42 Billion Won in Kickbacks Disguised as Research Funding... Medical Device Manufacturer Faces Trial

Fake Clinical Trials Used to Funnel Illegal Kickbacks
Two Company Executives and Six Professors Indicted

A number of university hospital professors and executives at a medical device manufacturer have been indicted for exchanging tens of billions of won in kickbacks by exploiting the 'post-marketing clinical trial' system.

Seoul Western District Prosecutors' Office, Mapo-gu, Seoul. Photo by Ji Eun Oh

On July 30, the Food and Drug Crimes Investigation Division of the Seoul Western District Prosecutors' Office (Chief Prosecutor Lee Junghoon) announced that it had indicted the CEO (Mr. A), a former executive (Mr. B), and one corporation of a cardiovascular stent (a medical device for widening blood vessels) manufacturer without detention on charges including violating the Medical Devices Act and the Fair Trade Act. Six university hospital professors, including Professor C, who accepted the kickbacks, were also indicted without detention on charges including violation of the Medical Service Act.

According to the prosecution, from August 2016 to September last year, Mr. A and Mr. B allegedly proposed a post-marketing clinical trial of their company’s cardiovascular stent to 53 university hospitals nationwide and induced them to use their products by providing 4.2 billion won in research funding. Professors at university hospitals, including Professor C, participated as principal investigators and are charged with receiving amounts ranging from tens of millions of won to as much as 408.1 million won in the name of research funding.

In particular, Prosecutor C established a sales agency corporation under their spouse’s name and, despite performing no actual sales agency work, inserted the agency into medical device transactions on paper; by doing so, between February 2018 and April last year, C collected 778 million won in commissions, which also led to an additional charge of breach of trust involving third-party bribery.

Post-marketing clinical trials are a system for monitoring the long-term safety and efficacy of approved medical devices in actual medical settings. However, the authorities' investigation found that Mr. A and others exploited these trials primarily for promotional purposes rather than genuine research. When hospitals used the manufacturer’s stents in patients and registered those patients as clinical trial subjects, research funding of 200,000 to 1.15 million won per case was paid according to the number of patients enrolled.

The prosecution determined that these clinical trials merely tracked patients’ conditions without requiring additional medical procedures, and at some medical institutions, company employees filled out observation records instead of medical staff, or records were not properly kept, despite research funding still being paid. Furthermore, it was found that patient consent was designed to be obtained only after device procedures, thereby undermining both the patient's right to choose a medical device and the fairness of the clinical trial itself.

The prosecution emphasized that this is the first case in which it has been proven that a public-interest system like post-marketing clinical trials was abused as a tool for sales promotion, and that kickbacks were paid using sales agency transaction structures. A prosecution official stated, “We will respond strictly to illegal rebate crimes that threaten the fair trading order of the medical market.”

Meanwhile, back in July 2024, the Fair Trade Commission imposed a corrective order and a fine of 287 million won on the company for unfair customer inducement practices. Subsequently, after a referral from the Ministry of Health and Welfare, the prosecution commenced an investigation and searched the company and several university hospitals this past April. Last month, the prosecution requested arrest warrants for Mr. A and Professor C, but the court dismissed them at the time, citing no risk of flight or evidence destruction.

This content was produced with the assistance of AI translation services.