Medicinal product regulation and product liability in South Korea: overview

A Q&A guide to medicinal product regulation and product liability law in South Korea.

The Q&A gives a high level overview of key issues including pricing and state funding, manufacturing, marketing, clinical trials, advertising, labelling, and product recall and liability.

To compare answers across multiple jurisdictions, visit the Medicinal product regulation and product liability Country Q&A tool.

For information on pharmaceutical patents, trade marks, competition law, patent licensing, generic entry, abuse of dominance and parallel imports, visit Pharmaceutical IP and Competition Law in South Korea: overview.

The Q&A is part of the global guide to Life Sciences law. For a full list of jurisdictional Q&As visit www.practicallaw.com/lifesciences-guide.

Contents

Regulatory overview

1. What are the main legislation and regulatory authorities for pharmaceuticals in your jurisdiction?

Legislation

Pharmaceutical products are regulated by the Pharmaceutical Affairs Act. It contains, among other things:

  • Comprehensive provisions relating to the manufacture, import, sale and advertising of pharmaceutical products.

  • The conditions for licensing, establishing and operating pharmacies.

The Pharmaceutical Affairs Act categorises pharmaceutical products as follows:

  • Drugs.

  • Herb medication.

  • Therapeutic devices.

Regulatory authorities

The main administrative authority overseeing the enforcement of the Pharmaceutical Affairs Act is the Ministry of Food and Drug Safety (MFDS) (www.mfds.go.kr). The MFDS can:

  • Accept reports or applications to manufacture, import or sell medicinal products.

  • Assess safety and effectiveness of new medicinal products.

  • Approve clinical trials.

  • Set categories or standards for medicinal products.

  • Issue corrective administrative orders and fines.

 
2. Briefly outline how biologicals and combination products are regulated in your jurisdiction.

Biologicals are treated as drugs, as defined under the Pharmaceutical Affairs Act. Additionally, the MFDS has issued specific good manufacturing practices (GMP) for biologicals.

 
3. Briefly outline how medical devices and diagnostics are regulated in your jurisdiction. Is there any specific regulation of health IT issues and mobile medical applications?

The manufacture, import, sale and advertising of medical devices are regulated by the Medical Devices Act. It classifies medical devices into four classes based on the intended use and the risk that the device poses to the patient:

  • Class I. Devices with rare potent risk.

  • Class II. Devices with low potent risk.

  • Class III. Devices with medium potent risk.

  • Class IV. Devices with high risk.

The MFDS enacted the Guideline on Mobile Medical Applications on 31 December 2013. The major provisions of the Guideline are as follows.

If the mobile medical application qualifies as medical device under the Medical Devices Act, the mobile medical application is deemed a medical device.

Mobile medical applications that are medical devices subject to regulatory oversight by the MFDS include any of the following:

  • Applications that remotely control a medical device.

  • Applications that display, store and analyse a measurement transmitted from a medical device.

  • Applications whose platform is used as a medical device using a coupling apparatus.

  • Applications whose platform is used as a medical device using an apparatus embedded in the mobile platform.

  • Applications that diagnose or provide treatment through patient-tailored analysis.

Applications that are not medical devices subject to regulatory oversight by the MFDS include those that:

  • Provide general medical information.

  • Help patients self-manage their disease or conditions without providing specific patient-tailored treatment or treatment suggestions.

  • Assist the operation of the medical institution (for example, management of patient information and an electronic recording system) by the process of automation.

  • Are used to provide a communication system (for example, video assistance for the medical examination of the patient by the healthcare professional).

Mobile medical applications, like general medical devices, are reviewed for approval and for good manufacturing practices (GMP) based on the particular characteristics of the application. Considering the service environment of a mobile medical application, the MFDS evaluates the safety and efficacy of the mobile medical application, based on the standards for medical software and ubiquitous healthcare (U-healthcare) systems.

A sales business report is not required for the sale of a mobile medical application for self-diagnosis. The MFDS monitors and suspends the sale of products for which there is unapproved manufacture/import/sale, exaggerated advertisement or unapproved pre-advertisement.

For in vitro diagnostic products, those that are considered a drug were regulated by the Pharmaceutical Affairs Act and those that are considered a device were regulated by the Medical Devices Act. However, as of 10 November 2014, all in vitro diagnostic products (drugs and devices) are consolidated to be regulated singularly under the Medical Device Act.

 

Pricing, state funding and reimbursement

4. What is the structure of the national healthcare system, and how is it funded?

At the core of the national health system is national health insurance under the National Health Insurance Authority. Any South Korean citizen with an income must subscribe to the national health insurance, and make insurance payments based on his level of income. A foreign national residing in South Korea who meets certain requirements can become a subscriber or a dependant of a subscriber to receive benefits.

If the insured contracts a disease, he is entitled to insurance proceeds under the National Health Insurance Authority until he makes a full recovery, regardless of the amount of insurance payments he has previously made. The funds administered under the National Health Insurance Authority consist of government subsidy and insurance payments from the insured.

