Taiwan’s effective response to the COVID-19 outbreak called international attention to its outstanding public health system. At the same time, the crisis underscored the urgent need to develop an innovative biopharmaceutical R&D capability to combat new and rapidly spreading infectious diseases, as well as to meet the challenge of healthcare issues in an aging society.
According to the National Development Council’s projection, Taiwan will become a “super-aged society” by 2026, greatly increasing the demand for healthcare. However, healthcare spending in Taiwan as a proportion of GDP has risen only from 5.11% in 1996 to 6.58% in 2018, lower than Korea’s 7% and much lower than Japan’s 12%.
Meanwhile, life expectancy in Taiwan has continued to fall further and further behind that of Korea and Japan. Life expectancy is viewed worldwide as a key indicator of basic public health, overall social and economic well-being, and national competitiveness.
The low proportion of healthcare spending to GDP in Taiwan compared to all OECD countries shows that Taiwan has considerable latitude for further increases in new technology funding under the National Health Insurance (NHI) Global Budget and for greater investment in the healthcare ecosystem.
This year the Committee suggests the following solutions to help meet the challenges faced by the healthcare system:
Accelerate patients’ access to lifesaving, lifechanging innovative drugs by securing adequate funding for new drugs/new indications and expediting copayment reform;
Improve implementation of the Drug Expenditure Target (DET) and Managed Entry Agreement (MEA) programs and build a more transparent, predictable, and sustainable reimbursement system; and
Replace cost-containment measures with a value-creation mindset to provide optimum incentives for the biopharmaceutical industry.
The Committee is convinced that by instituting these reforms, the government can spur the upgrading of Taiwan’s biopharmaceutical industry and lay a sustainable foundation for the healthcare ecosystem.
Suggestion 1: Improve patients’ access to innovative medicines.
1.1 Allocate sufficient new drug/new indication budget to meet the need for reimbursement of innovative medicine. Taiwan’s high quality of healthcare is the result of investment by the biomedical industry and the professionalism of its healthcare practitioners. Insufficient budget for new drugs and new indications will result in a less attractive investment environment for the biomedical industry in the long-term.
Value Creation: We urge the government to shift from a cost-control mindset to one of value-creation and to provide sufficient new-drug budget in accordance with unmet clinical needs.
Adopt global standards of care. The current slow timing and narrow scope of reimbursement fail to meet international clinical-treatment guidelines, impacting patient care.
Ensure sustainable high-quality healthcare. Over-reliance on strict cost-control is unsustainable for the delivery of high-quality healthcare in the long run.
Attract Biomedical Investment: Greater incentives for biomedical investment will strengthen Taiwan’s biomedical R&D capability and accelerate the government’s “5+2” biomedical innovation plan.
Attract foreign investment. Creating a positive environment for continuous foreign investment will also benefit domestic industry by facilitating international linkages.
Accelerate research and development. Enabling Taiwan to remain competitive in terms of global clinical R&D capability will further its long-term objective to become the Asia Pacific new-drug discovery and clinical-trial center of excellence.
Value-based Pricing: We urge the government to recognize the value of innovative medicines.
Adopt value-based pricing. The current pricing methodologies lead to adoption of the lowest price and fail to provide reasonable room for growth in the use of innovative medicines.
Engage in financial risk-sharing. Pharmaceutical companies bear most of the financial risk under the current conditions of “no budget increase” when applying for new-indication reimbursement or “100% rebate agreement” when the budget cap is exceeded.
We urge the government to allocate sufficient funding for new drugs/new indications based not only on the existing retrospective methodology, but also on forward-looking methodology:
Review the current new drug/new indication budget-planning methodology and rebase the amount to reflect the trend of innovative health technology.
Plan for an increased growth rate for the new drug/new indication budget on top of the Global Budget while also taking good care of disadvantaged groups.
Allow patients to co-pay for high-cost new drugs in order to fulfill unmet medical clinical needs, adopt global standards of care, ensure sustainable high-quality healthcare, accelerate research and development, recognize the value of innovative medicines, and attract foreign investment.
Continue to revise the new drug/new indication budget-planning methodology and establish a backup mechanism to supplement budget needs.
1.2 Expedite copayment reform to facilitate patient access to innovative medicines.
Copayments, if properly designed, can help ease the financial burden on the NHI and facilitate patient access to innovative medicines. The Committee urges the NHI Administration to initiate copayment reform this year – an idea that stakeholders have gradually become aligned behind in recent years – to expedite accessibility to new drugs.
