) clinical trials; (iii) post-market surveillances; (iv) product presentations to multiple medical institutions; (v) product presentation to a single medical institution; (vi) academic conferences; and (vii) price discounts based on payment conditions. These seven (7) categories represent economic benefits that are permitted by exception under the Pharmaceutical Affairs Act and Medical Devices Act, provided that they meet strict requirements as prescribed by applicable laws and regulations.
It is expected that the draft template will require information on the recipient medical institution and healthcare professional, as well as the value of the economic benefit given. Furthermore, according to the draft template currently under discussion, with respect to the seven (7) categories to be reported on, the reporting pharmaceutical and/or medical device company will be required to provide at least the following information:
- Samples: Information on the receiving medical institution, information on the samples provided, and the date of provision.
- Clinical Trials: Approval details of the Ministry of Food and Drug Safety, information on the participating healthcare professionals, and payment details of the research funds.
- Post-Market Surveillance: Information on the subject drug, information on the participating healthcare professionals, and payment details of the surveillance funds.
- Product Presentation (multiple medical institutions): Name of the product, information on the relevant healthcare professionals, payment details, and the place and date of the presentation.
- Product Presentation (single medical institution): Name of the product, information on the relevant healthcare professionals, payment details, and the place and date of the presentation.
- Academic Conference: Overview of the academic conference, information on the participating healthcare professionals, and payment details.
- Price Discounts based on Payment Conditions: Information on the purchasing medical institution and details of the discount arrangement.
Currently, there is a debate among interested parties whether the expense report template should include the signature or the identification number of the relevant healthcare professionals.
It is highly probable that a preliminary legislative announcement of the Enforcement Decree of the Pharmaceutical Affairs Act and Medical Devices Act will be released to the public in March or April of 2017. However, due to transitional provisions, the obligation to implement an Expense Reporting System is not expected to begin until the 2018 fiscal year. In light of the foregoing, it is very important that pharmaceutical and medical device companies keep themselves up to date on the ongoing legislative developments to prepare themselves for implementation of the Expense Reporting System.
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