 
5. How are the prices of medicinal products regulated?

There are no direct restrictions on the price of medicinal products. However, reimbursement prices of medicinal products are strictly regulated if the costs of the products are reimbursed under the National Health Insurance Authority. In principle, reimbursement ceilings for new products are determined through negotiations with the medicinal product producer and the National Health Insurance Corporation. The National Health Insurance Corporation determines a lower reimbursement price for generic products pursuant to the Ministry of Health and Welfare (MOHW) Regulations (for example, generic pharmaceutical products will have a reimbursement price, which is 53.55% of the new pharmaceutical products).

Medicinal product prices are generally set at reimbursement ceilings as listed and publicised by the MOHW.

 
6. When is the cost of a medicinal product funded by the state or reimbursed? How is the pharmacist compensated for his dispensing services?

The insurance proceeds are reimbursed to the medical institutions and pharmacies that provide medicinal products to insured patients. The medical institutions and pharmacies:

  • Buy medicinal products from the pharmaceutical companies to treat insured patients.

  • Administer or provide these medicinal products to insured patients, in exchange for a limited amount paid by the insured patient under the National Health Insurance Authority.

  • Subsequently receive reimbursements in the form of insurance proceeds from the National Health Insurance Corporation, within the limit under the National Health Insurance Authority.

For medicinal products bought outside medical institutions, the ratio between the amount paid by the insured patient and the National Health Insurance Corporation is about 30:70.

For medicinal products bought within medical institutions, the percentage paid by the insured patient varies from 20% to 60%, depending on the type of medical institution or whether the patient is hospitalised.

 

Clinical trials

7. Outline the regulation of clinical trials.

Legislation and regulatory authorities

The Pharmaceutical Affairs Act and Medical Devices Act govern the clinical trials of medicinal products and medical devices, respectively. The overseeing authority is the MFDS.

Authorisations

To conduct a clinical trial for medicinal products without market authorisation, a clinical trial protocol must be approved by the MFDS. For this purpose, the following must be submitted to the MFDS:

  • A plan for the clinical trial.

  • Supporting documents or data proving the relevant medicinal products have been manufactured in compliance with medicinal product manufacturing and quality management standards. For biomedical materials, biomedical product manufacturing and quality management standards must be included.

  • Self-evaluation standards and testing methods, and the documents requested by the Commissioner of the MFDS relating to safety and effectiveness.

  • Data on safety and effectiveness, consisting of the following parts:

    • development plan;

    • introduction: detailed information on the medicinal product (for example, name, major ingredients and effects), purpose and term of the clinical trial, clinical experience and a short explanation of the reason for suspension (if any) of the clinical trial or sale of product;

    • information on the properties of the relevant matter;

    • information on the medical action;

    • information on the toxicity;

    • information on the clinical trial results;

    • evidentiary materials; and

    • information on clinical subjects.

To obtain approval of a clinical trial protocol in South Korea, a foreign pharmaceutical company with no company established in South Korea must delegate all rights and responsibilities for the execution of the clinical trial through an agreement with a contract research organisation established in South Korea. In this case, the contract research organisation that obtained approval of the clinical trial protocol becomes the clinical trial investigator under the clinical trials regulations.

Consent

The following must be explained to the trial subject to obtain their prior informed consent to the trial:

  • The contents of the clinical trial.

  • Possible adverse effect on the health of the trial subject.

  • Compensation amount and procedure.

Trial pre-conditions

Before a clinical trial begins, the protocol must be reviewed in advance by an institutional review board (IRB), and a written contract must be concluded between the sponsor (for example, a medicinal product manufacturer) and the medical institution.

Procedural requirements

Clinical trials must be conducted in accordance with the standards under the Good Clinical Practices for pharmaceutical products and medical devices, relating to the:

  • Test method.

  • Qualifications of testing institution and test supervisor.

  • Safety plan.

  • Test period.

  • Preservation of related data.

 

Manufacturing

8. What is the authorisation process for manufacturing medicinal products?

Application

To operate a medicinal products manufacturing business, an application for a manufacturing business licence must be submitted to the MFDS under the Pharmaceutical Affairs Act.

In addition, a manufacturer must obtain a product licence to manufacture a medicinal product under the Pharmaceutical Affairs Act (see Question 9).

As for importation of medicinal products, the Pharmaceutical Affairs Act (PAA) does not require an import business licence for the importation of medicinal products (a person can import medicinal products, even without a manufacturing licence or wholesale licence). However, although not provided in the PAA, registration as an import business at the local branch of the MFDS is required in practice. Under the proposed amendment to the PAA, which will come into effect as of 29 September 2015, the importer would need to obtain an import business licence, in addition to the marketing authorisation for the medicinal product itself. Importers who have already obtained a marketing authorisation before enforcement of the amendment will be given a cure period of one year to obtain the necessary import business licence.

Conditions

To receive a manufacturing business licence for medicinal products, the following must be obtained:

  • A manufacturing facility.

