[Reporter’s View] Rebate investigation expertise must survive system overhaul

Korea’s criminal justice system has undergone a major overhaul with the abolition of the Prosecutors’ Office and the launch of the Public Prosecution Service and Serious Crimes Investigation Agency. Investigations in the healthcare sector have also been reorganized under the new framework.

The Food and Drug Crime Investigation Division of the Seoul Western District Prosecutors’ Office, which had handled pharmaceutical and medical device rebate investigations, no longer exists. The joint investigation team that had focused on illegally operated hospitals and license-lending pharmacies has also been disbanded. Ongoing cases have been transferred to the police and other agencies.

As the investigative system changed, the agency in charge of cases also changed. The key question is whether the investigative expertise accumulated over many years can be carried over into the new system.

Healthcare crime investigations have undergone years of specialization. In 2011, the government established a joint investigative unit dedicated to pharmaceutical rebates. In 2013, the Seoul Western District Prosecutors’ Office was designated as a prosecution office specializing in food and drug safety. Its work later continued through the Food and Drug Investigation Division and the Food and Drug Crime Investigation Division, which handled rebate cases and a range of other healthcare crimes.

In May this year, a joint investigation team targeting illegal medical and pharmaceutical practices was also established, led by prosecutors and police with participation from the Ministry of Health and Welfare, National Health Insurance Service, Health Insurance Review & Assessment Service, National Tax Service and Financial Supervisory Service. The team was designed to connect criminal investigations, administrative sanctions, recovery of health insurance funds and the tracing of criminal proceeds within a single coordinated framework.

There was a clear reason for strengthening dedicated and joint investigations: criminal schemes are becoming increasingly complex.

Recent cases have involved establishing paper companies, giving hospital officials equity stakes, and then paying rebates in the form of dividends. Other cases have involved payments disguised as research funding under the pretext of post-marketing surveillance. Rather than handing over cash or gift certificates directly, rebate schemes have evolved to resemble legitimate commercial transactions or research payments.

Illegally operated hospitals and pharmacies have likewise moved beyond simple name-lending arrangements. Some schemes use multiple layers of corporate entities and contractual relationships to conceal the actual operator, while others transfer assets into third-party names to evade recovery. Identifying the true operator and tracing the flow of funds are becoming increasingly difficult.

Such cases cannot be uncovered simply by examining the relevant laws. Investigators need to understand pharmaceutical sales practices and drug distribution structures, as well as how legitimate clinical trials are conducted and research funds are normally disbursed. They must also be able to trace National Health Insurance claims data, corporate relationships, and financial flows. Knowing which agency holds which information, and how those pieces of information can be connected, is equally important.

Investigative expertise is built through layers of repeated cases being accumulated through trial and error. Judgment about which transactions warrant suspicion, how to distinguish legitimate contracts from sham transactions, and which records should be examined first becomes more refined with each case. The experience accumulated in this process is itself one of the most valuable investigative assets.

Under the new system, these functions are divided among multiple agencies. Rebate cases are investigated by the police and, depending on the nature of the case, may fall to the Serious Crimes Investigation Agency. The Major Crimes Prosecution Division within the Prosecution Office is responsible for prosecuting healthcare cases and maintaining prosecutions. Cases previously handled by the joint investigation team are being distributed among police units.

More important than the new division of responsibilities is preserving the expertise built up over the years. The investigative judgment gained through years of casework, along with established channels of cooperation among relevant agencies, must be carried forward into future investigations.

Expertise does not come simply from an establishment of an organization. It gains strength through people, cases and time. It is sharpened by digging through countless cases, revisiting missed clues and keeping pace with new criminal methods. Healthcare crime continually changes shape as offenders exploit gaps in the system. The investigative framework can change. But the chain of expertise built over many years must not be broken.