[Reporter’s View] Medical Devices Act binds payment within 6 months

An amendment to the Medical Devices Act, centered on the introduction of a “payment within 6 months” standard, is set to take effect in Korea. Although the regulation aims to enhance transaction transparency, it is likely to act as a variable requiring changes in overall cash flow management and transaction structures within the actual distribution sector.

There is no disagreement regarding the direction of improving unfair trading practices and increasing transparency.

However, questions remain as to whether the system’s design is practical enough to function effectively in the actual industry.

The amended Medical Devices Act, scheduled to take effect on December 31, 2027, centers on strengthening the distribution management system, including restrictions on related-party transactions, explicit payment deadlines, mandatory written contracts, and reporting requirements on the status of related medical institutions.

Structurally, this means that regulatory mechanisms for ‘normalizing distribution order,’ focused on improving unfair trade practices and strengthening transparency in the distribution process, have become more specific.

The issue arises when these mechanisms are applied to real-world situations.

The current medical device distribution system is not a simple supply structure, but an ecosystem in which hospitals, sellers, and financial structures are intricately intertwined.

Against this backdrop, some in the industry are voicing concerns about the impact these regulatory changes will have on actual business environments, pointing out that payment practices extending beyond a certain period have long existed in transactions with hospitals.

In this situation, the ‘payment within six months’ standard is, in principle, interpreted as a device to enhance transaction transparency. However, if exception criteria and application methods are not sufficiently specified, it may become a burden on some companies’ cash flow management or transaction structures.

If financial pressure materializes, some distributors will have no choice but to reduce transaction volumes or delay shipments. This is highly likely to lead not to an improvement in distribution order but to a contraction in transactions.

The purpose of restricting related-party transactions is also clear. However, given the diverse distribution structures formed in Korea’s medical device market, some hold the view that existing transaction methods cannot simply be interpreted as unfair transactions.

Ultimately, the core of this legislative amendment places greater emphasis on ‘on-the-ground implementation’ rather than merely ‘introducing regulations.’

For the system to actually function, not only the direction of regulation but also the application method and detailed criteria are important. Without meticulous planning that takes into account the scope of exceptions, the possibility of phased implementation, and the impact on different industry scales, it is difficult to rule out the possibility that the policy’s intent could lead to market confusion.

In this regard, the opinion-gathering process before implementation is expected to serve as an important forum for discussion that can improve the completeness of the system before it takes effect. Above all, it is important to narrow the gap in perspectives between industry and policy authorities and find points of contact that can actually work.

A system is completed not when it is created, but when it works in the field.

Whether the amendment to the Medical Devices Act remains just another regulation or becomes a turning point that changes the distribution order depends on how it is designed from this point forward.