  • A laboratory for managing the quality of ingredients, materials and products.

  • Storage for ingredients, materials and products.

  • Facilities and equipment necessary for manufacturing and maintaining quality.

  • Manufacturing supervisor and safety control officer, who has the qualification (for example, pharmacist) required under the relevant law and cannot hold two offices concurrently, and must report to the local MFDS office about accepting either of these positions).

Further, the MFDS has established GMPs for medicinal products.

Restrictions on foreign applicants

A foreign manufacturer of medicinal products without a Korean manufacturing business licence must distribute its products through an authorised operator with an address in South Korea. A foreign manufacturer with either a Korean affiliate or a subsidiary can produce medicinal products through toll manufacturing (that is, outsourcing the manufacture of medicinal products to a qualified company using a manufacturing business licence (see above, Conditions).

Key stages and timing

Close co-operation with any MFDS order and/or decision in a timely manner during the application procedure is very important. After filing an application, there is usually an opportunity to discuss the application with a MFDS official and correct any shortcomings in the application. The MFDS also conducts an on-site inspection of the applicant's facility. It generally takes 25 days from the date of filing the application for the MFDS to decide applications for manufacturing business licences for medicinal products.

Fee

The application fee is KRW280,000 if the application is submitted in person, and KRW252,000 if the application is submitted online. Information about MFDS fees can be found on its website.

Period of authorisation and renewals

Authorisation is not subject to any time limit. When an authorisation is issued, it continues to be in effect unless it terminates (for example, due to cancellation) or if it is revoked as a result of the company's failure to comply with requirements under the Pharmaceutical Affairs Act (see Question 10).

Monitoring compliance and imposing penalties

The MFDS is the principal regulator of manufacturing authorisations (Pharmaceutical Affairs Act). The MFDS can conduct an on-site inspection of a manufacturing facility to ensure that regulations and the GMP are satisfied (Pharmaceutical Affairs Act). If a violation is found, the MFDS can issue an order for:

  • Correction.

  • Disposal.

  • Suspension or cancellation of the manufacturing licence.

Criminal sanctions, such as imprisonment or a fine, can be imposed. The person liable and also the company for which the person works can be fined.

 

Marketing

Authorisation and abridged procedure

9. What is the authorisation process for marketing medicinal products?

Application

A product licence must be obtained from the MFDS to manufacture, import or market a medicinal product (Pharmaceutical Affairs Act).

For pharmaceutical products, an application with supporting documents (including clinical data and a GMP certificate) must be submitted to the MFDS for approval. However, some products are exempt from the MFDS approval procedure (for example, products set out under the Korean pharmacopoeia, an official compendium or a book of medicinal products recognised by the MFDS). In these cases, a report must be submitted to the MFDS before the manufacture, importing or marketing of such products. The MFDS will review the report to ensure that the exemption requirements are satisfied.

Authorisation conditions

The MFDS mainly considers whether the following factors have been satisfied, in accordance with the standards set out for each medicinal product:

  • Safety.

  • Efficacy.

  • Quality.

  • For imported products, information on production and sale in the country of origin.

  • Other relevant information.

For importers of medicinal products, the importer must have the following facilities along with the import supervisor and the safety control person and report to the local MFDS office:

  • Business office.

  • Warehouse for medicinal products.

  • Research facility and required equipment (if research will be outsourced to a contract research entity, this element is not required).

In case of generics, much like the Hatch-Waxman system of the US, a generic applicant for marketing authorisation must notify the relevant patent holder of the original product under the new Patent-Approval Linkage System. On receipt of such notification, the patentee can request MFDS for a generic stay (only on sales, not the marketing authorisation itself) for a period of nine months. If the generic applicant is the first to succeed in challenging the relevant patent through a court action (invalidation trial and negative patent scope trial included), a generic exclusivity is offered to the successful generic applicant for a period of nine months.

Key stages and timing

It usually takes at least seven months to obtain a product licence to manufacture and market medicinal products from the MFDS. The key stages are as follows:

  • Safety and efficacy review: 70 days.

  • GMP evaluation: 90 days in the case of a finished medicinal product; 60 days in the case of raw material medicinal products.

  • Review of the standards for manufacture and the materials regarding the test methods: 55 days (biological medicine: 115 days).

  • Review of the materials regarding pharmaceutical equivalence: 55 days.

  • Review of the materials regarding raw material medicinal products subject to registration: 120 days.

  • Review of all other materials: 25 days.

Fee

Fees payable to the MFDS vary from KRW27,000 to KRW4.14 million for pharmaceutical products. This depends on whether:

  • The filing is an application for approval or a report.

  • Safety and efficacy evaluations are required.

  • Evaluations on data for medicinal product equivalency tests are required.

Period of authorisation and renewals

For new drugs, the product licence is granted for a five-year term and, as such, the licence must be renewed every five years (Pharmaceutical Affairs Act) (see Question 10).

Monitoring compliance and imposing penalties

The MOHW and the MFDS can effectively monitor whether products are manufactured, imported, distributed and sold according to the Pharmaceutical Affairs Act.

