Hospitals fined $480,000 for forcing contributions

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Hospitals fined $480,000 for forcing contributions


Korea’s antitrust agency yesterday slapped a fine of 550 million won ($480,000) on operators of two general hospitals for allegedly forcing drug companies to donate 24.1 billion won for new construction and property expansion projects.

The hospitals involved are Catholic University of Korea’s Catholic Medical Center and Yonsei University Health System.

Seoul National University Hospital and Ajou University Medical Center received warnings.

A spokesman for the Yonsei University Health System said the hospital had done nothing wrong. Officials at the other hospitals could not be immediately reached for comment.

This is the first time that the Fair Trade Commission has slapped such fines on hospital operators for soliciting donations from drug companies. Those companies’ sales are largely determined by demand from large medical institutions.

According to the antitrust agency, the four operators received donations from local drug makers to buy land and erect new buildings.

“The giant hospitals, not the drug makers, decided when, how much and in what fashion the donations were to be made,” said the agency in a statement.

“The drug companies also saw the solicitation of donations as forcing them to pay money to maintain business relations,” said the statement.

Putting pressure on the drug companies to chip in for such projects, which practically benefit them directly, is “unfair” and the donations do not appear to be for well-intentioned charity, according to the statement.

“Doing so will make it more likely for the hospitals to maintain business [with drug companies] based on their contributions rather than price and product quality, which will harm fair competition and consumer interest.”

The agency did not disclose the name of donor companies as some of the companies that offered comments and evidence to government investigators asked not to be identified out of fear of losing business with the hospitals.

According to the agency, Catholic Medical Center, which faces a fine of 300 million won, received 17.6 billion won in donations from drug companies from 2005 to 2008 to build a new medical students’ center.

Yonsei University Health System, fined 250 million won, reportedly received 6.1 billion won in such donations from 2005 to 2007 to build a hospital building.

Seoul National University Hospital and Ajou University Medical Center also received 470 million won and 453 million won, respectively, for similar purposes.

A Yonsei University Health System spokesman argued that the donations were purely voluntary and no donors benefited from their contributions.

“There was absolutely no logical link between the drug companies’ donations and their sales to our organization afterward,” said Lee Sung-man.

“We made it very clear to the agency that our drug purchase volume or prescriptions for the drugs made by the donor companies did not increase much afterward,” he said.

He said some drug companies even saw their sales to the hospital decline after the donations.

Lee said the hospital will decide what action to take, including the filing of a possible appeal, when the official notification from the agency arrives. Such notification usually takes about a week after the public announcement, he said.

But Kwon Soon-kuk, the Fair Trade Commission’s deputy director of market monitoring, said the key issue is that the drug firms made the donations solely to remain on good terms with hospitals and keep their business with the giant buyers, rather than necessarily to increase their sales.

“What’s important is that the drug firm representatives we talked to said their donations were not voluntary at all, and they were afraid that they would face difficulties in business if they did not meet the hospitals’ demands.”

By Jung Ha-won []
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