US embassy cable - 05TAIPEI2143

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002143 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/BTA, STATE PASS AIT/W AND USTR, 
USTR FOR KI AND FREEMAN, DOC FOR 
4431/ITA/MAC/OPB/TAIWAN/MBMORGAN AND DUTTON 
 
E.O. 12958: DECL: 05/12/2015 
TAGS: ECON, KIPR, TW, ETRD, IPR 
SUBJECT: COUNTERFEIT PHARMA NOT A PRIORITY FOR TAIWAN DOH 
 
REF: 04 TAIPEI 3198 
 
Classified By: AIT Director Douglas Paal, Reason 1.4 (d) 
 
1.  (SBU) Summary:  Following the March 2004 passage of 
amendments to Taiwan's Pharmaceutical Law that increased 
penalties for trafficking in counterfeit pharmaceuticals, 
Taiwan's Department of Health (DOH) is now beginning to look 
for ways to address concerns about pharmaceutical piracy and 
the sale of unlicensed copies of active ingredients in 
medicines and food supplements.  Officials from the DOH and 
from Taiwan Customs reported an increase in the number of 
cases of counterfeit medicines discovered and seized in 2004. 
 The National Police and the Coast Guard also reported making 
seizures.  In spite of what appears to be increasing 
awareness of the need to "do something" about counterfeit 
drugs, DOH is driven by its concern for consumer protection 
rather than respect for intellectual property.  In addition, 
Taiwan's system for pharmacy accreditation is weak, DOH has 
no enforcement or national inspection arm, and sees no need 
to cooperate with the Taiwan Intellectual Property Office 
(TIPO) to glean best practices in the fight against 
counterfeits.  End Summary. 
 
========================================== 
Counterfeit Pharma a Problem, but How Big? 
========================================== 
 
2.  (U) International pharmaceutical manufacturers have long 
complained that pharmaceutical counterfeiting is a serious 
problem in Taiwan.  An oft-cited 2002 survey by a major 
international pharmaceutical research manufacturer claimed 
that approximately 40 percent of Viagra sampled in several 
hundred pharmacies all over Taiwan was counterfeit or an 
unlicensed parallel import.  One quarter of an expensive 
heart medication was found in the same survey to be 
counterfeit.  This 2002 survey remains the best estimate of 
the scale and scope of the problem and seems to be supported 
by the results of MJIB and National Police raids.  Since this 
survey, manufacturers have estimated that around 25 percent 
of research-based pharmaceuticals sold in Taiwan are 
counterfeit or unlicensed.  The DOH also uses this figure in 
discussing the prevalence of unlicensed drugs.  The USTR 
Special 301 report in 2005 listed pharmaceutical piracy as an 
area of concern for the first time. 
 
======================================== 
DOH Defines the Problem, but Lacks Power 
======================================== 
 
3.  (U) In response to increasing concern about counterfeit 
pharmaceuticals, DOH began a pilot project in March 2005 to 
try to identify which medical products, including 
pharmaceuticals and non-pharmaceutical supplements, are most 
popular among by Taiwan consumers.  According to DOH Bureau 
of Pharmaceutical Affairs Chief Wang Hui-po, DOH has 
contracted an outside research institute to conduct a survey, 
the results of which should be known by June.  DOH then plans 
to use the results of that survey to target the most popular 
products for testing to determine the percentage of these 
products that are counterfeit or contain unlicensed 
ingredients.  DOH sees the problem purely as a consumer 
safety issue and does not distinguish between fake 
pharmaceuticals and unlicensed ingredients or additives. 
This is in contrast to pharmaceutical manufacters, which tend 
to view the problem as a lack of protection of their 
intellectual property that not only hurts their sales and 
reputations but puts consumers at risk. 
 
4.  (U) DOH,s efforts to combat counterfeit pharmaceuticals 
are made more difficult by the fact that it has no statutory 
enforcement arm, nor does it have any official role in 
accrediting pharmacies.  Instead, DOH relies on county health 
authorities to conduct ad hoc and sporadic inspections of 
pharmacies as part of their regular duties and the National 
Police and Ministry of Justice Investigation Bureau (MJIB) to 
carry out inspections and raids of night markets or other 
unlicensed distribution channels.  Pharmacies, once licensed, 
do not have to renew that license and are only subject to 
biennial accreditation inspections by the county 
pharmaceutical association. 
 