The MFDS can issue an order of:

  • Correction.

  • Disposal.

  • Recall.

  • Suspension or cancellation of the manufacturing licence.

Further, the MFDS can file a criminal report with the public prosecutors' office for criminal prosecution.

 
10. What commitments and pharmacovigilance obligations apply after a company has obtained marketing authorisation? Are there further conditions concerning how the drug is distributed and accessible to patients?

Other conditions

Under the Pharmaceutical Affairs Act, pharmaceutical products can only be distributed and sold by licensed wholesalers (including manufacturers and importers) or pharmacists and registered sellers of emergency medicinal products under the Pharmaceutical Affairs Act.

Post-marketing commitments and pharmacovigilance obligations

Post-marketing surveillance focuses on the efficacy and safety of new medicinal products. The minimum number of reports required to be submitted to the MFDS depends on the type of product and varies from 600 to 3,000. For example, the following are subject to post-marketing surveillance during the following re-examination periods, starting from the date of the product licence approval:

  • New drugs: six years.

  • Pre-approved prescription drugs with a new indication (that is, a new application for an existing approved drug): four years.

 
11. Which medicinal products can benefit from the abridged procedure for marketing authorisation and what conditions and procedure apply? What information can the applicant rely on?

The Pharmaceutical Affairs Act has simplified the application procedure for authorisation of certain medicinal products. If a product is subject to approval, the approval procedure can also be simplified as follows:

  • Information or materials relating to safety and efficacy need not be submitted if the product (other than new drugs) both:

    • is not a biological product, gene recombination product, cell culture product, gene treatment, cell treatment, or other similar product;

    • corresponds to the manufacturing standards publicised by the MFDS, or is listed in the Korean pharmacopoeia or book of medicinal products recognised by the MFDS.

  • Pills, capsules or suppository drugs that contain the same ingredients as those already approved for manufacture and sale are exempt from safety and efficacy evaluations, but data on biological equivalency must still be submitted.

  • If the product is an orphan drug that requires immediate introduction, information or materials relating to manufacture, quality standards, and test methods need not be submitted.

  • For generic drugs, the MFDS's review focuses mainly on the bioequivalence test.

 
12. Are foreign marketing authorisations recognised in your jurisdiction?

Foreign marketing authorisations are not recognised (see Question 8, Restrictions on foreign applicants).

 

Parallel imports

13. Are parallel imports of medicinal products into your jurisdiction allowed?

South Korean law does not specifically prohibit parallel imports. However, the parallel import of medicinal products is not allowed, in that a product licence must be obtained to sell foreign medicinal products in South Korea (see Question 9).

For information on pharmaceutical patents, trade marks, competition law, patent licensing, generic entry, abuse of dominance and parallel imports, visit Pharmaceutical IP and Competition Law in South Korea: overview ( www.practicallaw.com/6-561-4265) .

 

Restrictions on dealings with healthcare professionals

14. What are the restrictions on marketing practices such as gifts, sponsoring, consultancy agreements or incentive schemes for healthcare establishments or individual medical practitioners?

Amendments made in 2010 to the Pharmaceutical Affairs Act and Medical Services Act (MSA) introduced the Dual Punishment System, which prohibits the provision and receipt of any economic benefits for the purpose of promoting the sales of medicinal products. This restriction applies broadly to healthcare professionals, including:

  • Doctors.

  • Pharmacists.

  • Nurses.

  • Medical institutions and their administrative staff.

  • Pharmaceutical companies, medical device companies, wholesalers and their employees.

The following activities are not prohibited:

  • Provision of samples.

  • Sponsoring the organisation or attendance of academic congresses.

  • Sponsoring clinical studies.

  • Product presentations.

  • Early payment discounts.

  • Post-marketing surveillance.

  • Accumulation of procurement credit card points.

Violation of the amended Pharmaceutical Affairs Act and MSA results in:

  • Monetary fines.

  • Suspension or cancellation of business or practice licences.

  • Criminal charges of up to two years' imprisonment.

The Monopoly Regulations and Fair Trade Act (MRFTA) also prohibits offering and receipt of kickbacks (that is, benefits offered to healthcare professionals to induce recommendation or prescription to their clients). In case of violations of the MRFTA, the Korea Fair Trade Commission (KFTC) can issue a corrective order, impose monetary fines and file a criminal report with the public prosecutors' office.

When kickbacks are discovered, a 20% decrease in drug reimbursement prices can be imposed under the National Health Insurance Authority.

The extraterritorial enforcement clauses of MRFTA, Pharmaceutical Affairs Act and the Penal Code apply to foreign entities if they offer or provide kickbacks to Korean healthcare professionals.

On 3 March 2015 the National Assembly passed the Act on the Prevention of Improper Solicitation and Receipt of Money and Goods (Anti-Bribery Act), which purports to scrutinise interactions with public officials and members of some private sectors such as the media. The Anti-Bribery Act will undergo the remaining legislative process and is scheduled to become effective as of September 2016.

