Sanofi executive, others arrested as South Korean prosecutors probe vaccine cartel

20 January 2020 00:00

Seven executives of various pharmaceutical companies and distributors, including an executive of the local branch of French pharma giant Sanofi, have been arrested by the South Korean prosecutors' office as part of its first independent antitrust probe, which is targeting bid-rigging schemes in public tenders for vaccines and is likely to expand to cover more major South Korean and global pharmaceutical companies, MLex has learned.

Among the seven, executives of two vaccine-distribution companies have been indicted while one faces fraud charges, which could potentially increase the penalties imposed, far exceeding the maximum allowed under South Korea's antitrust law.

It is understood that South Korean prosecutors recently placed a South Korean executive of Sanofi under detention for bribery while investigating a cartel for vaccines supplied to the government's immunization programs. Sanofi sells various types of vaccines in the South Korean market, many of which are for younger children, according to the company's local website. Prosecutors suspect that the arrested executive received financial compensation from local vaccine distributors to guarantee business with them.

A spokesperson for Sanofi Korea said the company cannot comment on the matter because the investigation is ongoing.

In May last year, the Korea Fair Trade Commission, or KFTC, fined Korea Vaccine 990 million won ($828,746) and referred two of its executives to prosecutors for deliberately reducing the supply of intradermal Vacillus-Calmette Guerin, or BCG, vaccine imports from Japan in order to boost demand for an alternative type of percutaneous BCG vaccine, which is as much as 30 times more expensive than the intradermal vaccine.

Prosecutors, suspecting possible collusive schemes while investigating the referred case, opened a separate cartel case of their own in November, targeting the supply of various types of vaccines for the government's public and military immunization programs.

The ongoing investigation, handled by the Anti-corruption Investigation Division 1 of the Seoul Central Prosecutors' Office, could extend to cover a wide swathe of the South Korean vaccine market and involve billions of dollars in vaccine tenders won through suspected collusion, as the probe expands to more than 50 companies.

In addition to the apparent expansion of the investigation, it is understood that an executive who has been indicted by prosecutors is facing charges of fraud — the first time South Korean prosecutors have indicted an individual with such charges in an antitrust case.

According to the Act on the Aggravated Punishment, Etc. of Specific Economic Crimes, a person who commits fraud could face imprisonment of more than five years or even an indefinite term, if the amount of profit made through the offence exceeds 5 billion won ($4.3 million).

South Korean antitrust law caps maximum penalties at three years in prison or 200 million won — penalties that are often criticized as insufficient to effectively deter cartel behavior.

While it is unclear whether the court will endorse the prosecutors' findings, such indictments indicate the intention of South Korean prosecutors to increase the level of sanctions for cartel behavior and create a more powerful deterrent effect.

MLex also understands a civil suit against companies found to have colluded on public tenders for vaccines for indemnification for damages caused to the South Korean government is also on the cards for prosecutors.

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