Cablegate: Taiwan Pharma: Bnhi Cuts Drug Rates, Pushes Standard

DE RUEHIN #1788/01 2210850
P 090850Z AUG 07







E.O. 12958: N/A
SUBJECT: Taiwan Pharma: BNHI Cuts Drug Rates, Pushes Standard

1. (SBU) Summary: The Taiwan authorities are taking steps on drug
pricing that will both disappoint and hearten the U.S.
pharmaceutical industry. Despite a media and lobbying campaign by
U.S. and other foreign drug makers urging the Taiwan Bureau of
National Health Insurance (BNHI) to delay the latest round of
price-cuts, BNHI announced on August 2 that it has stopped accepting
appeals from drug companies regarding its July 19 price list and
will reduce pharmaceutical reimbursement rates from September 1 as
planned. In better news, BNHI told AIT on August 9 that the
Department of Health (DOH) will pass an amended National Health
Insurance (NHI) Law to the Executive Yuan (EY) that will require
hospitals to use a Mandatory Standard Contract (MSC) for all
purchase agreements with drug companies, which would help prevent
hospitals from asking makers for under-the-table discounts. End

Drug Prices Drops Anger Industry

2. (U) On August 8, BNHI announced that it will implement the latest
round of drug price reimbursement reductions from September 1 as
originally planned. BNHI announced the new price cuts on July 19
and based its data on generic groupings of prices gathered during an
early-2007 re-check of the 2006 Price Volume Survey (PVS) results.
BNHI allowed appeals from drug companies on individual prices until
August 2, but has not announced any changes to the original
re-check's conclusions. [Note: BNHI ordered the re-check in the wake
of May 2006 raids by the Tainan Prosecutor's Office on several
hospitals and companies for allegedly filing false drug-pricing data
with BNHI. The process ended in February 2007, and resulted in the
July announcement that BNHI would adjust average reimbursement
amounts downward. End note.]

3. (SBU) After the July 19 announcement, the Taiwan-based
International Research-based Pharmaceutical Manufacturers
Association(IRPMA)--which represents the interests of original drug
manufacturers in Taiwan--launched a media and lobbying campaign to
pressure BNHI to delay or reverse the price cuts. BNHI, however,
ignored the effort and re-iterated on August 6 that it would accept
no further input from drug makers and would implement price cuts as

4. (SBU) In other drug price news, during an August 9 meeting with
econoff, Dr. Cheng-hua Lee, BNHI's Vice President, confirmed local
press reports that BNHI plans to examine individual drug prices paid
by hospitals once every six months during the three-year period
after a medicine's patent expires. This would be a significant
reduction of the current one- to two-year break between price
reviews, and is further evidence of continuing budget pressures on
the nationalized health insurance program.

Now the Good News

5. (SBU) According to DOH National Health Insurance Task Force
member Sharon Lin, the DOH decided on August 6 to recommend that the
Executive Yuan (EY) amend the National Health Insurance (NHI) Law to
require all hospitals to use a Mandatory Standard Contract (MSC) for
all price agreements with drug companies. On August 9, BNHI's Dr.
Lee told econoff that the Executive Yuan will take up the issue of
amending the NHI Law to require MSCs by the end of August, and that
the EY will then submit an amended NHI bill to the Legislative Yuan
(LY) before the end of September. He was pessimistic, however,
that the LY will do anything with the bill before its elections at
the end of this year, since changes to the health insurance system
will be controversial.

6. (U) If passed, the amended law would make price agreements more
transparent and help prevent hospitals from asking makers for
additional, under-the-table discounts, thereby reducing large gaps
between the lower drug prices that hospitals pay and the higher
amounts that BNHI reimburses them. This gap is the so-called "black
hole" in the health care system that industry claims unfairly
reduces drug prices while raising Taiwan's health-care costs and
lining hospitals' pockets.


7. (SBU) U.S. and other foreign pharmaceutical manufacturers are
unhappy that BNHI will go ahead with further drug price cuts, but
BNHI's actions are unsurprising given its past reluctance to allow
substantial foreign industry input into pricing decisions. As for
the BNHI plan to amend the National Health Insurance Law to require
MSCs, even if the EY sends an amended NHI Law to the LY before the

TAIPEI 00001788 002 OF 002

end of September, passage is uncertain and at least six months off.
Still, it's a victory for the TIFA process: according to Dr. Lee,
BNHI originally approached hospitals about using MSCs voluntarily,
but the reaction was so negative that BNHI, mindful of U.S. TIFA
requests, decided to go the legislative route. AIT will track the
amended bill's progress and continue to press the Taiwan side on the
importance of speedily implementing MSCs. End comment.

© Scoop Media

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