When it becomes effective, it will penalise various acts of corruption that the current laws and regulations do not. One significant aspect of the Anti-Bribery Act is that the "duty relation" is removed. Until the Anti-Bribery Act was enacted, receipt of money or gifts by a public official in connection with one's official duty was subject to prosecution. However, under the Anti-Bribery Act, receipt of money or gift in any circumstance would be subject to a penalty.

In the pharmaceutical/medical industry, this new law becomes relevant to its interactions with the MFDS and other government agencies, publicly funded universities, research centres and hospitals, and the media. This adds to the already stringent burden imposed on the industry by the industry codes, Pharmaceutical Affairs Act, fair trade laws, and so on. However, it is still at the early legislative stage and it is uncertain what the final form will be, given that its contents at present are highly contested.

 

Sales and marketing

15. What are the restrictions on selling medicinal products? Are there specific regulations for the sale of medicinal products on the internet, by e-mail and by mail order?

The Pharmaceutical Affairs Act imposes strict restrictions on the marketing of medicinal products. Only licensed pharmacists and pharmaceutical (including manufacturers and importers) can sell medicinal products in principle.

Further, pharmacists and pharmaceutical sellers can only sell medicinal products in their pharmacies or shops. Therefore, online sales of medicinal products are illegal.

Since November 2012, certain household medicines designated by the MOHW can be sold in 24-hour open convenient stores, as the Pharmaceutical Affairs Act was amended.

 

Advertising

16. What are the restrictions on advertising medicinal products?

Legislation and regulatory authority

Advertising of medicinal products is subject to the Pharmaceutical Affairs Act. The MFDS is the main regulatory authority (see Question 1, Regulatory authorities).

Restrictions

Under the Pharmaceutical Affairs Act:

  • Advertising is only allowed for MFDS-approved products.

  • Advertising must comply with the MFDS's approved indications, efficacies and other conditions.

  • False, deceitful, exaggerating or slanderous advertising is prohibited.

  • Absolute expressions such as "the best" cannot be used.

  • Individual healthcare professionals cannot be recommended.

  • Direct-to-consumer advertising must be reviewed in advance by the MFDS or its designated body.

  • Direct-to-consumer advertising for prescription drugs is not allowed.

Additionally, the Fair Labelling and Advertising Act generally prohibits false, deceitful, exaggerating or slanderous advertising.

Direct-to-consumer advertising is possible for OTC products. However, advance screening by the review committee under the Korea Pharmaceutical Manufacturers Association applies.

Internet advertising

The Pharmaceutical Affairs Act does not specifically regulate internet advertising. Therefore, the same principles apply to internet advertising (see above, Restrictions).

The Promotion of Information and Communications Network Utilisation and Information Protection Act regulates e-mail advertising and requires the following details to be disclosed when sending out mass advertising e-mails:

  • Name and contact information of the sender.

  • Steps to easily indicate whether to accept or refuse to receive the e-mail. If recipients reject an e-mail, the sender must not resend the e-mail to the same recipients (opt-out method).

 

Data protection

17. Do data protection laws impact on pharmaceutical regulation in your jurisdiction?

Data protection

If a written request is made for the protection of data submitted to the MFDS (in connection with product approval, clinical trials, post-market surveillance and so on), the MFDS will not disclose such information, unless disclosure is deemed necessary for public interest (Article 88, Pharmaceutical Affairs Act).

Personal information protection

The Personal Information Protection Act governs the protection of personal data in South Korea. Under the Personal Information Protection Act, the MFDS has announced Detailed Guidelines on Personal Information Protection to be complied with by the MFDS, its affiliates and all personal information handlers. More specifically, the Detailed Guidelines:

  • Provide a principle of protection of personal information applicable to the collection, use, provision, management and disposal of personal information.

  • Require personal identification information passwords and bio-information to be encrypted.

  • Provide rules on the management of the life cycle of personal information by the personal information handler. This includes:

    • notification of the origin of personal information;

    • handling of sensitive information;

    • consent to handling of unique identification information;

    • verification of online identity;

    • storage and transmission of personal information;

    • use of personal information for other purposes;

    • management of transfer of the personal information to third parties;

    • disposal of personal information; and

    • protection of the rights of personal information subjects.

 

Packaging and labelling

18. Outline the regulation of the packaging and labelling of medicinal products.

Legislation and regulatory authority

Packaging and labelling of medicinal products are subject to the Pharmaceutical Affairs Act. The MFDS is the regulatory authority.

Information requirements

Packaging and labelling rules for medicinal products differ depending on the types of medicinal products.

The following information (among others) must generally be indicated on the container or packaging of medicinal products:

  • Name and address of the approved manufacturer or importer.

  • Name of the product.

  • Manufacture number and expiration.

  • Quantity (weight, volume or number).

  • Method of storage and other matters to be indicated on the labelling, for certain specially designated medicinal products.

  • Name of the ingredients.

  • Indication of prescription drug or over the counter (OTC) and price.

