CONTENTS
- 1. Pharmaceutical Affairs Act | Case Overview and Issues
- 2. Pharmaceutical Affairs Act | Judgment of the Court of First Instance
- - Judgment of the Appellate Court
- 3. Pharmaceutical Affairs Act | Determination of the Supreme Court
- - Legal Framework and Reasons for the Determination
- - Significance of This Judgment
- 4. Pharmaceutical Affairs Act | Daeryun Law Firm LLP's Strategy
1. Pharmaceutical Affairs Act | Case Overview and Issues
The core of this case under the Pharmaceutical Affairs Act was whether an existing pharmacy may contest a disposition registering the establishment of a newly opened pharmacy nearby.
That is, in a case concerning the spatial connection with a medical institution (shared facilities, sites, passageways, and the like) prohibited by Article 20(5) of the Pharmaceutical Affairs Act, the issue was whether the existing pharmacy could assert that it suffered a direct economic disadvantage.
The plaintiffs in this case, pharmacists who had been operating pharmacies near the relevant medical institution, argued that the pharmacy establishment registration violated each item of Article 20(5) of the Pharmaceutical Affairs Act, that it raised a concern of forming a de facto collusive structure with the medical institution, and that their dispensing opportunities were unfairly infringed.
Accordingly, they filed a lawsuit naming the pharmacist who had obtained the registration to establish the new pharmacy as an intervenor assisting the defendant, and the head of the competent public health center as the defendant.
2. Pharmaceutical Affairs Act | Judgment of the Court of First Instance
The court of first instance did not accept the plaintiffs' arguments.
The reason was that the proportion of the plaintiffs' pharmacy sales based on prescriptions from the relevant medical institution was low, and that any decrease in sales or loss of dispensing opportunities resulting from the establishment of the new pharmacy was not statistically significant.
In other words, it denied the plaintiffs' standing on the ground that "actual damage had not been proven."
Judgment of the Appellate Court
The Seoul High Court, the appellate court, likewise rendered a judgment upholding the first-instance determination.
The appellate court held that in order to seek revocation of the pharmacy establishment registration, "the infringement of dispensing opportunities must be actual and direct."
It then found that although the plaintiff pharmacies had dispensed a portion of the prescriptions from the relevant medical institution, the proportion of sales and the extent of any actual decrease were not large, so it was difficult to regard this as a legally protected interest.
Accordingly, it stated that the plaintiffs did not qualify as "a person having a legal interest" under Article 12 of the Administrative Litigation Act.
As a result, the appellate court, like the court of first instance, did not recognize the plaintiffs' standing.
3. Pharmaceutical Affairs Act | Determination of the Supreme Court
The Supreme Court reversed the determination of the lower court and affirmatively recognized the plaintiffs' standing.
Legal Framework and Reasons for the Determination
Article 12 of the Administrative Litigation Act provides that "a revocation lawsuit may be filed by a person who has a legal interest in seeking the revocation of a disposition."
Here, a "legally protected interest" means an interest that goes beyond a mere economic interest and is individually, directly, and specifically protected by the statutory provisions underlying the disposition and the related statutes (See Supreme Court en banc Decision, 2006 Du 330).
Accordingly, the Supreme Court held that even a third party who is not the direct addressee of an administrative disposition has standing if that party's legally protected interest is infringed by the disposition.
② The Structure of the Pharmaceutical Affairs Act and Recognition of the Protected Interest
The Supreme Court emphasized that Article 20(5), items 2 through 4, of the Pharmaceutical Affairs Act are provisions for ensuring fair competition and independence between medical institutions and pharmacies.
Article 20(5) of the Pharmaceutical Affairs Act prohibits the establishment of a pharmacy sharing the same facilities, site, or passageway with a medical institution, and the Court stated that this must be read together with Article 23 (independence of dispensing), Article 24 (prohibition of collusion), and Article 26 (duty to verify prescriptions) of the Pharmaceutical Affairs Act, and that it is intended to realize the essence of the separation of dispensing and prescribing, namely a "mutually checking and transparent prescription system."
Accordingly, the Supreme Court held that maintaining an environment in which an existing pharmacy can carry out dispensing work independently near a medical institution is also included among the interests protected by the Pharmaceutical Affairs Act.
③ The Purpose of the Separation of Dispensing and Prescribing and the Independence of Pharmacists
The Supreme Court specifically reaffirmed the purpose behind the introduction of the separation of dispensing and prescribing.
