Ban on Establishment of Pharmacy by JuristicPerson Case

(14-2 KCCR 268, 2000Hun-Ba84, September 19, 2002)

In this case, the Constitutional Court rendered a decision of non-conformity to the Constitution against the provision allowing only anatural person to open up a pharmacy and prohibiting establishment andmanagement of a pharmacy by a juristic person formed by pharmacists.

A. Background of the Case

The complainant is a corporation whose stockholders include phar-macists. The complainant, a juristic person, has established and manageda pharmacy. The Commissioner of the Food and Drug Administration,however, issued a warning that he would order suspension of businessfor three months against any pharmaceutical company or wholesaler of medicine who provides a pharmacy managed by a juristic personwith medicines because management of a pharmacy by a juristic personis against the statutory provision stipulating that "No person otherthan a pharmacist or Korean traditional medicine pharmacist shallestablish a pharmacy."

When pharmaceutical companies warned of suspension of businessstopped supplying medicines to the complainant, the complainant insti-tuted an administrative litigation to revoke the administrative disposi-tion warning suspension of business, and then petitioned the Court torequest the constitutional review of Article 16(1) of the Pharmaceu-tical Affairs Act. The Court did not grant the request, and the com-plainant filed the instant constitutional complaint, arguing that the instantstatutory provision violated the freedom of occupation as well as the right to equality.

B. Summary of the Decision

The Constitutional Court rendered a decision of nonconformity to the Constitution against the instant statutory provision on a majorityvote of six Justices (four voting for nonconformity to the Constitution,two voting for unconstitutionality) as follows:

(1) Opinion of Nonconformity to the Constitution by Four

Justices

(A) The instant statutory provision stipulates that only a pharma-cist, a natural person, can open a pharmacy and prohibits establish- ment and

management of a pharmacy by a juristic person that con- sists of pharmacists and individuals who are not pharmacists or that comprises only pharmacists.

The legislative purpose of the instant statutory provision is to gen-erally prohibit sales of medicines because it would be inappropriate toleave sales of medicines to the market system considering the effectthat medicine sales has on public health. Therefore, the provision onlyallows pharmacists who obtained a license by passing an examina-tion to sell medicines. However, such legislative objective could be obtained by requiring that the individual who treats and sells medi- cines at a pharmacy be a pharmacist. There is no legitimate reasonto limit the establishment and management of a pharmacy to pharma- cists who are natural persons. Since legislators have legislative dis- cretion to prohibit the establishment of a pharmacy by ordinary indi- viduals or a juristic person made up of ordinary individuals after dueconsideration of the positive and the negative effects that would becaused by allowing such persons to sell medicines by establishingpharmacies, it is not unconstitutional to prohibit establishment of apharmacy by such ordinary persons.

However, it is not appropriate as a means to achieve the legis-lative objective to prohibit the establishment of a pharmacy by ajuristic person composed only of pharmacists. It is an excessiverestriction of the freedom of occupation without a reasonable basis forthe juristic person as well as for the individual pharmacists who con-stitute the juristic person. It also improperly infringes on the free-domof association of such individuals and juristic persons.

It is also against the right of equality of the pharmacists to pro-hibit only pharmacists from forming a juristic person to establish apharmacy while allowing other professionals such as attorneys, certifiedpublic accountants, or manufacturers of medicines who are subjectto regulation under the Pharmaceutical Affairs Act to form a juristic person to run their business.

If the Court were to simply invalidate the instant statutory pro-vision by a decision of unconstitutionality, there would be no restric-tion on the establishment of the pharmacy, and anybody, who may notbe a pharmacist, could establish and manage a pharmacy. A simple decision of unconstitutionality would make the limits set by the leg-islators under their legislative discretion ineffective, and it would causemore confusion legally to issue a decision of unconstitutionality thanto render a decision to maintain the effectiveness of the instant statu-tory provision with some unconstitutional elements. Furthermore, thelegislators have discretion on how to rid the provision of unconsti- tutional aspects of the provision, and one of its many options wouldbe to allow only a specific form of a juristic persons to establish andoperate a pharmacy. For these reasons, the Court hereby issues adecision of nonconformity to the Constitution to

allow the instant stat-utory provision to remain effective and continue temporarily until thelegislature enacts a new law to replace the existing one

(2) Opinion of Unconstitutionality by Two Justices

As far as the public health is concerned, it would not matter whoestablished the pharmacy, as long as the person dealing and sellingthe medicine at the pharmacy is a pharmacist. Therefore, there is nolegitimate reason to allow only a pharmacist to establish a drug store.There is an exaggeration of disorderliness or health hazard that may be caused once anyone is permitted to establish a pharmacy, and thatis not even the central issue of the problem. If the instant statu-tory provision were to be declared unconstitutional, there needs to bean additional revision to allow only a pharmacist to prepare and sellmedicines. There might be additional advantage of providing newbusiness opportunities, encouraging competition, and promoting moreresearch opportunities with official corporation of knowledge and capitalif ordinary individuals who are not pharmacists were allowed to opendrug stores.

Even if the instant statutory provision were to lose its effect by adecision of unconstitutionality, other provisions of the PharmaceuticalAffairs Act could be applied to prohibit individuals who are not phar-macists from preparing or selling medicines. Since it is not neces- sary to allow the provision to sustain its effect temporarily througha decision of nonconformity to the Constitution, the Court should rendera decision of simple unconstitutionality.

(3) Dissenting Opinion of Three Justices

To allow business operation by establishment of a juristic persondoes not mean that a juristic person formed by natural persons who,as individuals, will be allowed to perform the job, will be guaran-teed the same freedom of occupation given to individual natural persons.The instant statutory provision does not restrict pharmacists to forman organization to promote their interests or to assist their profes-sional activities: It restricts only establishment of a pharmacy by suchjuristic person. Therefore, the provision does not infringe on the free-dom of occupation to manage their work by forming a juristic person,nor encroach on their freedom of association. The existing law clearlydistinguishes a juristic person and individual natural persons makingup such juristic person. A juristic person consisting only of phar-macists does not have a pharmaceutical license issued under its name,and therefore, it is perfectly natural to prohibit the establishment of a pharmacy by such juristic person. Here, the activities of the juristicperson, not those of individual members

of the juristic person, arebeing restricted.

The legislative objective of the instant statutory provision is notlimited to allowing only a pharmacist to prepare and sell medicines butto entrust the same pharmacist with operation and management of thepharmacy to ensure safety of sales of medicine. Such legislativeobjective may not be achieved by allowing anyone to establish apharmacy but limiting only a pharmacist to dispense medicines.

Other occupations listed on the Pharmaceutical Affairs Act suchas manufacturer of medicines do not directly contact consumers, and therefore, the effect that they have on the public health is relativelysmall compared to that of pharmacists. Since there is a need to amasshuman capital for attorneys and other professionals, differential treat- ment of other professionals and pharmacists does not violate the rightof equality of pharmacists without a reasonable basis.

Therefore, the instant statutory provision does not infringe on thefreedom of occupation, freedom of association, or the right of equalityof pharmacists or juristic persons composed only of pharmacists.