The NHI has been running in deficit since 2017, and the NHI reserve funds will be falling below a level equal to 1.5 months of NHI spending in 2021. The Committee appreciates that MOHW Minister Chen Shih-chung recently shared his thoughts about the plan to improve NHI’s financial status, including the possibility of increasing the NHI premium rate and placing more copayment burden on frequent users of outpatient services.
The Committee urges the government to move decisively in the direction of copayment reform this year and to execute the plan by 2021 to ensure NHI’s sustainability. We also call on the government to consider patient groups’ copayment reform proposals in order to meet patients’ urgent needs for accessibility to new drugs and indications. Moreover, we suggest that the increased financial resources generated from the drug-related copayment reform be reallocated to the new drug/new indications budget to give patients the opportunity for early access to innovative medicines.
Regarding the question of balancing patients’ rights with new-drug affordability, the government should also use this time to formulate comprehensive measures to provide a healthcare safety net for disadvantaged groups.
Implement copayment reform by 2021 with comprehensive supporting measures to ensure NHI’s financial sustainability and new-drug accessibility for patients.
Reallocate the increased financial resources from drug-related copayment reform to the budget for new drugs/new indications to facilitate patients’ early access to innovative medicines.
Suggestion 2: Form a working group between the Taiwan authorities and the Committee to find solutions regarding barriers to patient access to new drugs.
In light of the COVID-19 pandemic, it is more important than ever for Taiwan to attract international investment and engage in international partnerships to provide Taiwanese patients with access to innovative medicines. Taiwan has set an excellent example for international best practice in emergency response. It is therefore time to capitalize on Taiwan’s key strengths in terms of healthcare infrastructure and remove known barriers to achieving international partnerships, so that Taiwan can fully meet its potential in biopharmaceutical industry development.
Last year, the Committee applauded the implementation of Patent Linkage in Taiwan, which will help ensure that Taiwan stays at the forefront of intellectual property protection for innovative medicine. Further, it sends an unambiguous signal to the international community regarding Taiwan’s commitment to the most critical asset in biopharma investment.
The Committee’s outlook for Taiwan in 2020 is less encouraging. In several key areas, Taiwan has begun to show signs of deviation from international best practices, significantly impacting its preparedness to access innovative lifesaving, lifechanging medicine.
2.1 Reform current cost-containment measures for reimbursement to enhance patient access to innovative new drugs. Cost-containment measures have been adopted to such an extent in Taiwan that they have started to deter international companies from prioritizing Taiwan as a key market for launching and continuing to offer innovative drugs. Although the NHI rules on International Reference Pricing (IRP) have provided guidance and predictability for international biopharmaceutical operations in Taiwan, the rules have come under constant scrutiny. There is a risk that they could lose their ability to provide stability and foreseeability for international operations in Taiwan.
Deviations from the pricing rules have been occurring with increasing frequency, including the use of reference prices from countries outside the current A10 IRP list. This is a worrying trend that could negatively impact Taiwan’s reputation for commitment to rewarding innovation. Explicitly adopting the lowest international price regardless of consideration for innovation or patients’ benefit will put Taiwan in serious disadvantage in international competition for innovative drugs.
The Committee asks the Ministry of Health and Welfare (MOHW) and NHIA to commit to maintaining the current basket of IRP and NHI pricing rules in reviewing both new and currently reimbursed biopharmaceutical products.
2.2 Improve current MEA provisions and practices. The Committee applauds NHIA for its August 2018 decision to include MEA in the NHI reimbursement provisions. One year into the implementation, however, the Committee has found a lack of mutual risk-sharing and equitable treatment in the implementation of agreements under the MEA scheme.
Under the current scheme, NHIA has proposed multiple options under the MEA umbrella to various member companies. These can be a combination of class budget cap, product MEA, and Price-Volume Agreement (PVA). Under all options, current practices raise the amount of risk to a point that could impact the continued viability of operations in Taiwan as follows.
Manufacturers bear all the risks associated with prescriptions exceeding MEA and PVA levels, even though the manufacturers have no influence over the volume of prescriptions. In addition to the uncertainty regarding prescriptions, the clawback payout on the amount exceeding MEA is 100%, including taxes, hospital discounts, and other costs.
