US embassy cable - 05TAIPEI2626

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002626 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC, STATE PASS AIT/W AND USTR, USTR FOR 
FREEMAN, WINEMAN, AND WINTERS, USDOC FOR 
4431/ITA/MAC/AP/OPB/TAIWAN/MBMORGAN 
 
E.O. 12958: DECL: 06/14/2015 
TAGS: ECON, ETRD, TW 
SUBJECT: DOH DODGES A POTENTIAL TRADE/HEALTHCARE CRISIS 
 
REF: A. 04 TAIPEI 4021 
     B. TAIPEI 2078 
 
Classified By: AIT Director Douglas Paal.  Reasons 1.4 b/d 
 
 1.  (C) Summary:  With the June 21 medical device 
registration deadline fast approaching, Taiwan,s Department 
of Health (DOH) still has thousands of applications pending 
but has issued just over 200 licenses.  Without licenses, 
manufacturers feared they would be prohibited from importing 
products (from medical scissors to chemotherapy treatments) 
into Taiwan after June 20.  DOH staff blames late 
registrations, but its lack of clear requirements and 
manpower to process applications are the real culprits.  DOH 
senior staff have been scrambling to find a way to avoid a 
healthcare and trade-related crisis, even suggesting 
manufacturers might help to process applications.  After 
direct intervention from AIT, DOH told medical device 
manufacturers it would authorize a blanket extension of 
import permit validity, potentially ensuring that needed 
medical equipment can continue to be supplied to Taiwan 
patients for at least another six months.  End Summary. 
 
============================================= ==== 
Background: How Not to Implement a New Regulation 
============================================= ==== 
 
2.  (U) Taiwan,s Department of Health (DOH) announced in 
2004 that all medical device manufacturers would have to 
register their products by June 20, 2005 or face exclusion 
from the Taiwan market.  However, registration requirements 
were not finalized and made public until December 31, 2004, 
leading to complaints from manufacturers that there was 
insufficient time to comply with the new registration 
regulations.  DOH responded by guaranteeing medical device 
manufacturers that all applications received before April 5, 
2005 would be reviewed and issued import licenses.  However, 
it quickly became clear that DOH lacked the staff and 
expertise to process the thousands of applications (Johnson 
and Johnson submitted more than one thousand registration 
applications, other U.S. manufacturers each submitted several 
hundred.)  Sub-contracting application processing to the 
Industrial Technology Research Institute (ITRI) and the 
Pharmaceutical Testing Bureau (PTB), rather than speeding the 
registration process, has resulted in inconsistent 
requirements and sometimes bizarre requests for additional 
documentation. 
 
3.  (SBU) In May, the Director General of the Bureau of 
Pharmaceutical Affairs, Dr. Wang Hui-po (who has since 
resigned, reportedly for unrelated reasons), assured AIT that 
all products for which applications had been received would 
continue to be allowed in the Taiwan market (reftel B). 
However, AIT subsequently learned that DOH planned only to 
allow stocks already in Taiwan to be used.  All imports would 
be barred until licenses were issued. 
 
================================== 
DOH Oblivious to the Trade Problem 
================================== 
 
4.  (SBU) AIT accompanied representatives of AmCham's Medical 
Device Committee June 10 to meet with DOH Counselor Hsiao 
Mei-ling to discuss how DOH could overcome the law-based 
restrictions and avoid barring imported medical devices. 
Hsiao had been meeting constantly for several days with DOH 
staff and manufacturers and was clearly engaged in finding 
practical ways to allow urgently needed and perishable 
products to enter Taiwan.  AIT made it clear that barring 
imports of medical devices, most of which have already been 
used in Taiwan for many years, would lead not only a 
potential health care crisis, but would also needlessly 
create a serious trade problem that would have a negative 
effect on U.S.-Taiwan trade relations.  AIT also raised the 
problem with Board of Foreign Trade staff, with BOFT Director 
General Huang Chih-peng on June 10, and with Ministry of 
Economic Affairs Deputy Minister Steve Chen on June 13. 
 
