P 070819Z NOV 08
FM AIT TAIPEI
TO SECSTATE WASHDC PRIORITY 0298
INFO CHINA POSTS COLLECTIVE
AMEMBASSY SEOUL 
AMEMBASSY TOKYO 
USDOC WASHDC

UNCLAS AIT TAIPEI 001575 
 
 
STATE FOR EAP/TC, EB/TBB/BTA 
STATE PASS TO USTR/BLUE AND WINELAND AND AIT/W 
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN TW
SUBJECT: TAIWAN: PART TWO OF 2009 NATIONAL TRADE ESTIMATE REPORT 
 
REF:  STATE 88685 
 
PHARMACEUTICALS AND MEDICAL DEVICES 
------------------------------------ 
 
¶1. Taiwan has identified both the medical device and pharmaceutical 
sectors as priorities for development, resulting in Taiwan agencies 
sometimes appearing to favor the interests of local companies over 
foreign firms.  In addition, Taiwan bans imports from China of about 
30 medical products. Due to global manufacturing plans, however, 
many U.S.-designed medical devices are produced in China, and the 
foreign medical device industry has suggested that Taiwan lift 
import bans for these products. In response, the Ministry of 
Economic Affairs (MOEA) recently announced that it would 
conditionally allow the import of blood glucose meters made in 
China. 
 
¶2. Improvements have occurred in the registration and approval 
process for less risky medical devices in recent years. However, 
registration and approval procedures for higher risk medical device 
imports are complex and time consuming, and continue to be the 
subject of longstanding complaints by U.S. firms. The registration 
process requires extensive documentation and sometimes arbitrary 
demands for additional information and redundant testing. 
 
¶3. DOH officials are therefore continuing to work with industry to 
improve the medical device registration process, primarily 
concerning identical products made in different quality system 
documentation manufacturing sites, or with outer packaging changes. 
In order to make product registration more efficient, the DOH 
recently adopted more flexible product registration procedures for 
in-vitro diagnostic medical devices that allow importing companies 
to follow U.S. or EU procedures, rather than demand extensive 
documentation and redundant testing for products made in Europe by 
U.S. companies. Regulations are vague on when local clinical trials 
are required for the review process or whether industry is allowed 
to provide additional input in response to questions posed by DOH 
officials reviewing the clinical trial submissions. 
 
¶4. A continuing concern in the pharmaceutical sector in Taiwan 
involves pharmaceutical pricing and management. Through the TIFA 
process, the United States has been encouraging Taiwan to adopt a 
system of actual transaction pricing (ATP) in order to address the 
significant gap between the amount that the Bureau of National 
Health Insurance (BNHI) reimburses for a pharmaceutical product and 
the price actually paid to the provider of that product. This gap 
distorts pharmaceutical trade and prescription patterns in Taiwan. 
These distortions are worsened by hospital doctors' ability to both 
prescribe and dispense pharmaceuticals. Separating these functions 
would help to resolve the long term pricing problem. 
 
¶5. In addition, Taiwan's lengthy pharmaceutical registration process 
imposes unnecessary costs and slows market entry for new drugs that 
have already received regulatory approval in advanced economies. 
For example, the Taiwan Department of Health (DOH) Bureau of 
Pharmaceutical Affairs (BOPA) requires a company that wants register 
a drug for sale in Taiwan to provide Certificates of Pharmaceutical 
Product (CPP) certifying the drug for sale in two separate markets 
outside Taiwan.  BOPA, however, is considering new registration 
procedures that would reduce the current requirement to one CPP, 
which would help speed introduction of new 
pharmaceuticals--especially U.S.-made drugs--into the Taiwan 
market. 
 
¶6. The reimbursement price gap noted above for pharmaceuticals is 
also an issue for medical devices offered in the Taiwan market.  In 
addition, BNHI pricing criteria currently specifies a single 
purchase price for all medical devices that treat the same 
indication. This policy effectively subsidizes lower quality, often 
domestically-made devices while forcing producers of high-priced, 
high-value devices to be reimbursed at an insufficient level. Unless 
the policy is modified, this may lead to significant market 
distortion in favor of lower quality products over time. 
 
¶7. Through the TIFA process, the United States is encouraging 
Taiwan's Ministry of Justice and DOH to work together to take action 
to resolve pharmaceutical pricing and reimbursement problems. The 
DOH has agreed to set up working groups to study options to bring 
more transparency and fairness to drug pricing, including requiring 
standard contracts for all drug purchases, implementing ATP, and 
separating dispensing and prescription. In September 2007, Taiwan's 
Executive Yuan approved a proposed amendment to the National Health 
Insurance (NHI) Law that would increase pricing transparency by 
requiring all hospitals to use a common standard contract for 
pharmaceutical purchases; the amendment is pending approval by the 
Legislative Yuan. 
 
