The revised Pharmaceutical Law that requires medical institutions and pharmacies to pay drug prices to drug suppliers, such as pharmaceutical wholesalers and pharmaceutical companies, within six months went into effect on Dec. 23.
Under the amendment, hospitals that have not paid their prices within the mandatory period will be ordered to correct the violation within three months. If they do not fulfill it, the government can cancel their license and suspend their business up to a year.
Until now, many hospitals have delayed drug payments for more than a year, which resulted in wholesalers and pharmaceutical companies reeling under financial difficulties. In a buyers’ market, however, it was difficult for wholesalers and pharmaceutical companies to ask the hospital to shorten the payment period.
As a result of this amendment, the government expects that wholesalers and pharmaceutical companies will be able to ease cash flow problem. However, if their annual drug transaction is less than 3 billion won ($2.7 million), the buyer is exempted from the requirement.
Hospitals with an annual medicament transaction of more than 3 billion won will have to face considerable pressure from next year as they will have to pay for medicines that they have already purchased and every other subsequent drug that they are buying within six months.
In an attempt to prevent financial problems that may occur, some hospitals have accelerated the grace period settlement period before the enforcement of the amendment, while signing annual contracts and holding limited competitive biddings.
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