Taiwan Pharmaceutical Market Outlook 2013
Taiwan’s Pharmaceutical Market Expected to Reach $5.5 Billion by 2018
Taiwan’s healthcare is driven by a single-payer global budget system run by the Bureau of National Health Insurance (BNHI). National health expenditure stood at TWD 910.2 billion ($30.9 billion) in 2011 and will grow at a rate of 2.2% to reach TWD 937.6 billion ($31.6 billion) in 2012. Taiwan’s pharmaceutical market was worth $4.4 billion in 2012, having grown at a Compound Annual Growth Rate (CAGR) of 2.9% from 2006, and is estimated to reach $5.5 billion by 2018 at a CAGR of 3.9%. Some of the key drivers of growth in the forecast period are:
- The provision of incentives for the biotech sector in the form of investment support, as part of the National Development Fund, worth TWD60 billion ($1.8 billion) in the coming six to 10 years. The Department of Health (DoH) and BNHI have introduced second-generation National Health Insurance (NHI), which is expected to improve pricing and regulatory policies. Research alliances with academic institutions and public-private partnerships are expected to boost research in new drug development, with several projects already underway and products already in late-stage clinical trials.
- The improving cross-straits relations with the People’s Republic of China (PRC) are expected to drive the market demand for drugs in common diseases. Trade relations improved with the recent signing of the Economic Cooperation Framework Agreement, and the Cross-Strait Cooperation Agreement on Medicine and Public Health Affairs was signed especially to promote cooperation in medicine development and disease prevention. Taiwan could prove to be the launch pad for new drugs to gain access into the much larger Chinese market.
- An aging population, the rising prevalence of lifestyle disease and the increasing demand for new technologies in medicine are expected to drive market growth. The demand for new drugs in oncology and liver cancer is expected to increase, and circulatory and genitourinary diseases are other key therapeutic areas with growth potential.
Major Structural Changes and Government Policies Expected to Address Industry Concerns and Challenges
Taiwan is expected to address the major challenges faced by the pharmaceutical market, especially by overseas investors, in the coming two to three years, providing encouragement for more investment in the sector.
- Strict drug pricing controls to be achieved by setting Drug Expenditure Targets
After seven rounds of pricing adjustments, which were achieved through Price-Volume Surveys (PVS), by 2011, drug prices in Taiwan were the lowest among the developed markets, with the average price of original drugs at just 28% of the US average. To address this challenge, the new second-generation NHI law of 2011 proposed setting an annual Drug Expenditure Target (DET) based on the historical data of actual drug expenditures and negotiations with the pharmaceutical industry.
However, another challenge in drug pricing remains: generic drugs prices are as high as originator drug prices due to a policy of grouping similar products. This discourages original R&D companies from the market. Generic drug prices are much higher than in other countries, at 80–100% of the price of originator drugs.
- Provider price-reimbursement gap to be addressed by separating dispensing from prescribing
Hospitals and clinics in Taiwan have the authority to both prescribe and dispense medication, and hence the price paid to the manufacturer is often different from the price reimbursed, inducing a price gap and affecting the profits of mainly originator companies. In order to address this price-reimbursement gap, independent pharmacies are being promoted by the DoH, which saw a marginal increase since 2010. In addition, to discourage hospital dispensation based on price negotiations, volume controls are being introduced as part of a new second-generation NHI.
- Challenges in intellectual property rights protection still persist
Although the government’s Intellectual Property Rights (IPR) policies are being reviewed, major issues still persist, deterring the international community from investing in the sector. One major challenge is that many patent-infringing drugs are being approved and included in the reimbursement list.