The Ministry of Health and Welfare will push to overhaul the contract sales organization (CSO) system for pharmaceutical marketing within this year, following problems including illegal rebates and multi-tier subcontracting. It marks the first major reform of the CSO sales structure in the 20 years since it was introduced in South Korea in 2000.
According to the pharmaceutical industry on the 25th, the ministry is reviewing ways to improve the system based on the findings of a report titled "Strengthening the Management and Oversight System for Pharmaceutical Promotion and Sales," commissioned by the Korea Pharmaceutical and Bio-Pharma Manufacturers Association. A CSO is a company that carries out drug marketing and sales on behalf of pharmaceutical firms. Because such companies can operate simply by registering with a local government, they have been pointed to as a cause of market overcrowding.
In response, the ministry is reviewing measures such as tightening entry requirements and capping the number of subcontracting steps. The leading option is to raise management standards so that only companies meeting substantive requirements, such as internal control criteria, can enter the market, and to set clear rules for subcontracting, which can otherwise extend through multiple steps without limit.
A ceiling on CSO fees, however, which some have proposed, is seen as unlikely to be adopted. Profit structures differ by product and by company, making it difficult to set a uniform cap, and a fee ceiling could instead distort the market.
The ministry plans to draw up its reform proposal based on the research findings, weighing factors such as industry acceptance and regulatory effectiveness. "We are pushing reform tasks based on the commissioned report," a ministry official said. "Since reform is urgent, we plan to introduce feasible measures first within this year."
