Cablegate: Taiwan Pharmaceuticals: Mixed Progress

VZCZCXYZ0004
PP RUEHWEB

DE RUEHIN #2570 2130845
ZNR UUUUU ZZH
P 010845Z AUG 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 1352
INFO RUEHBJ/AMEMBASSY BEIJING 5498
RUEHHK/AMCONSUL HONG KONG 6705

UNCLAS AIT TAIPEI 002570

SIPDIS

STATE PLEASE PASS TO AIT/W AND EAP/RSP/TC

STATE PASS USTR/EALTBACH

USDOC FOR 4430/ITA/MAC/BRENDA CARTER-NIXON AND JEFF DUTTON

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON TW
SUBJECT: TAIWAN PHARMACEUTICALS: MIXED PROGRESS

1. Summary. On July 27, AIT and International Research-based
Pharmaceutical Manufacturers Association (IRPMA) met with Taiwan's
Bureau of National Health Insurance (BNHI) officials for the third
time since the May 25-26 TIFA talks to discuss main issues related
to the Price Volume Survey (PVS): generic grouping and patent term.
BNHI indicated flexibility on the patent term issue after IRPMA
presented rationales. BNHI clarified to AIT on July 28 that all
issues related to the Fifth PVS remain open until September 30 for
discussion with USTR and possible change. End Summary.

Taiwan Welcomes USTR Mid-August Visit
-------------------------------------

2. On July 28, AIT met with the BNHI and Department of Health (DOH)
and received assurance that all aspects of the PVS will be open for
discussion and possible modification during the USTR visit in
mid-August 2006. BNHI recommended that future AIT delegations to
the consultation include representatives of PhRMA, Washington and
the AmCham Pharmaceutical Committee to facilitate communication on
technical issues.

Patent Term
-----------

3. During the July 27 consultations with IRPMA and AIT, BNHI
indicated it may redefine the patent term from 22 years to 24 years
by adopting the Merck Index 1982, as suggested by IRPMA. However,
Alex Chang, Chairman of IRPMA, noted that no final consensus was
reached on the patent term.

4. Note: The Merck Index (MI), a one-volume encyclopedia of
chemicals, drugs and biologicals, was first published in 1889 and
has been updated periodically since then. BNHI and the
pharmaceutical industry in Taiwan have adopted the MI 1980 as the
standard reference to define patented drugs for the PVSs implemented
in 2003 and 2005. End Note.

Generic Grouping
----------------

5. Also at the July 27 consultations, IRPMA noted that generic
grouping (which refers to the BNHI practice of grouping off-patented
drugs and generics of same ingredients into a common average price
category) destroys the market mechanism. IRPMA was concerned that
the generic prices were not accurate due to heated competition and
discount prices over the past few years. IRPMA believes that
generic grouping allows generic pharmaceuticals to offer steep
discounts to hospitals and thus greatly restricts the use of
patented pharmaceuticals. BNHI officials said generic grouping is
too broad an issue to be resolved quickly, and needs further
discussion with local industrial associations. BNHI President Liu
Chien-Hsian said that DOH Minister Hou has instructed him to
establish a task force of six local pharmaceutical related
associations and IRPMA to discuss controversial issues related to
the PVS. Liu encouraged IRPMA to participate in the task force.

Data Validation Comment Period Is Extended
------------------------------------------

6. At the July 27 meeting, BNHI extended by one week the two-week
comment period for individual drug companies to verify the accuracy
of price data from distributors. IRPMA and AmCham Pharmaceutical
Committee members indicated they are satisfied with these price
validation arrangements.

BNHI Action on Data Accuracy
----------------------------

7. BNHI President Liu noted that BNHI was working with the Ministry
of Justice on an initiative to combat false data reporting. Liu
urged companies to provide more input for improving data accuracy
and auditing mechanisms.

YOUNG

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