The Supreme Court found that the separation of dispensing and prescribing is a system intended to prevent unnecessary medication and to grant pharmacists autonomy in dispensing and professional review authority, by separating the prescribing function of physicians from the dispensing function of pharmacists.
Accordingly, it held that if a medical institution and a particular pharmacy collude so that prescriptions are concentrated at that particular pharmacy, the dispensing opportunities of nearby pharmacies are unfairly restricted and the purpose of the separation of dispensing and prescribing is undermined.
In the end, the Court held that the fair dispensing opportunity of a pharmacy near a medical institution is not a mere business interest but is to be evaluated as a legally protected interest guaranteed by the Pharmaceutical Affairs Act.
④ Presentation of the Standard for Determination
The Supreme Court set out the standard for determining standing in similar cases going forward as follows.
"In determining whether there is a concern that a disposition registering the establishment of a new pharmacy may infringe upon the interest of an existing pharmacy in fairly receiving its share of opportunities to dispense the prescription medications of a medical institution, one must comprehensively consider the location and scale of the medical institution, the distance between the existing pharmacy and the new pharmacy, accessibility, the dispensing records of both pharmacies, the distribution of nearby pharmacies, and patient movement routes."
In particular, the Supreme Court presented a broad standard, stating that standing is not recognized only where the principal sales of the existing pharmacy are based on prescriptions from the relevant medical institution, and that standing may be affirmed if even a partial actual dispensing record exists.
⑤ Application to the Present Case
The plaintiff pharmacies were located near the relevant medical institution, and they had dispensing records on several occasions, based on prescriptions issued by that medical institution, both before and after the disposition registering the establishment of the new pharmacy.
Accordingly, the Supreme Court determined that "there is a sufficient concern that the plaintiffs may lose at least a portion of their dispensing opportunities as a result of the disposition" and recognized their standing.
In the end, finding that the determination of the lower court was unlawful in interpreting the concept of a "legally protected interest" too narrowly, the Court reversed and remanded the case.
Significance of This Judgment
1. Expansion of the Doctrine of Standing
By holding that "even if direct harm has not materialized, there is standing if there is a concern that the legally protected interest in fair competition may be infringed," the Supreme Court broadened the scope of third-party standing in the area of the Pharmaceutical Affairs Act.
2. Presentation of a Significant Standard for the Administrative Practice of Pharmacy Establishment
It made clear that when an administrative agency, such as a public health center, reviews a pharmacy establishment registration, it must consider not only the distance standard but also the structural connection with the medical institution, the competitive landscape, and patient accessibility.
3. Strengthened Protection of the Rights of Existing Pharmacies
It established a precedent that, if there is a possibility that dispensing sales may be infringed even in part by a nearby new pharmacy, the existing pharmacy also has the right to file an administrative lawsuit.
4. Pharmaceutical Affairs Act | Daeryun Law Firm LLP's Strategy
In situations similar to this case, such as those under the Pharmaceutical Affairs Act, Daeryun Law Firm LLP responds with the following strategy.
▶Strategy at the Administrative Litigation Stage
Submitting, as objective materials, the records of prescriptions from the relevant medical institution dispensed, dispensing performance, and patient access routes
Analyzing, on a comparative basis, changes in the number of dispensing instances after the establishment of the new pharmacy, prescription issuance statistics, and the like
· Proving the Spatial Connection
Presenting the building floor plan and the facility structure, such as corridors, elevators, and passageways, through photographs and drawings to specifically demonstrate the violation of the Pharmaceutical Affairs Act
▶Strategy in Responding to the Administrative Agency
· Establishing a criteria table for assessing the possibility of collusion and economic dependence when a pharmacy located within the same building as a medical institution applies for registration
▶Advisory for Pharmacists and Pharmacy Operators
For existing pharmacies, regularly recording and preserving dispensing performance and prescription inflow routes so that they may be used as a basis for standing in any future litigation
This precedent may be regarded as a judgment that goes beyond business-right disputes among pharmacies and strengthens the fair-trade aspect of the Pharmaceutical Affairs Act.
Going forward, when an administrative agency issues a disposition registering the establishment of a pharmacy, whether the independence of the medical institution and the pharmacy is secured is expected to serve as an important standard for determination.
Daeryun Law Firm LLP provides legal services tailored to each case through the collaboration of relevant legal professionals, including attorneys handling medical matters who hold pharmacist qualifications, attorneys experienced in administrative litigation, attorneys handling fair-trade matters, the Evidence Examination Center, and the Digital Forensics Center.
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