5.  (C) Hsiao was obviously more comfortable dealing with the 
issue as an operational rather than a policy matter, 
constantly trying to turn the discussion to ways to ensure 
that patients have continued access to needed devices.  She 
suggested issuing a limited number of emergency import 
licenses for perishable products, and proposed ways to more 
efficiently process applications, including recommending that 
manufacturers assign staff to assist ITRI and PTB process 
applications in advance of the June 21 deadline. 
Manufacturers were asked to bear these costs, in addition to 
the already considerable sums spent to prepare application 
documents, reportedly averaging over US$1000 per application, 
for items that have already been widely used in Taiwan for 
many years. 
 
6.  (C) Econoff welcomed DOH,s efforts to protect the 
welfare of Taiwan patients, but again reminded Hsiao that if 
American manufacturers of medical devices were unable to 
import products because of bureaucratic inefficiencies within 
DOH there would obviously be negative ramifications in the 
US/Taiwan trade dialogue, in addition to serious health 
concerns.  Hsiao lamented that the DOH legal office had 
already advised that import licenses could not be legally 
extended beyond the June 20 deadline and was even arguing 
that products already in Taiwan warehouses should not be used 
until licenses had been granted.  She asked manufacturers to 
share the blame, but Econoff reiterated that the problem 
originated with DOH,s inability to set clear requirements 
and assign sufficient staff to process applications and 
suggested that DOH find a way to extend import permits for as 
long as need to insure applications could be processed and 
licenses issued. 
 
================================= 
Last Minute Efforts Lurch Forward 
================================= 
 
7.  (C) American Medical Device suppliers met with ITRI on 
June 13 at Hsiao's urging and were prepared to assign staff 
to assist ITRI and the PTB to process applications at their 
own expense.  However, according to representatives from the 
AmCham medical devices committee, these initiatives were 
resisted by ITRI staff.  Instead, ITRI and representatives 
from Abbott, BD, and Beckmen Coulter discussed previously 
agreed guidelines and ITRI assured participants that some 
licenses would be issued June 14. 
 
8. (C) On June 14, DOH called a meeting with representatives 
of medical device manufacturing associations to discuss ways 
to overcome the import license requirement.  In that meeting, 
DOH officials told manufacturers that DOH would publicly 
announce by Friday, June 17 a decision to extend current 
import regulations for six months in order to allow DOH 
additional time to process registration applications. 
 
============================================= == 
Comment: Poor Management=Future Problems Likely 
============================================= == 
 
9.  (C) If it plays out as promised, the above proposal to 
extend import permits could temporarily resolve our trade 
related concerns as well as head off a potential healthcare 
crisis for Taiwan patients.  However, this was a problem that 
could have been easily avoided.  Taiwan,s DOH has again made 
obvious its shortage of mid-level management and leadership 
skills.  The medical device registration requirement has been 
public knowledge for well over one year.  Medical device 
manufacturers, while not enthusiastic about the new 
requirement, have been willing to comply.  The Department of 
Health had time to consult with manufacturers to devise 
reasonable requirements and procedures, but failed to do so. 
When warned by manufacturers that the number of applications 
was likely to exceed the processing capability of DOH staff, 
senior leadership dismissed this concern as an attempt simply 
to avoid regulation. 
 
10.  (C) As the scope of the problem became obvious even to 
DOH, its frantic attempts to overcome legal and personnel 
challenges to resolve the issue have left manufacturers, 
hospitals, and us frustrated.  The medical device 
registration process is just the latest example of DOH 
regulating itself into trouble through a lack of 
consultation, communication and clear requirements and then 
relying on senior leadership to cobble together a policy 
adjustment to save the day at the last moment.  (See reftel 
A)  If DOH issues the announcement to extend import 
regulations through December 2005 as promised, it will have 
successfully dodged both trade and healthcare problems for 
now.  But even if DOH is able to narrowly avoid this crisis 
in the near term, without a serious effort to improve 
mid-level management, leadership skills, and a broader vision 
within DOH, it is almost certain that this type of episode 
will be repeated.  End Comment. 
PAAL