Reviewing Pharmaceutical Policy

A National Drug Policy Forum brought wide discussion but few conclusions.

The Ministry of Health and Welfare (MOHW) in early February convened a one-day National Drug Policy Forum (originally scheduled to be held in December 2014), bringing together representatives from the various stakeholders: government, hospitals and other healthcare providers, the pharmaceutical industry (both originals and generics), consumer and patient groups, and academic experts in healthcare policy.

It was only the second such Forum ever held – and the first since 2008 – and the items on the agenda included a number of thorny issues on which different stakeholders have very different views. Behind those issues are some basic questions about how drug policy should be framed. How, for example, can Taiwan’s National Health Insurance system best control costs to keep the program solvent while still providing patients and physicians with access to the latest innovative medications? What, in addition, is the proper balance between protecting patented drugs and promoting a domestic pharmaceutical industry based primarily on producing generics?

The meeting – which lasted into the early evening – ended with few concrete conclusions, but at least with a productive airing of some important topics. Among them:

Drug Expenditure Target (DET). For the past two years, the National Health Insurance Administration (NHIA) has implemented a pilot DET program under which a target is set for NHI spending on pharmaceuticals for the coming year, with agreement from industry to make up any difference if the target is exceeded. Industry has regarded the system as more transparent and predictable than the previous mechanism of periodic Price Volume Surveys followed by heavy cuts in reimbursement prices. Now the two-year pilot period has ended, and a decision needs to be made on whether to continue the program. The consensus at the Forum was that the government should make that determination after consulting further with all stakeholders.

Balance Billing. NHIA is interested in adopting the concept of Balance Billing for certain categories of pharmaceuticals. Under this system, the health insurance system would cover part of the cost of the drug, while the patient agrees to make up the remainder. A potential benefit of this method is to encourage manufacturers to keep medications on the market even when the reimbursement price has been decreased.

But the research-based pharmaceutical industry is wary of balance billing unless some policy changes are first introduced. These include liberalizing current restrictions on patient education so that patients can be better informed about the advantages of a given brand, requiring hospitals to limit their demands for endless rounds of discounting and to abandon their practice of removing one drug from their formulary for every new drug added, and eliminating price comparisons by groupings. The argument is that these changes are needed to ensure the continued availability of original drugs in all categories, which is the avowed purpose of balance billing.

Automatic generic substitution. Local manufacturers have been seeking a change in regulations to permit pharmacists to substitute generic drugs for original medicines on a prescription unless the physician has explicitly disallowed that option. Such a system is in place in major markets, including the United States. But some Forum participants countered that the rationale for generic substitution in those markets is significant cost savings, whereas generic prices in Taiwan are unusually high by world standards – often 80-100% that of the original. At the same time, as a generic’s chemical composition is not precisely the same as the original, it is uncertain who would bear the responsibility in case the substitution is ineffective or has an adverse impact.

“Orphan drugs.” Pharmaceuticals in this category have been developed to treat relatively rare medical conditions, but because of the low volume they tend to be quite expensive. Although they add to the burden on the NHI budget, their availability is regarded as important from a social welfare perspective. Government officials said they would study the idea of creating a separate funding channel for orphan drugs to relieve the pressure on the regular budget.

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