MOHW acknowledge need for 'CSO Association' establishment

To eradicate illegal rebates

Government has selected the eradication of illegal CSO O·pharmaceutical rebates as a national normalization agenda

"Temporary CSO Association, review will commence once supplementary documents are submitted"

The Ministry of Health and Welfare (MOHW)

As the President Lee Jae Myung administration designates the eradicating illegal Contract Sales Organizations (CSOs) and illicit pharmaceutical rebates as a core national normalization agenda, the Ministry of Health and Welfare (MOHW) is preparing to review the temporary CSO Association's authorization as an official legal association.

Following the legalization of the mandatory CSO registration system, the MOHW acknowledges the need for an official communication channel with the CSO industry. This channel is deemed essential for addressing the proliferation of illegal CSOs and curbing expedient, unhealthy distribution and sales practices, such as illicit rebates.

The CSO Association, whose previous two applications for incorporation were rejected, is expected to undergo an official regulatory review process once it submits the required documentation, including updated business plans, to the MOHW.

On June 24, an official from the MOHW’s Division of Pharmaceutical Policy stated, "With an increasing number of pressing issues related to CSO advancement and rebate eradication, such as conducting investigative surveys on CSO practices and refining relevant systems, we recognize the need to establish an association to serve as an official communication channel with the CSO sector."

The MOHW had previously rejected the temporary CSO Association's applications for incorporation during the document screening phase. 

The rationale for the rejections was reportedly a lack of industry representativeness and insufficient detail in the association's business plans to warrant official legal-entity status. 

Consequently, the organization has operated as a temporary entity for approximately 4 years, focusing on enhancing transparency in CSO operations.

The regulatory momentum shifted significantly after the MOHW finalized its drug-pricing reform plan, which includes reductions in generic drug prices. This policy shift amplified the urgent need to eliminate CSO-mediated rebates as a critical follow-up measure.

As the government continues to monitor unhealthy distribution, sales, and prescribing practices in which certain pharmaceutical companies or medical institutions exploit CSOs, blocking illegal CSOs entirely has become crucial. This aligns with the government's broader goals for the domestic pharmaceutical industry, which is to accelerate global market expansion and shift the industrial ecosystem toward blockbuster novel drug development.

Currently, the MOHW, in collaboration with the Korea Pharmaceutical and Bio-Pharma Manufacturers Association (KPBMA), is developing a robust regulatory framework to ensure a transparent drug distribution environment following CSO registration. This initiative will kick off with a comprehensive status survey on CSO consignment and re-consignment practices.

The establishment of the CSO Association is garnering significant attention because it will provide the MOHW with a direct, centralized stakeholder to consult on advancing CSO regulatory policies.

The approval process for establishing a legal association involves the CSO Association submitting an application to the MOHW. Once the MOHW reviews and passes the documentation, the proposal is referred to the 'Non-Profit Corporation Review Committee' for final approval.

A MOHW official explained, "An official channel for communicating with the CSO industry is necessary, which is why we agree on the need for the association's establishment." 

And added, "Once they supplement the previously missing documentation and reapply, we will review it in accordance with relevant regulations."

Accordingly, the incorporation process is expected to accelerate once the temporary CSO Association meticulously prepares and submits the necessary paperwork to the MOHW.

Meanwhile, the association plans to elect a new president at its upcoming board meeting this summer to expedite the administrative procedures required for official approval.