MOHW opposes bill requiring proof for CSO registration

“Business registration certificates and other documents already allow verification”

Korean Pharmaceutical Association: “Bill should pass to curb illegal rebates”

The Ministry of Health and Welfare (MOHW) has effectively opposed a proposed amendment to the Pharmaceutical Affairs Act that would explicitly stipulate in law the requirements for CSOs to maintain a place of business and require the submission of supporting documents, arguing that the change would offer little practical administrative benefit.

On the 2nd, the ministry was found to have submitted its position on the bill proposed by Democratic Party lawmaker Jin-sook Jeon, which is pending in the National Assembly.

Jeon’s bill would require CSOs, when reporting their pharmaceutical promotional sales activities to local governments, to meet requirements prescribed by Ministry of Health and Welfare regulations, including maintaining at least one business premises, and submit documents demonstrating compliance. The measure is intended to prevent the proliferation of so-called “ghost CSOs” that operate without an actual place of business.

While agreeing with the bill’s aim of improving transparency in pharmaceutical distribution, the ministry stopped short of supporting the legislative change, citing its limited practical effect. Its position is that the existing framework already provides sufficient means to verify and enforce the requirements, reducing the need for a statutory amendment.

The MOHW explained, “The current Enforcement Rule of the Pharmaceutical Affairs Act already stipulates that a CSO must have a business address as a reporting requirement, and local governments do not accept reports if the address cannot be verified.”

“Competent authorities can already sufficiently verify the existence of an actual place of business through official documents submitted with the report, such as a business registration certificate or corporate registry. Since the requirements can already be enforced under the current rules, there is little practical benefit to amending the law.”

The National Assembly’s Expert Advisory Office also lent support to the ministry’s position, noting that while elevating provisions currently contained in subordinate regulations into the parent statute could improve legal clarity, the practical benefit of the amendment would be limited because compliance can already be verified through checklists and official documents.

The advisory office further noted that simply verifying the existence of business premises would do little to prevent illegal or evasive practices by disguised businesses, and suggested that more substantive measures are needed, such as mechanisms to identify ownership structures or new authority to investigate pharmaceutical sales and distribution practices.

The Korean Pharmaceutical Association (KPA), however, strongly supported the amendment, calling for its swift passage to address problems associated with ghost CSOs.

KPA said, “The recent increase in CSOs operating without business premises has made pharmaceutical distribution channels and lines of accountability increasingly unclear, worsening blind spots in oversight and contributing to disruptions in distribution practices, including illegal rebates and unfair sales practices. The amendment would clearly establish in law the basic infrastructure and reporting requirements for pharmaceutical sales representatives, thereby improving transparency in distribution channels and strengthening accountability.”