Other conditions

All labelling of medicinal products must be in Korean. Foreign language or Chinese characters in the same size as the Korean language can be used together with Korean.

 

Product liability

19. Outline the key regulators and their powers in relation to medicinal product liability.

Order for recall, disposal or publication

The Commissioner of the MFDS, the local mayor or governor can order the seller of a medicinal product to recall, dispose of or make other appropriate measures regarding a medicinal product in circulation, if he determines that the medicinal product causes or may potentially cause harm to public health.

If the order is not complied with, or if urgent action is needed for public health, the Commissioner of the MFDS, the local mayor or governor can have a public official recall or dispose of the product as necessary. If this occurs, the relevant seller of the medicinal product must publicise this fact.

Penalties

Criminal sanctions, such as imprisonment or a fine, can be imposed for a violation of an order to recall or dispose of a product under the Pharmaceutical Affairs Act. The person liable and also the company for which the person works can be fined.

Relief scheme for drug side effects

A system provides relief funds to patients that suffer substantial damage (for example, death and hospitalisation) due to drug side effects despite proper usage of the drug, through funds imposed/collected from manufacturers/importers/holders of product licences.

The key governing body is the MFDS. The scheme is operated by the Korea Institute of Drug Safety and Risk Management, whose role is to manage the system of relief funds, such as processing relief applications, investigation of the claimed damage, and processing relief payments to claimants. The MFDS's role is to manage the system of relief funds, operate the drug side effects assessment committee, operate the approval mechanism for relief funds apportioned to each manufacturer, and so on.

 
20. Are there any mandatory requirements relating to medicinal product safety?

Warnings

Side effects of medicinal products must be properly disclosed on labels and packaging of the medicinal product (Pharmaceutical Affairs Act).

Duty to report adverse events

The following must be reported to the Chairman of the Korea Institute of Drug Safety and Risk Management, who must report it to the Commissioner of the MFDS (Pharmaceutical Affairs Act):

  • The person that obtained approval of the product, manufacturer, importer or wholesaler becomes aware of a harmful event regarding the safety or efficacy of a medicinal product, which may have been caused by the medicinal product.

  • A founder of a pharmaceutical or a medical institution becomes aware of a harmful event involving a serious illness, disability or death that may have been caused by the medicinal product.

Voluntary recall

The following must, without delay, recall or take all measures required for recall of a medicinal product in circulation, on becoming aware of a problem with the safety or efficacy of the product in violation of the Pharmaceutical Affairs Act (sellers of medicinal products):

  • The person that obtained approval of the medicinal product.

  • The manufacturer of the medicinal product.

  • Importer or seller of medicinal products.

  • Founder of a pharmacy.

  • Founder of a medical institution.

  • Other persons that may sell or handle medicinal products under the Pharmaceutical Affairs Act, or any other law designated by ordinance of the Prime Minister.

A seller of medicinal products must also, without delay:

  • Voluntarily recall any medicinal product that is known to have caused or have the potential to cause harm to the human body by, for example, a quality defect.

  • Report the recall plan to the MFDS.

The Commissioner of the MFDS can (Pharmaceutical Affairs Act):

  • Exempt a person who undertakes the above measures in good faith from administrative sanctions.

  • Once he receives the report of the recall plan, order the sellers of medicinal products to publish the recall plan.

The recall notice must indicate the:

  • Name of the product.

  • Manufacture or purchase by date.

  • Manufacture number.

  • Reason for recall.

  • Method of recall.

  • Recall operator.

  • Address of operator.

  • Contact information.

  • Date of notice.

Additionally, the MFDS can publish information on its website (http://ezdrug.mfds.go.kr) about a harmful medicinal product subject to an order for recall or suspension of sale. This notice includes the:

  • Name of the medicinal product.

  • Address and telephone number of the company.

  • Product name.

  • Reason for recall.

  • Manufacture number (manufacture date).

  • Use by date.

  • Unit of packaging.

  • Date of order for recall.

  • Person in charge.

Penalties

A violation of the duty to report side effects or of the voluntary recall provisions under the Pharmaceutical Affairs Act and the Medical Devices Act is subject to:

  • Up to a one year suspension of the manufacture and import of the product.

  • Cancellation of the permit for manufacture or import of the product.

  • Suspension of manufacture or import.

The founder of a medical institution or a healthcare professional can be subject to fines of up to KRW5 million. A violation of the duty to report side effects is subject to criminal sanctions, such as imprisonment or a fine. The person liable and also the company for which the person works can be fined.

A violation of the duty to publish the recall plan is subject to:

  • Up to a one year suspension of sale of the product.

  • Cancellation of the permit for manufacture or import of the product.

  • Suspension of manufacture or import.

 
21. Outline the key areas of law applicable to medicinal product liability, including key legislation and recent case law.

Legal provisions

The main provisions are:

  • The Product Liability Act.

  • Principles of tort outlined in the Civil Code.

  • Contract principles of non-performance of obligations and compensation for damages outlined in the Civil Code.

