US embassy cable - 05TAIPEI4685

UNCLAS SECTION 01 OF 02 TAIPEI 004685 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/RSP/TC AND EB/TPP/BTA, STATE PASS AIT/W AND 
USTR, USTR FOR WINELAND, WINTERS AND , USDOC FOR 
431/ITA/MAC/AP/OPB/TAIWAN/MBMORGAN AND DUTTON 
 
E.O. 12958: N/A 
TAGS: ETRD, TW, ESTH, Trade 
SUBJECT: TAIWAN DOH AGREES TO REGULAR MEETINGS WITH PHRMA 
COMPANIES ON PRICING 
 
 1.  (U) Summary:  Country managers from PhRMA companies 
joined AIT in a meeting with Department of Health (DOH) 
Deputy Minister Chen Shih-chung to discuss pharmaceutical 
pricing issues and the DOH proposal to extend National Health 
Insurance (NHI) reimbursement caps (commonly refered to as 
the "global budget") to all hospitals and medical centers in 
Taiwan.  Chen insisted that health and safety were DOH's 
primary concern and offered that actual transaction pricing 
and the separation of prescribing and dispensing were part of 
Taiwan's long term health plans.  Chen explained that the 
Bureau of National Health Insurance (BNHI) had learned 
valuable lessons from its previous experience in implementing 
a limited global budget scheme and was proposing creating a 
two-tier system that would reduce incentives for hospitals to 
dump high-cost patients. In response to concerns that DOH had 
not done enough to share information with industry, Chen 
promised to support regular meetings between the BNHI and 
PhRMA companies to discuss any industry concerns.  End 
Summary. 
 
2.  (U) AIT Econ officer and country managers from PhRMA 
members Eli Lilly, Merck, and Pfizer met with DOH Deputy 
Minister Chen November 21 to discuss pharmaceutical pricing 
issues and a new BNHI proposal to extend global budgeting 
nationwide in early January 2006.  PhRMA members had only 
been made aware of the BNHI proposal in early November and 
expressed serious concerns that not only would such a move 
lead to increased incidents of patient dumping -- the 
practice of refusing to treat patients with difficult, 
chronic, or expensive-to-treat illnesses -- but would lead to 
increased pressure from hospitals and medical centers for 
pharmaceutical companies to provide even deeper discounts on 
pharmaceutical products. 
 
The root of the problem 
----------------------- 
 
3.  (U) Chen began by insisting that DOH was concerned only 
by how to provide the most effective and efficient treatment 
for Taiwanese patients, and that cost did not enter into 
DOH's policy considerations.  He praised the manufacturers of 
innovative medicines and offered that DOH was always willing 
to work with them to improve the safety and effectivness of 
Taiwan's health care system.  Eli Lilly country manager and 
PhRMA's Taiwan representative Melt van der Spuy noted that 
Taiwan's current system actually encourages over-prescribing 
and that moving to actual transaction pricing (ATP) would 
reduce incentives for doctors and medical centers to view 
prescriptions as a cash cow.  BNHI needed to cut costs but 
would be better served by taking steps to cut generic 
reimbursement prices, discourage over-prescribing and reduce 
doctor visits, he said.  Chen acknowledged BNHI's financial 
difficulties but pointed to the lack of a transparent 
hospital accounting system as a reason ATP implementation 
would be difficult.  BNHI needed to maintain stability to 
best serve the people of Taiwan, he said.  Changing doctor 
and patient behaviors, Chen responded, would require 
education over a long period and if forced on the system 
would lead to instability. 
 
4.  (U) Merck's regional Executive Director Mark Tennyson 
suggested the U.S. had implemented an ATP system without 
generating instability.  Chen responded that Taiwan's low 
service fees made it difficult.  He suggested Taiwan did not 
want to experience doctor strikes as in Korea when the 
government tried to implement changes to the prescription 
system.  Chen said he understood the concerns of the 
pharmaceutical industry, but that Taiwan needed time to 
develop the expertise and ability to make successful any 
necessary changes in the current system.  In the long term, 
Taiwan would want to move towards separating prescribing and 
dispensing and would also want to improve accounting 
standards.  But before these pieces were in place, Chen 
thought enforcing ATP would be very difficult.  Chen told AIT 
that BNHI would propose unspecified measures in 2006 that 
would try to address over-prescribing.  He acknowledged that 
previous attempts to reform NHI finances had not focused on 
this part of the problem. 
 
 
Universal Global Budgets 
------------------------ 
 
5.  (U) When asked about the proposal to implement a 
nation-wide global budget system by January 2006, Chen 
replied that this new proposal would not lead to the same 
kind of problems seen when global budgeting was first 
implemented in several of the larger hospitals and medical 
centers in July 2004.  At that time, reports of patients 
being denied treatment for expensive illnesses or being 
shunted from hospital to hospital led DOH to threaten to 
impose fines on any facility found to be engaging in this 
kind of patient dumping.  The new proposal would actually 
create a two-tier reimbursement mechanism with one part 
capped, and another part more flexible.  He promised BNHI 
would closely monitor the standard of patient care. 
 
6.   (U) AIT Econoff offered that there had been no 
consultation or efforts to inform industry about these 
prospective changes and suggested that early sharing of 
information could help to avoid misunderstandings, noting 
that industry had useful experiences to offer.  Chen first 
suggested there was no point in consulting until DOH had 
decided the details of its plans, but when reminded that 
consultation is most effective before decisions have been 
finalized, volunteered to arrange a bimonthly meeting between 
the PhRMA companies and BNHI to discuss plans and concerns, 
beginning with a detailed explanation of the BNHI universal 
global budget proposal. 
 
7.  (SBU) Comment: Deputy Minister Chen's assertion that cost 
is not a concern for DOH policy-makers is disingenuous and 
directly contradicts the message from others in Taiwan's 
health care policy establishment, including DOH Minister Hou. 
 His offer of a bimonthly consultative meeting with PhRMA 
companies is very welcome, even at this late date, but is a 
good illustration of a serious weakness in the DOH 
decision-making culture.  DOH is led by Taiwanese doctors. 
Like most doctors in Taiwan they are confident in their 
ability to diagnose and prescribe the best medicine, and 
dismissive of the need for consultation and discussion. 
Engaging BNHI in a more regular manner is bound to be 
positive, but we suspect that changing the behavior of Taiwan 
patients will be a quicker and easier task than changing the 
culture of the DOH.  End Comment. 
Paal