War Declared on Drug Makers` Rebates to Doctors

The government will crack down harder on pharmaceutical companies who use rebates to doctors as a means of inflating drug prices.

The Health, Welfare and Family Affairs Ministry said yesterday that the state-run health insurer will pay up to 20 percent less for medicine from manufacturers that offer rebates to doctors.

Pharmaceutical makers found to provide rebates to doctors will receive 20 percent less than the official price of the drug in question. Second-time violators will see a cut of 30 percent.

In May, a court also decided not to reduce the penalty for doctors who receive rebates from pharmaceutical manufacturers.

The latest moves are said to be the strongest among government policies and could deal a direct blow to pharmaceutical makers by cutting the prices of drugs accounting for most of their revenue.

The government action is a response to pharmaceutical companies using rebates to doctors to inflate drug prices. A survey by the Fair Trade Commission and the Anti-Corruption and Civil Rights Commission said pharmaceutical companies spend about 20 percent of sales revenues for rebates every year, and the rebate amount is rising in accordance with inflation in medicine costs.

From Saturday, pharmaceutical importers will also implement their own agreement on transparency in transactions, limiting the value of gifts to doctors. The ministry also plans to determine the legality of sales activities based on the limits.

A majority of doctors support the rebates and are expected to resist the government move. According to a survey by an online community of doctors, 78 percent of 354 respondents said the rebates are legitimate marketing activities by pharmaceutical makers and should be legalized. Just five percent opposed the practice.

isityou@donga.com