May 26, 2015

Korea's Medical Devices Act Amendment: Monetary and Monetary-Like Benefits to Healthcare Workers

The Korean government is fighting the pervasive practice of rewarding doctors and other healthcare providers for utilizing the products of medical device and pharmaceutical companies.  A passive quid pro quo has led, in the eyes of many in the Korean government, to an industry that is dominated by a few players (most of which are noted foreign players).

The Korean Medical Devices Act and clarifying rules prohibit manufacturers and importers from providing monetary or monetary-like benefits in all forms but those explicitly listed under the amended Maintenance of Order from Distribution and Sale of Medical Devices Rule ("Medical Devices Rule" or "Rule").  The amended rule came into force in January of 2015.

This Medical Devices Rule covers all types of monetary and monetary-like compensation except for certain specified benefits including: sample, funding of clinical trials, post-market surveillance and support for presentations.

The salient parts of this convoluted Rule is as follows:

Samples
The prior Rule allowed the distribution of unit samples.  The prior Rule was criticized, since it is, often, not practicable to give to a healthcare provider a free sample in the case of a medical device. Imagine a medical device company giving away an MRI machine.  Thus, with industry input, the Rule was amended to allow the free use of a medical devices for one month prior to purchase.

Post-Market Surveillance
The prior Rule allowed for the funding of Post-Market Surveillance by medical device companies, however, the Rule limited the number of case reports to the number required to be submitted under the Enforcement Degree of the Medical Devices Act.  The limit caused the lack of funds, in many cases, for necessary re-examinations.

The amended Rule, now, allows for the funding of additional case reports in certain limited cases.

Overseas Product Demonstrations
The prior Rule attempted to keep importers out of the quid pro quo game by, only, allowing importers of medical devices to provide monetary or monetary-like benefits to those attending training programs that may improve their skills in the usage of medical devices.  The scope of acceptable benefits under the old Rule was very limited.

The new Rule expands the scope of acceptable practices and expands, potentially, the allowed benefits.

Overall, the revisions, for the medical device community, was warmly welcomed.  However, the increased enforcement over the part few years has not.  We will update the reader when more information on enforcements under this amended Rule become available.

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.