GOVERNMENT PROCUREMENT 
 
---------------------- 
 
¶8. Taiwan committed to accede to the GPA as soon as possible after 
it became a WTO Member, but it has not yet acceded due to 
differences with GPA Parties regarding nomenclature issues. To 
prepare for accession, Taiwan implemented a new government 
procurement law in mid-1999, an important first step toward 
establishing a transparent and predictable environment for Taiwan's 
multi-billion dollar public procurement market. In August 2001, 
Taiwan and the United States signed a Memorandum of Understanding on 
Government Procurement (MOU). The MOU calls for Taiwan to implement 
certain procedural commitments immediately, with others to be 
implemented upon accession to the GPA. The United States continues 
to work with the Taiwan authorities to resolve nomenclature issues 
and permit Taiwan accession. 
 
¶9. Many Taiwan procurement contract clauses specifically exclude 
foreign tenders. In addition, Public Construction Commission 
(PCC)-determined terms and conditions for model public procurement 
projects impose large indirect and unforeseeable liabilities on 
contractors and thereby prevent U.S. firms from bidding on projects. 
 
 
EXPORT SUBSIDIES 
---------------- 
 
¶10. Taiwan provides incentives to industrial firms in export 
processing zones and to firms in designated "emerging industries." 
Taiwan has notified the WTO of these programs and, as part of its 
WTO accession, committed to amend or abolish any subsidy programs 
inconsistent with WTO rules. When it became a WTO Member, Taiwan 
amended relevant laws, such as the Statute for Establishment and 
Management of Economic Processing Zones and the Statute for 
Establishment of Scientific Industrial Parks. The United States 
continues to monitor Taiwan's compliance with the commitments it 
undertook as part of its WTO accession, including those obligations 
associated with the Agreement on Subsidies and Countervailing 
Measures. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
--------------------------------------------- 
 
¶11. IPR protection continues to be an important issue in the United 
States-Taiwan trade relationship. The United States recognizes 
Taiwan's continuing efforts to improve enforcement of IPR in 2008, 
but continues to be concerned with a number of issues, including the 
availability of counterfeit pharmaceuticals in Taiwan, Internet 
infringement, illegal textbook copying on and around university 
campuses, and inadequate protection for the packaging, 
configuration, and outward appearance of products (trade dress). The 
U.S. International Intellectual Property Alliance estimates that 
losses due to IPR copyright piracy in Taiwan cost U.S. industry 
$327.8 million in 2007. Transshipment of counterfeit products from 
China is also a problem.  Counterfeit goods from Taiwan seized by 
U.S. Customs dropped from $26.5 million in 2002 to $3.4 million in 
2007 and to $1.3 million in the first half of 2008. 
 
¶12. Trademark counterfeiting, particularly of clothing and luxury 
goods, is still a concern. Much of the counterfeit product is 
reportedly smuggled from China. Rights holders state that Taiwan is 
both a transshipment point and a market for this counterfeit 
material. Taiwan Customs and IP police make regular seizures of 
counterfeit apparel and handbags, but rights holders complain that 
investigation and prosecution remain hampered due to inadequate 
resources and personnel and that light sentences issued for 
convictions do not deter trademark counterfeiters. 
 
¶13. Internet piracy and illegal peer-to-peer (P2P) downloading 
remain serious concerns for IP enforcement in Taiwan, and the sale 
of counterfeit goods over the Internet - resulting in part from 
increased raids on traditional sales venues - is also a concern. 
Taiwan has made efforts to combat such Internet-related IPR 
violations, including strengthening cooperation with foreign 
enforcement agencies and passing an amendment to the Copyright Law 
in June 2007 that subjects illegal file sharing to a maximum jail 
term of two years.  Also, the authorities are amending the Taiwan 
Copyright Law to require Internet service providers (ISP) to 
undertake more effective notice-and-takedown actions against online 
infringement.  To improve Taiwan's ability to protect IPR on college 
campuses, Taiwan continued its Campus IPR Action Plan to strengthen 
management of academic computer networks and illegal textbook 
copying by students. 
 
¶14. The United States remains concerned about counterfeit 
pharmaceutical products in the Taiwan market. The recent revision of 
the Pharmacist Law increased penalties for pharmaceutical 
counterfeiting, and the Ministry of Justice, the Taiwan Coast Guard, 
and Taiwan Customs have had some success in intercepting imports of 
counterfeit pharmaceuticals. Nevertheless, counterfeit products 
continue to be a threat to public health in Taiwan, and may 
undermine confidence in legitimate products. 
 
¶15. U.S. rights holders report that court procedures and delays can 
constitute impediments to effective IPR enforcement and that 
penalties for intellectual property infringement are inadequate to 
deter violators. In addition, Taiwan's judiciary continues to 
experience difficulties handling technically challenging IPR 
infringement cases. To improve this situation, Taiwan established a 
specialized IP court in July 2008, and the United States continues 
to assist Taiwan to remedy weaknesses in the judicial system by 
providing training and holding seminars on different criminal 
enforcement issues.