5.  (C) According to DOH statistics, there were five cases of 
counterfeit pharmaceuticals reported by the county 
pharmaceutical associations in the last year.  DOH itself 
filed 72 cases in 2004 accusing vendors of selling 
counterfeit or unlicensed drugs.  27 of these cases involved 
food products and supplements, 21 involved herbal medicines. 
The active ingredients of Viagra and Cialis were the most 
often illegally added to pills or drinks that were then 
marketed as sexual potency aids. 
 
===================================== 
Coordination to Combat Counterfeiting 
===================================== 
 
6.  (U) In 2003, DOH established a committee to facilitate 
the sharing of information about pharmaceutical 
counterfeiting.  The committee includes representatives from 
the Ministry of Justice (MOJ), Taiwan Customs, the Taiwan 
Coast Guard, the Ministry of the Interior (which includes the 
National Police), the International Research Pharmaceutical 
Manufacturers Association (IRPMA), local pharmaceutical 
manufacturers associations, and the Taiwan Pharmacists 
Association, in addition to DOH.  The Committee meets 
biannually and provides agencies the opportunity to share 
information and best practices, and offers training for 
enforcement officials on how to recognize counterfeit 
products. 
 
7.  (U) That training appears to be paying some dividends. 
Enforcement agencies active in the Counterfeit Pharmaceutical 
Committee (DOH, Customs, the Coast Guard, and the National 
Police) report a steady increase in the number of cases of 
counterfeit or unlicensed drugs: 84 cases in 2002, 171 in 
2003, and 249 cases in 2004.  Taiwan Customs has been most 
active, filing 23 cases in 2002, 103 in 2003, and 160 in 
2004.  Taiwan Customs officials tell AIT they believe that 
the majority of these counterfeit products originate in China 
and are destined for the Taiwan market.  The Ministry of 
Justice and National Police cooperated on an investigation in 
the summer of 2004 that led to the seizure of almost a 
million doses of Viagra, Reductil, and Stilnox with a street 
value of several million US dollars that were allegedly 
produced in Guangdong Province and smuggled into Taiwan on 
fishing boats.  (reftel) 
 
============================= 
"Protecting IP not DOH's Job" 
============================= 
 
8.  (SBU) According to Dr. Wang, DOH,s primary concern is 
consumer protection, not the protection of intellectual 
property.  Taiwan,s adverse reaction reporting system has 
not yet reported any case of illness or death brought about 
by an adverse reaction to a counterfeit pharmaceutical 
product.  For that reason, DOH prefers to focus its attention 
on specific products that make exaggerated claims or do not 
meet sanitary production standards.  In 2005, DOH is 
concentrating its efforts on inspecting medicated liquors. 
Wang noted that MOJ had been making specific efforts to focus 
on counterfeit drug cases in 2004 and had had some success, 
offering to pass the ultimate responsibility for combatting 
counterfeit pharmaceuticals to them.  When asked if DOH had 
ever considered cooperating with TIPO to find ways to 
successfully combat counterfeit pharmaceuticals, Wang 
dismissed the idea, noting that the Pharmaceutical Law makes 
public health concerns paramount, not IP protection and that 
TIPO didn't have a role to play in protecting public health. 
 
============================================= ========= 
Comment: DOH Passing the Buck on Pharmaceutical Piracy 
============================================= ========= 
 
9.  (C) Despite their positive spin, it is clear that DOH has 
no idea of the scale of pharmaceutical counterfeiting in 
Taiwan, is not making combating piracy a priority, and seems 
happy to pass the buck to MOJ, the county health authorities 
or others.  The pilot project proudly touted by Dr. Wang as 
evidence of DOH,s commitment to rooting out counterfeiters 
will not produce a list of potential target products for 
monitoring before July and appears to be aimed more at 
unlicensed food additives and supplements.  Wang told AIT 
that recently installed DOH Minister Hou had not yet been 
briefed on the project, further calling into question the 
importance DOH places on even this meager effort.  The 2004 
amendments to the pharmaceutical law were a very positive 
step in that they substantially increased penalties for 
manufacture, sale and distribution of counterfeit products, 
but given the slowness of the judicial process in Taiwan we 
will not see increases in sentences for infringers until 
later this year at the earliest.  While DOH,s commitment to 
consumer protection is laudable, they are not likely to take 
a leadership role in efforts to reduce the scale of 
pharmaceutical counterfeiting in Taiwan,s market until there 
is a public health crisis caused by fake drugs. 
PAAL