[2026 Parliamentary Audit] Pharmaceutical Promotion Oversight to Be Overhauled... "CSO Consignment Contracts Need Standardization"

More than 8,000 of 20,000 CSOs are one-person businesses
Response rate to Health Ministry survey just 2%
Analysis limited despite obtaining 980,000 contracts

Health and Welfare Minister Jung Eun-kyung said the government would standardize consignment contract forms and analyze them in conjunction with health insurance claims data to examine the opaque sales practices of contract sales organizations (CSOs) that promote pharmaceuticals.

Health and Welfare Minister Jeong Eun-kyeong responds to a question from Democratic Party of Korea lawmaker Nam In-soon during a parliamentary audit by the Health and Welfare Committee at the National Assembly on the 7th. National Assembly Broadcasting.

At a parliamentary audit by the National Assembly Health and Welfare Committee on October 7, lawmakers focused on the low response rate to the first survey of CSOs since the registration system took effect, the structures involving subcontracting and further subcontracting, and high promotional commission rates.

CSOs are sales agencies that promote and sell pharmaceuticals on behalf of pharmaceutical companies and receive commissions. In response to concerns that they could be used as a conduit for illegal rebates, they were included in the scope of the ban on providing rebates and the requirement to prepare expenditure reports in 2021. A registration system took effect in October 2024.

According to data submitted by the Ministry of Health and Welfare to Nam Insoon, a lawmaker from the Democratic Party of Korea, 20,014 CSOs are currently registered. However, only 396 responded to a survey conducted from April to June this year, for a response rate of just 2.0%. The ministry also acknowledged that low submission rates and concerns about the accuracy and reliability of the data limited its analysis.

The CSO market was found to consist largely of one-person and small businesses. Of the companies that responded to the survey, 42.9% were one-person businesses, while those with five or fewer employees accounted for 77.0%. Based on all registration data, the ministry estimated that there were 8,182 one-person sole-proprietor CSOs, accounting for 41% of the total. A total of 1,981 people were found to operate two or more CSOs under the same founder.

Among the top targets for CSO sales activities, clinics ranked first at 58.5%, followed by general hospitals and larger institutions at 17.6% and hospitals at 14.7%.

Lawmakers also raised concerns about the limitations of the CSO consignment contract data submitted by pharmaceutical companies. Of the 286 pharmaceutical and import companies, 212 submitted data. The ministry obtained approximately 980,000 consignment contracts, totaling 9.8 million pages. However, the contract forms were not standardized, making it difficult to organize and analyze the data.

Commission rates for products handled by CSOs were also found to be high. The average commission rate among the 446 products for which rates were confirmed was 42.9%, and 140 contracts (31.4%) had rates of 50% or higher. The highest commission rate was 60%.

Nam said that competition in pharmaceutical promotion was becoming excessive, particularly in markets where numerous generic drugs with the same active ingredient compete. For example, more than 120 generic products with the same active ingredient and strength as the 75 mg clopidogrel tablet, which had a commission rate of 60%, were being distributed in South Korea.

Nam said, "The government should establish a system to continuously monitor and manage CSO activity and commission rates. It is necessary to systematically analyze the approximately 980,000 consignment contracts and assess promotional expenses by product in connection with health insurance finances."

Minister Jung said, "Because this was the first survey of its kind, the forms were not standardized, creating practical limitations on data analysis. To examine opaque sales practices, we will standardize consignment contract forms and seek effective methods for investigation and analysis, including introducing an electronic system and conducting analyses in conjunction with health insurance claims data."

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