  • Pharmaceutical Affairs Act.

Substantive test

Product Liability Act. The claimant bears the burden of proving the following:

  • Defect in the product (manufacturing defect, design defect or labelling defect).

  • Life, bodily or property damage.

  • Causal relationship between the defect and damage.

Tort. The claimant bears the burden of proving the following:

  • Intentional or negligent act.

  • Damage suffered by the claimant.

  • Causal relationship between the act and damage.

Contract. The claimant bears the burden of proving the following:

  • Non-performance of contractual obligations.

  • Damage suffered by the claimant.

  • Causal relationship between the non-performance and damage.

Pharmaceutical Affairs Act. The Relief Scheme for Drug Side Effects (see Question 19 ( www.practicallaw.com/9-500-8379) ) came into force in December 2014, and its effect will gradually expand to other areas by 2017. The burden to prove causality has been lightened through this implementation. When causality is proven that the use of the relevant drug caused harm, disability, or death, the following category of relief fund will be paid out to the claimant:

  • Medical expenses (enforced as of January 2017).

  • Disability allowance (enforced as of January 2016).

  • Death allowance (enforced as of December 2014).

  • Funeral expenses (enforced as of January 2016).

 
22. Who is potentially liable for defective medicinal products?

Liability

Product Liability Act. Product liability claims can be brought against manufacturers, which include:

  • Persons engaged in the business of manufacturing, processing, or importing the product.

  • Persons who represent or misrepresent themselves as persons identified in the above bullet point by putting their name, trade name, trade mark or any other identification markings on the product.

Tort. There is no limit on who can be liable. If the substantive requirements are met (see Question 21, Substantive test) any involved party can be liable, including manufacturers, processors, importers, sellers, doctors, nurses, and pharmacists.

If a government official has wilfully or negligently granted approval for the sale of medicinal products that have defects, the state employing the government official may be required to compensate for damages (State Compensation Act).

Contract. A breach of contract claim can only be made against a party which has a contractual relationship with the claimant. Hospitals, doctors, pharmacists and other medical professionals that are parties to a medical services contract can be liable. Due to the lack of a contractual relationship, consumers and patients cannot generally bring breach of contract claims against manufacturers or importers.

Pharmaceutical Affairs Act. The Relief Scheme for Drug Side Effects provides relief funds to claimants from the reserve of funds collected from all manufacturers/importers/holders of medicinal product licences, through the Korea Institute of Drug Safety and Risk Management. The reserve funds consist of a basic contribution from all manufacturers/importers/holders of medicinal product licences in Korea, and any additional funds will be assessed by the Institute and imposed on the relevant manufacturers/importers/holders of medicinal product licences. Such additional funds imposed will not exceed 25% of the mandatory relief fund payable by the relevant manufacturers/importers/holders of medicinal product licences, and will not exceed 1% of the total volume of the product manufactured half annually.

 
23. What defences are available to product liability claims? Is it possible to limit liability for defective medicinal products?

Showing failure to satisfy the substantive elements (see Question 21, Substantive test), in whole or in part, is generally a defence. In addition, the following defences may also be possible.

Product Liability Act

Manufacturers of medicinal products can be exempt from liability if they can prove any of the following:

  • The manufacturer did not supply the product.

  • It was impossible for the manufacturer to discover the defect based on the level of scientific or technical knowledge available at the time of supply of the product.

  • The product defect is due to compliance with the applicable law at the time of supply of the product.

  • If raw materials or components of the product have the defect, the defect is produced by the design of the product or the manufacturing instructions from the manufacturer.

However, if appropriate preventive measures are not taken to prevent damage on discovering, or becoming aware of, a defect in the product, manufacturers cannot assert defences in the second, third and fourth bullet points above.

Tort

The Korean Supreme Court often relieves the claimant's burden of proving the causal relationship between the defect and damages, and a prima facie case may be established. In this case, the defendant must prove that the damage was caused by something other than the defect.

Contract

A claim can be defended if it is proved that the non-performance of contractual obligations was not intentional or negligent.

Pharmaceutical Affairs Act

Under the system of Relief Scheme for Drug Side Effects, the manufacturer/importer/holder of a product licence can only submit the requested documents necessary for assessing the relief amount. They will not have the opportunity to participate in the process in terms of contesting the claim. While there is no mechanism to contest the liability issue as such, the manufacturer/importer/holder of a product licence can contest the assessment of additional funds with the MFDS.

 
24. How can a product liability claim be brought?

Limitation periods

Product Liability Act. The limitation period to bring a claim is both:

  • Three years from the date when the injured person became aware of the damage and the person liable.

  • Ten years from the date of supply of the product by the manufacturer.

In relation to latent damage, the symptoms of which appear after a lapse of a certain period, the ten-year limitation period starts from the date on which the symptoms appear.

Tort. The limitation period to bring a tort claim is:

  • Three years from the date when the injured person became aware of the damage and the person liable.

  • Ten years from the date when the unlawful act was committed.

