Taiwan’s New National Health Insurance Bill May Alter Drug Price Gaps

Taiwan’s Department of Health (DOH) has been proposing a “Second-Generation National Health Insurance” bill (2G NHI Bill) since March 2010. Although President Ma Ying-jeou is advocating a quick implementation, legislators are still reviewing the details. The most recent topic of discussion is how to best modify the drug price gap to meet the goals of the reform.

Under Taiwan’s current healthcare system, most of the population depends on health insurance reimbursement for drugs. The national health insurance system regulates drug prices. This is done by standardizing the amount of reimbursement medical institutions receive for each drug (drug reimbursement prices are listed in the Pharmaceutical Benefit Scheme). However, this reimbursement price can sometimes be lower than the hospital or clinic’s cost of procuring the drug from a distributor. This difference between the reimbursement price and the actual procurement price is known as the “drug price gap.”

Drug price gaps are bad for both hospitals and pharmaceutical companies. When the cost of buying a drug is much higher than the reimbursement level, hospitals make less money. At the same time, drug companies have to deal with hospitals that routinely bargain for lower procurement prices. This creates competition between drug companies that have similar products. Studies have shown that some foreign drug companies have been turned off from marketing opportunities in Taiwan by this situation. Six different government-imposed drug price decreases have further exacerbated the problem. These drug price cuts meant less reimbursement for certain drugs. The effect was that even more hospitals and clinics had to ask drug distributors for discounts.

As the drug price gap is being addressed in the 2G NHI Bill, legislators will likely respond. This bill is expected to help create a more favorable market environment for drug companies and hospitals in Taiwan by limiting the drug price gap.

Taiwan’s 2G NHI Bill primarily aims to reform the calculation of premiums. The new bill will factor in household size, total household income, and more. Other changes such as the aforementioned curbing of the drug price gap are also anticipated. A final version of the bill is expected to be released by December 2010. Taiwan’s pharmaceutical regulations will change accordingly in the coming years.