Pharmaceutical Companies Turn Themselves In Due to Hanmi Incident

Since Hanmi Pharmaceutical Co.’s “late public disclosure” scandal, pharmaceutical companies have been showing some moves to turn themselves in over so-called “negative issues.” They intend to recover the credibility of the pharmaceutical industry which deteriorated since the scandal by publicly disclosing matters not subject to mandatory disclosure such as the suspension of clinical tests unlike contract annulments which should be made public.

According to the pharmaceutical industry on October 17, major pharmaceutical firms in Korea were musing over whether or not they would voluntarily inform the outside of issues such as the suspension of clinical tests for new drugs in the future. Even though pharmaceutical firm publicize technology exports or the start of clinical tests with great fanfare, they do not properly inform of the suspension or failure of clinical tests. Such practices have been steadily criticized or disparaged as deceptive acts against investors.

However, recently, Hanmi Pharmaceutical disclosed the cancellation of a new drug export deal late on purpose, putting itself into the biggest-ever crisis in its corporate history. This made a big change in the pharmaceutical industry.

One good example is that Green Cross informed of the suspension of a clinical test of “Green Gene F,” a hemophilia remedy in the US before the opening bell at the Korean stock market in the morning of October 13. Although the US FDA announced the suspension on the same day, considering a time difference, the company broke the news about ten hours earlier in Korea than in the US. As Green Cross’s stock price tumbled about 4% for two days after the announcement of the bad news, some of those in the pharmaceutical industry even said, “Green Cross went too far, didn’t it?”

Korea United Pharm also disclosed the cancellation of a new drug supply deal with China’s Jiangxi Jimin Kexin Pharmaceutical Co. (JJK) at 4:17 pm shortly before the closing bell of the stock market on October 12.

To top it off, pharmaceutical companies vowed not to cause unnecessary misunderstandings such as “overestimating contracts on purpose” by not stressing the size of a technology export but clearly explaining milestones (technological fees by stages) among others. But it is still uncertain that such self-cleaning efforts will continue in the pharmaceutical industry. “Since the Hanmi Pharmaceutical Incident, a consensus is brewing that drug companies should voluntarily disclose not only mandatory matters but negative issues inside our company,” a representative of a big pharmaceutical firm. “But there is a polemic against voluntary announcements of negative issues as well.”     

But many experts point out that as Korean companies have upgraded their new drug development capabilities since Hanmi Pharmaceutical hit the jack pot with technology export, related practices should honor global standards. “As the suspension of a clinical test among others during the development of a new drug can take place, there is no reason for hiding it,” said Yun Seon-ju, lead researcher at the government’s New Drug Development Group. “The more such issues are disclosed, the more investors will understand about new drug development processes. Accordingly, it will come into play positively for relevant ecosystems.”