Starting in 2006, the National Health Insurance program in Taiwan faced the ordeal of recurrent budgetary deficits. An ageing population was and remains one of the fundamental factors contributing to this shortfall, making system reform inevitable. Approval of Second Generation Healthcare Reform came to the rescue in 2011 but brought with it eventual market access hurdles.

Second Generation Healthcare Reform was finally implemented in 2013 and included schemes such as the Drug Expenditure Target and NHI PharmaCloud. While the latter relates to cloud-based prescription records, the former presented particular challenges for the pharma industry. Under the Drug Expenditure Target scheme, the National Health Insurance Administration (NHIA) sets an annual pharmaceutical expenditure target based on the previous year’s sales, following negotiations with pharmaceutical companies. If the target is exceeded, the NHIA adjusts drug prices for the following year accordingly. NHIA data has shown that following implementation of DET, average drug price reductions of 3.9%, 5.2% and 2.1% were observed in 2014, 2015 and 2016, respectively. While 2016 witnessed a decreased reduction in average drug prices, it was attributed to savings from the implementation of the aforementioned NHI PharmaCloud, which reduces the instances of duplicate prescriptions.

The Taiwanese government believes that DET will deliver enhanced stability, transparency and predictability in terms of the national pharmaceutical pricing strategy. But in a country which is known for setting prices at the lower end of the spectrum, DET further limits pharma stakeholders. Research shows that average drug prices are less than 50% of the reference prices in top ten advanced economies.

The Drug Expenditure Target has indeed been successful in steering the NHI funds to a surplus after almost a decade at the expense of decreased drug prices and curbed monetary outflow to pharmaceutical spending. However, making further cuts to prices that are already lower than those of most other countries is unfavorable to industry at best. Alongside Taiwan’s lengthy drug review process, lower reimbursement prices and weak intellectual property laws, this represents another barrier to pharmaceutical market access. Unsurprisingly, the United States Trade Representative’s 2016 National Trade Estimate Report included ambiguous calculations of drug expenditure targets and uncertainty with regard to the expected course of action if targets are exceeded as contributors to potential market access volatility in Taiwan.

DET was initially implemented for a period of two years but its trial period was extended in 2015 to further contain pharmaceutical spending. Taiwan’s pharmaceutical spending as percentage of GDP does lean towards the higher side and with the increased pressure to provide improved medical services for the ageing population the government has a large task at hand to make ends meet. As a result, industry stakeholders can expect tougher pricing policies. Thus, it seems fair to expect that DET is here to stay and will continue to complicate market access in Taiwan through 2017.

Follow Kriti on Twitter @ksharmaDRG.

This blog is part of a series of posts from DRG’s global market access team examining challenges facing pharmaceutical firms in different countries in 2017. See our other blogs as they are added here (https://decisionresourcesgroup.com/tag/2017challenges/).

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