Corruption and Conflicts of Interest in the Pharmaceutical Market: Regulation of Pharmaceutical Companies’ Gift-Giving Practices

Abstract

Pharmaceutical companies often give gifts to doctors or pay them to recommend or prescribe their products. Such practices not only pose a risk to patients’ recovery, but also cause excessive medication use, increase medical costs and undermine merit-based competition amongst pharmaceutical companies, causing severe inefficiency in society. Japan’s regulatory approach towards pharmaceutical companies’ gift-giving practices is lenient and ineffective, with the criminal code prohibiting bribery only in relation to public officials. Most doctors who privately provide medical services are not able to be reached by the law. Furthermore, only the individual, not the company, is penalised under the criminal code. Although the Antimonopoly Act and the Act against Unjustifiable Premiums and Misleading Representations regulate attempts to entice customers using unfair means, a violation results only in a cease-and-desist order. The detailed rules set out in the Fair Competition Code are rarely enforced by the industry’s self-regulatory body, which issues only a warning and guidance to violators. Disclosure, rather than prohibition, has become the primary way to control pharmaceutical companies’ profiteering practices. However, disclosure alone is insufficient to ensure a proper distance remains between doctors and pharmaceutical companies. Given the serious harms and inefficiencies that may be caused by gift-giving practices, such regulatory systems must be overhauled to effectively prevent such unfair and inefficient methods of competition.