Contract. The limitation period for a claim is ten years (five years for commercial contracts) from the date when the injured party is first able to make the claim. Under Korean case law, medical services contracts between doctors and patients are not generally considered to be commercial.

Class actions

Class actions, except for stock-related suits, are not allowed under Korean law. The Civil Procedure Act allows for joinder of parties' claims if their grounds for bringing these claims are the same or similar.

Pharmaceutical Affairs Act

A claimant can file a claim with the Korea Institute of Drug Safety and Risk Management, and on satisfaction of causality, the relief funds will be paid out to the claimant. However, there are certain exemptions to the applicability of this relief system, such as a non-drug reaction, and injury resulting from cancer treatment, negligent or wilful misconduct of the claimant/pharmacist, or drug use in a clinical trial.

 
25. What remedies are available to the claimant? Are punitive damages allowed for product liability claims?

Monetary compensation can be sought for damages that would usually arise from the defect.

For damages that have arisen due to special circumstances, compensation can be awarded if the liable party was aware of, or could have reasonably foreseen, the special circumstances. Loss of future earnings, medical expenses and consolation money (mental suffering) are generally compensated.

Punitive damages are not allowed under Korean law. Punitive damages are also not permitted in product liability claims.

 

Reform

26. Are there proposals for reform and when are they likely to come into force?

An amendment to the Pharmaceutical Affairs Act was announced on 28 January 2015, which will come into effect as of 29 September 2015. This amendment will introduce:

  • A process of therapeutic devices reassessment, thereby permitting therapeutic devices to be continued to be manufactured and sold whose safety and efficacy have been confirmed.

  • Medicinal products and biologics whose clinical studies have been conducted overseas to be permitted as the subjects of business registration and marketing authorisation.

  • Importation licence to be obtained for those in the business of importing medicinal products or therapeutic devices.

  • Relaxing the regulations on pharmaceutical warehouse requirements (from 264 square metres to 165 square metres).

For information on pharmaceutical patents, trade marks, competition law, patent licensing, generic entry, abuse of dominance and parallel imports, visit Pharmaceutical IP and Competition Law in South Korea: overview ( www.practicallaw.com/6-561-4265)

 

Online resources

South Korean Ministry of Government Legislation

W www.law.go.kr

This is the official website maintained by the Ministry of Government Legislation. It provides up-to-date legislative information, including full texts of statutes together with notable case law, in Korean.

Korea Legislation Research Institute

W www.klri.re.kr/eng/category/main.do

This is the official website provided by the Korea Legislation Research Institute. It provides English translations of major acts and subordinate regulations. Information is potentially out-of-date and translations are for guidance only.



Contributor profiles

Hyeong Gun Lee

Partner, Lee & Ko

T +82 2 772 4379
F +82 2 772 4001
E hyeonggun.lee@leeko.com
W www.leeko.com

Professional qualifications. South Korea, 1994

Areas of practice. Healthcare law; M&A; general corporate law.

Non-professional qualifications. LLB, Seoul National University College of Law; LLM, Columbia Law School.

Recent transactions

  • Representing GE Healthcare, Bard and other multinational medical devices clients in matters relating to the import licence of medical devices, business contracts and other issues.
  • Representing LG Healthcare in acquiring Haitai Beverage Company.
  • Advising Bayer Korea and other multinational pharmaceutical clients on potential patent infringement, compliance and other various legal and regulatory issues.
  • Advising Mars and other food industry clients on various legal and regulatory issues.

Languages. Korean, English

Professional associations/memberships. Korean Bar Association.

Publications

  • Appraisal Rights of Dissenting Shareholders, BFL (vol. 38), Center for Financial Law at Seoul National University, 2009.

  • Korean Regulations on Business Combination involving Foreign Entities, Asialaw Corporate Finance Review, January 2008.

Jin Hwan Chung

Partner, Lee & Ko

T +82 2 772 4711
F +82 2 772 4001
E jinhwan.chung@leeko.com
W www.leeko.com

Professional qualifications. South Korea, 2000; New York State, US, 2009

Areas of practice. Healthcare law; antitrust; general corporate law.

Non-professional qualifications. LLB, Seoul National University College of Law; LLM, Georgetown University Law Center

Recent transactions

  • Advising AstraZeneca, Bayer, Berna Biotec (Crucell), Daiichi-Sankyo, GE Healthcare, Janssen, Johnson & Johnson Medical, Merck & Co., Inc., Novo Nordisk and UCB on matters regarding compliance (including FCPA), regulation and business contracts.
  • Representing multinational and domestic healthcare companies and medical institutions in connection with the investigation by the Korea Fair Trade Commission.
  • Representing Johnson & Johnson Korea in acquiring the household healthcare business from Pfizer Korea.

Languages. Korean, English

Professional associations/memberships. Korean Bar Association; New York State Bar; American Bar Association.

Publications. The International Comparative Legal Guide to: Pharmaceutical Advertising – Korea Part, Global Legal Group, 2009.


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