VZCZCXRO5567
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #1788/01 2210850
ZNR UUUUU ZZH
P 090850Z AUG 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 6306
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHHK/AMCONSUL HONG KONG 8358

UNCLAS SECTION 01 OF 02 TAIPEI 001788 
 
SIPDIS 
 
STATE PLEASE PASS TO AIT/W AND EAP/RSP/TC 
 
STATE PASS USTR/EALTBACH 
 
USDOC FOR 4430/ITA/MAC 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON TW
SUBJECT: Taiwan Pharma: BNHI Cuts Drug Rates, Pushes Standard 
Contracts 
 
¶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 
summary. 
 
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 
scheduled. 
 
¶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. 
 
Comment 
------- 
 
¶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.