Until recently, the Korean government implemented consumer protection through various laws by requiring companies in certain industries to purchase insurance, such as: Framework Law on Disaster Management and Securitythe Industrial Convergence Promotion Actthe Guarantee of the Motor Vehicle Damage Compensation Actthe Special law on security control of public facilitiesthe Municipal Gas Actand the Law on the safety management of elevator systems). However, there was no such legal framework for the medical device industry. Therefore, if a patient suffered an injury or illness related to the use of a medical device, they had no choice but to resort to individual actions under the Product Liability Act or Civil Code to demand compensation for damages caused by the medical device(s) used by him/her. This has now changed. A provision has been added to the Medical Devices Act (particularly Article 43-6) which introduces a new obligation for manufacturers and importers of medical devices to take out liability insurance, on the basis of which patients using medical devices can benefit from insurance payments. This change went into effect on July 21, 2022.
Article 43-6 of the Medical Devices Act (insurance etc.)
① Manufacturers and importers of medical devices, as required by the Presidential Decree, must take out insurance or join a mutual aid organization to compensate patients for harm caused by significant side effects or death during the use of a medical device.
② In paragraph 1 above, the types of insurance or mutual assistance, Manufacturers and importers of medical devices those charged with arranging insurance, sums insured and other necessary matters are prescribed by Presidential Decree.
2. Significant changes to the Medical Devices Act and the Enforcement Decree
1. right to insurance coverage: According to the Medical Devices Act Presidential Decree (“Enforcement Decree”), manufacturers and importers of “implantable medical devices” (ie those medical devices that pose a high risk to the human body and/or are known to have caused numerous instances of adverse events associated with its use) are obliged to take out medical liability insurance.
Article 12-5 of the Execution Decree of the Medical Devices Act (manufacturers and importers of medical devices required to purchase insurance or mutual aid and kinds etc. insurance or mutual aid)
① Manufacturers and importers, as prescribed in the Presidential Decree pursuant to Article 43-6(1) of the Medical Devices Law, and those required to take out insurance under Paragraph 2 of the same Law, means manufacturers and importers of medical devices that are inserted into a human body and remain there for at least thirty (30) consecutive days (hereinafter the “Implantable Medical Devices”).
2. Sum insured and sum insured etc: The insurance will be paid to patients in the event of death (minimum KRW 150 million), accident (minimum KRW 30 million) and consequential damages (minimum KRW 150 million) after the medical equipment insurance scheme came into force (July 21, 2022).
Art. 12-6 of the enforcement decree for the Medical Devices Act (sum insured etc. for medical device liability insurance etc.)
① The sum insured for the medical device liability insurance etc. must not fall below the following sum:
1. In the event of death: 150 million KRW per person;
2. In case of injury: 30 million KRW per person; and
3. In the case of a physical disability caused by an injury, if, upon completion of treatment of such injury, the symptoms caused by that injury are resolved so that no further progress can be expected (hereinafter, “Consequences”): 150 million KRW per person.
3. time of taking out the insurance: While similar laws provide that insurance should be taken out before Initial Release/Introduction of the Productthe Medical Devices Act stipulates that manufacturers and importers of implantable medical devices should take out liability insurance before selling such a medical product.
4. When a foreign manufacturer or dealer has already purchased an insurance policy in another country outside of Korea: To the extent that such overseas insurance policy meets the conditions prescribed by the Medical Devices Act (e.g. amount of compensation) and covers damage suffered by patients in Korea, the manufacturer/importer of medical devices is not required to obtain separate insurance in Korea.
5. Administrative Sanctions: Medical device manufacturers and importers who fail to obtain medical device liability insurance when required by medical device insurance legislation will be subject to: (i) a warning, a type of administrative penalty, for the first offence; (ii) temporary suspension of sale of the relevant product for one month for the second violation; (iii) temporary suspension of the sale of the relevant product for three months for the third violation; and (iv) Prohibition of sale of the relevant product (for the fourth or more violation).
6. payment term: Manufacturers/importers of medical devices are granted a grace period of six months from the entry into force of the current Enforcement Ordinance on the Medical Devices Act (ie 6 months from July 21, 2022) to fulfill the legal obligation to take out medical device liability insurance.
Enforcement order for the Medical Devices Act, supplement Article 2 (applicability of medical device liability insured etc. and special exceptions at the time of purchase)
① The amendments to Article 12-5 and Article 12-6 of the Enforcement Order also apply to implantable medical device manufacturers and importers who have obtained a medical device manufacturing permit or manufacturing certification or an import permit or import certification (however, those manufacturers/importers who have received a manufacturing permit/manufacturing certificate or import permit/import certificate solely for the purpose of export are excluded).
② Notwithstanding the amended Article 12-6, paragraph 2 of the Enforcement Order, manufacturers and importers of implantable medical devices referred to in paragraph 1 above shall take out medical device liability insurance, etc., within six (6) months from the date of enforcement of this writ of execution.
3. Outlook and potential impact
1. Potential for expanding the scope of obligations: For now, Certain insurance companies sell medical device liability insurance products audited by Korean financial regulators. As soon as the current medical device insurance is well on course, the obligation to take out medical device liability insurance becomes likely extended to manufacturers/importers of “non-implantable medical devices”.’ or voluntary insurance may be recommended for ‘all medical devices“.
2. Regulatory developments must be closely monitored and appropriate measures considered: As of 2020, the estimated market size for “implantable medical devices” is approximately 1.07 trillion KRW. The annual premium that manufacturers and importers of “implantable medical devices” will have to pay under scheduled medical device liability insurance is expected to reach up to billion Korean won An increase is to be expected in the future.
- Once the payment term Medical Device Liability Insurance Purchasing Period expires (6 months from July 21, 2022, according to the Enforcement Order), the Korean government is likely to conduct a survey/assessment on medical device liability insurance purchasing. Also, the Korean government can impose administrative sanctions on non-compliant manufacturers and importers who fail to obtain medical device liability insurance in violation of the law.
- It would therefore be advisable for manufacturers and importers of medical devices to closely monitor the associated developments and take appropriate measures, such as taking out medical device liability insurance.