In cases where an MEA or class budget threshold is put in place, objectivity and mutuality are lacking, although there will be a lengthy and extensive impact on the viability of an innovative drug’s launch in Taiwan. Currently there is no objective evidence for setting the class budget threshold based on known eligible population or year-on-year forecast. Furthermore, current practice does not provide manufacturers with basic equitable treatment or mutuality. Our member companies have found it difficult to negotiate mutual terms in their MEAs or class budget thresholds, although that principle is critical to the feasibility of product launching, operations, and business predictability in Taiwan. For an international operation, these considerations are integral to prioritizing access to new products in Taiwan. The lack of mutuality and predictability in current practice has already significantly impacted the viability of launching new innovative medicines in Taiwan.
Calculate the budget threshold through mutual agreement and grounding in evidence. Revise the 100% clawback provision through consultation with industry by MOHW and NHIA.
Put in place a face-to-face negotiation mechanism to facilitate mutuality in the formation of agreements.
Implement MEA schemes only when they are proposed by the manufacturers and agreed to by NHIA in order to adhere to the principle of “voluntary MEAs” as set out in the current NHI reimbursement provisions.
Suggestion 3: Improve the DET system and address the price-gap issue to create a sustainable business environment for the biopharmaceutical industry.
The Committee appreciates NHIA’s postponement of the 2020 DET price adjustment to October 1 due to the COVID-19 pandemic. We believe that 2020 is the perfect time to revisit the question of DET methodology, as 2019 was the final year of the three-year pilot run (with its price adjustment effective in 2020). We suggest that MOHW and NHIA review the DET price-adjustment mechanisms to build a sustainable business environment for the biopharmaceutical industry.
The review should include updating the calculation methodology to reflect actual drug expenditures, as well as raising the amount of medical service payments to eliminate the problem of hospitals’ profiting from the drug-price gap. By disincentivizing healthcare providers from seeking further price negotiations, these changes would create a predictable ecosystem, encouraging continuous investment in Taiwan by the biopharmaceutical industry. Most importantly, patients’ rights of access to innovative medicines would be ensured.
3.1 Reform hospital discounting practices. After new medicines receive reimbursement prices from the NHIA, hospitals habitually request further discounts in the course of the procurement process. The growing demand for such discounts on medicines as part of the hospital listing procedure has placed additional pressure on the pharmaceutical manufacturers. The Committee recommends that MOHW and NHIA address the issue by reconsidering the hospital discounting process and raising the level of medical service payments to prevent profit-driven procurement decisions from becoming another obstacle hindering patient access to innovative medicines in Taiwan.
3.2 Adopt a broader definition of patents for price calculation and use the first generics entry as patent-off price adjustment. NHIA has long recognized only compound patents when conducting price adjustments. Given the implementation of Patent Linkage (PL) from November 2019, we urge NHIA to expand its recognition of patents for the purpose of price calculation to cover the full scope of products covered by PL. In many countries, price cuts on off-patent products are triggered by the first generic entry, rather than the timing of the product going off-patent. This approach would provide better protection to single-sourced products before a generic product is available.
3.3 Establish a sound R-zone mechanism. Single-source products are accorded a 15% reasonable-zone (R-zone) in setting the price adjustment. In these cases, the major compound has been off-patent or never had a registered patent in Taiwan, and the product is the only source available in this market, with no generic substitute. In the absence of price protection, the drug may have to be withdrawn from the Taiwan market, to the detriment of patients’ access to treatment.
3.4 Recalibrate each year’s DET baseline. The Committee suggests that the DET baseline should be revised from the current practice to one that benchmarks the previous year’s actual expenditure, multiplied by the annual growth rate in the Global Budget. As the methodology for a new round of DET practices may be reset in 2020, the Committee suggests that the 2021 price adjustment should treat the 2020 DET target amount as the 2019 actual drug expenditure multiplied by the 2020 Global Budget growth rate. Recalibrating the baseline will help build a sound DET mechanism to reflect actual drug expenditure and prevent further deviation from the real situation year by year. In addition, newly reimbursed technology that was not included in the previous year’s Global Budget should be reflected in the DET target growth rate.
3.5 Ensure that the 2020 DET postponement does not increase the 2021 DET price adjustment. In view of the six-month postponement of the 2020 DET price adjustment in order to cope with the COVID-19 pandemic, the Committee suggests that NHIA take steps to ensure that the delay does not magnify the impact on the 2021 DET price cut. We recommend that NHIA enter into a dialogue with the pharmaceutical industry to clarify the 2021 DET calculation methodology – for example, the drug sales period, the timing of the DET price cut in 2021 and beyond, and any revision in the algorithm – to mitigate any potential negative influences due to the 2020 DET postponement.