When will the CSO reporting system be legislated?

Companies subject to submitting expenditure reports await legislation

MOHW· industry closely watches legislation progress… “Needs to be passed before disclosure of the 2024 expenditure report”

Identifying CSO status currently difficult…illegal indirect rebates being neglected

In consensus, the government and pharmaceutical industry are voicing the need to legislate the pharmaceutical contract sales organization (CSO) reporting system and urging the National Assembly to review the bill.

 

Both the government and pharmaceutical industry share the position that a bill needs to be passed by the National Assembly to accurately identify CSOs that perform drug sales and promotion activities for pharmaceutical companies, such as one-person CSOs, to abolish indirect illegal rebates.

 

On the 21st, the Ministry of Health and Welfare and the pharmaceutical industry were found to be busy closely following the National Assembly’s review and passage of the bill for the establishment of the CSO reporting system.

 

Both the MOHW and industry believe that identifying the status of CSOs that are acting on behalf of domestic pharmaceutical sales is difficult because of the delay in the timely review of the CSO reporting system.

 

In particular, the MOHW is closely eyeing the legislative timeline because the ministry can only publicly announce the standards and guidelines on the eligibility of the CSO reporting system after the bill is passed by the National Assembly.

 

The CSO reporting system is a bill to regulate the CSO's drug promotion activities conducted on behalf of pharmaceutical companies that have not been reported to the government and local governments as illegal.

 

The bill, if legislated, is expected to have a significant impact on the domestic pharmaceutical business environment.

 

The MOHW plans to discuss and finalize the details of the system, such as the subject for the CSO report and the reporting system, with related ministries such as the Ministry of the Interior and Safety as soon as the bill passes NA review and is finalized.

 

The industry has also long been awaiting the legislation of the CSO reporting system.

 

Relevant laws have already been revised and CSOs are subject to filing and submitting expenditure reports.

 

However, as the bill for the CSO reporting system is yet to be passed, the specific size of the CSOs industry is difficult to identify.

 

This is why the criticism that a legal loophole has been created as the subjects for filing and submitting expenditure reports had been expanded, but those subject to the system are not identifiable, leaving open the risk for the rise of illegal indirect rebates.

 

In addition, the bill to legislate the CSO reporting system needs to be passed for the pharmaceutical sales order education to be legislated, and the obligation to write and manage consignment reports be introduced for further reinforcement of the drug distribution order.

 

Also, the passage of the bill will abolish the rebate attempts where some companies pay excessive promotion fees to CSOs for indirect rebates.

 

An official from the Korea Pharmaceutical and Bio-Pharma Manufacturers Association said, “CSOs are being imposed the same level of obligations as pharmaceutical companies in filling out and submitting economic profit expenditure reports but without the passage of the CSO reporting system, which companies will be applied the system, including one-person CSOs cannot be clearly identified.

 

The CSO system will allow the government to clearly identify and distinguish CSOs and assign the duty to prepare and manage consignment reports and prevent indirect rebates.” An official from a pharmaceutical company said, “Also, the system needs to be introduced to solidly establish a distribution order through pharmaceutical sale order education, etc.

 

Currently, there is a widespread perception that CSOs are used as a window for rebates after being paid excessive promotional fees.

 

The legislation is expected to have the effect of preventing excessive competition by allowing the pharmaceutical companies to pay appropriate fees to their CSOs while strengthening the government’s management and supervision function." Meanwhile, the MOHW plans to publicly disclose the expenditure report content submitted by pharmaceutical companies and medical device companies from January 2024 on its webpage and through other public systems.

 

The MOHW and the pharmaceutical industry believe the CSO reporting system needs to be implemented in a timely manner in line with the public disclosure system for the expenditure report.