South Korea’s Health Insurer Sues Tobacco Makers Over Costs

South Korea’s national health insurance body sued three cigarette makers for at least 53.7 billion won ($52 million) as compensation for health-care costs linked to smoking-related diseases.

National Health Insurance Service filed the suit against KT&G Corp. (033780), the former state-run cigarette maker privatized in 2002, and the local units of Philip Morris International Inc. (PM) and British American Tobacco Plc (BATS) in Seoul Central District Court, the insurer, which is overseen by the nation’s health ministry, said in an e-mailed statement today.

The lawsuit marks the first time a national agency has sought damages against an industry in which South Korea’s government was previously a key participant. The Korea Tobacco Association, which represents cigarette makers in South Korea, said in January the insurer’s proposed lawsuit has no legal merit based on past court rulings in favor of tobacco producers.

“It’s the duty of NHIS to take responsibility for people’s health and to manage insurance finances,” the insurer said in the statement. NHIS said in January it spends at least 1.7 trillion won a year on health care related to smoking, with costs expected to increase in future.

Photographer: Ed Jones/AFP/Getty Images

A man smokes as he sits in a food market in Seoul. Close

A man smokes as he sits in a food market in Seoul.

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Photographer: Ed Jones/AFP/Getty Images

A man smokes as he sits in a food market in Seoul.

KT&G will deal with NHIS’s legal action “in line with previous lawsuits,” the Daejeon, South Korea-based company said in an e-mailed response to questions from Bloomberg, without elaborating. The company had 62 percent of the nation’s tobacco market last year, according to the Korea Tobacco Association.

KT&G shares closed unchanged at 82,400 won in Seoul, while the benchmark Kospi index was little changed.

‘Legal Principles’

Philip Morris’s main switchboard operator in Seoul declined to make a public relations official available and referred inquiries to the Korea Tobacco Association. British American Tobacco’s local office didn’t immediately respond to phone calls seeking comment. The two companies had a 19 percent and 13 percent share of the Korean market respectively last year.

“In terms of legal principles, this litigation is not different from a lawsuit that was recently rejected by the Supreme Court,” the Korea Tobacco Association said in an e-mailed statement. “Tobacco makers have abided by related laws and they will attend trials sincerely.”

South Korea’s Supreme Court said April 10 that a smoker suffering lung cancer isn’t proof of a causal link between cancer and cigarettes, because a combination of external and biological factors can also contribute.

Photographer: Seokyong Lee/Bloomberg

A casher arranges KT&G cigarette packs at a convenient store in Ilsan, South Korea. Close

A casher arranges KT&G cigarette packs at a convenient store in Ilsan, South Korea.

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Photographer: Seokyong Lee/Bloomberg

A casher arranges KT&G cigarette packs at a convenient store in Ilsan, South Korea.

Cancer Patients

The nation’s highest court made the statement in rejecting an appeal by a lung cancer patient and families of deceased patients in a private suit filed against KT&G and the South Korean government. A group of 31 lung cancer victims and their families filed the suit in 1999, claiming they weren’t fully informed of the dangers of smoking.

NHIS will prove the causal relationship between smoking and disease with the results of studies, assistance from experts and cooperation with international bodies including the World Health Organization, the insurer said in today’s statement. It plans to increase the compensation claim during the legal process, according to the statement.

To contact the reporters on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editors responsible for this story: Stuart Biggs at sbiggs3@bloomberg.net Lena Lee

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