VZCZCXYZ0004
RR RUEHWEB

DE RUEHIN #3384/01 2750337
ZNR UUUUU ZZH
R 020337Z OCT 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 2402
INFO RUEHBJ/AMEMBASSY BEIJING 5721
RUEHUL/AMEMBASSY SEOUL 8135
RUEHKO/AMEMBASSY TOKYO 8077
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHGV/USMISSION GENEVA 1776

UNCLAS AIT TAIPEI 003384 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
 
 
STATE PASS USTR 
STATE FOR EAP/TC, 
USTR FOR BOLLYKY AND ALTBACH, 
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EIND TW
SUBJECT: TAIWAN PHARMACEUTICALS:  PVS RESULTS ANNOUCED, 
WITH NO SURPRISES 
 
REF: A. TAIPEI 3275 TAIPEI 2947 
 
     ¶B. TAIPEI 2570 
 
Summary and Introduction 
------------------------ 
¶1.  On September 28, the Bureau of National Health 
Insurance announced the results of the fifth Price Volume 
Survey, with price cuts effective November 1.  Pricing 
information for individual companies will be sent out 
Monday, October 2, and companies will have two weeks to 
ppeal.  BNHI President Liu Chien-hsiang briefed AIT on the 
results the day before the announcement.  The results 
mostly reflect changes previously discussed during 
consultations (ref A).  Generic grouping will be done based 
on the 2003 model. BNHI has no plans to implement 
therapeutic grouping.  According to BNHI, modifications to 
the PVS will increase reimbursements to multinational drug 
firms by about US$ 186 million.  Of course much of this 
will be passed back to hospitals in additional discounts. 
See action request in paragraph 8. 
 
The Fifth PVS - Mostly Sticking to Earlier Concessions 
--------------------------------------------- --------- 
¶2.  Many of the announced modifications have already been 
reported: 
 
-- Merck Index 1983 will determine patent term for pricing 
purposes.  Originally BNHI intended to use Merck Index 1984. 
Industry and USG had been pushing for Merck Index 1982. 
 
--The R-zone (the amount of "reasonable discount") remains 
at 15% for patented drugs. 
 
--Angio-tension receptor blocker (ARB) drugs will not be 
subject to groupings, but will be reclassified as patented 
drugs for related adjustments - a change that will benefit 
15 innovative drugs of six companies. 
 
--Nineteen categories of drugs, including EPO and insulin, 
on which the original R&D companies maintain 
competitiveness, will not be subject to price adjustments. 
This will influence the prices of 188 drugs of 16 
companies. 
 
¶3.  In addition to the drugs mentioned in earlier 
discussions, BNHI added three other pharmaceutical products 
- albumin, blood factor 8, and blood factor 9, which will 
not be subject to price adjustments.  BNHI is also 
establishing floor prices for categories of drugs - 
injections at NT$10 per dose, liquids at NT$20, and DOH- 
standard packaged tablets at NT$1.5. 
 
¶4.   The following is a complete list of drugs that will be 
exempt from price cuts: 
 
Dactinomycin Injection 
Phenobarbital Sodium single active ingredient injection 
Biperiden Lactate injection 
Verapamil HCL injection 
Phenylephrine HCL injection 
Digoxin tablet 
L-Asparaginase injection 
Penicillin G injection 
Streptomycin injection 
Azthioprine tablet 
Murine monoclonal antibody CD3 (=Muromonal CD3) injection 
Blood products:  Immunoglobulin, Blood Coagulation factors 
  8 and 9 for human use 
Atropine single active ingredient products 
Insulin Products 
Epoetin products 
Peritoneal dialysis solution 
Drugs for treating T.B. 
Compound active ingredients injection containing 10% 
  Calcium Gluconate and 0.35% Calcium Sacchrate 
Protamine Sulfate single active ingredient injection 
 
Generic Grouping 
---------------- 
¶5. The Fifth PVS reverts to a grouping model akin to that 
used in 2003. Off-patent branded drugs are grouped with 
BA/BE generics (i.e. generics tested against the original 
 
drug for bioavailability and bioequivalence).  In this 
grouping, the group weighted average price (or "GWAP" in 
industry parlance) for off-patent branded drugs will be 
multiplied by a factor of 1.05 to preserve a gap between 
these drugs and their BA/BE generic equivalents.  Simple 
generics will be grouped separately. 
 
Moving on Standard Contract, Thinking about Working Groups 
--------------------------------------------- ------------- 
¶6.  Longer term, BNHI reported that they are moving ahead 
on developing a standard contract and are planning meetings 
with various stakeholders on the issue. Dr. Liu was 
reluctant to give a timeline, stating that he was unsure if 
legislation would need to be adopted to implement a 
standard contract.  He also stressed the importance of 
training and education opportunities for the Department of 
Health and the BNHI staff as they work towards long-term 
reforms.  Dr. Liu reiterated his willingness to set up 
working groups on the issues of actual transaction pricing, 
separation of prescribing and dispensing, and standard 
contracts.  He asked the USG to provide its views on how 
these working groups should be constituted. 
 
No therapeutic grouping for the next 3 years -guaranteed 
--------------------------------------------- ----------- 
¶7.  AIT again expressed interest in the two new drug 
pricing cases where therapeutic grouping seems to be a 
factor in setting the price, both of which are being 
appealed.  Dr. Liu stated emphatically that no therapeutic 
grouping would be imposed for at least the next three 
years.  After that, he couldn't promise, since it was 
unlikely that he would still be at BNHI. 
 
Action Request: 
--------------- 
¶8.  Post requests guidance on how to move forward on the 
working groups suggested by DAUSTR during the September 13 
digital video conference. 
WANG