And yet, President Ma conceded, re-forms were long overdue. Premiums had, after some struggle, been recently adjusted upwards. The health care def-icit was headed toward US$3 billion. New legislation was essential to ensure that the NHI—a single payer scheme covering nearly all of Taiwan’s 23 mil-lion citizens—could meet the needs of a country facing the inherent chal-lenges of a rapidly aging population, not to mention the rising prevalence of such expensive conditions as cancer, cardiovascular diseases, and diabetes. Quality, efficiency, and fairness would lie at the heart of this second-genera-tion NHI, President Ma promised. A cadre of legislators—particularly those from the Health, Environment, and Social Welfare Committee—would ensure its seamless implementation.

On January 5th, 2011, such legislation came to pass. Among the new reforms are a dual-track premium payment system which, according to Bureau of National Health Insurance (BNHI) calculations, will reduce the premium rate from its current level of 5.175% to 4.915%, based on monthly salaries. An additional premium will then be levied on other income such as inter-est earnings, stock dividends, income from professional practices, rental in-comes, year-end bonuses (exceeding four months of salary), and non-in-sured salary income.

On the drug expenditure side, several new reforms will have been introduced to help control costs:

• Once drug patents have expired, from the first to the fifth year, the BNHI will adjust the drug’s reim- bursed price to the actual transition price (ATP). It also appears as if the BNHI will undertake reimbursed price adjustments on a more frequent basis.

• A drug expenditure target (DET) will be implemented. Time will tell if the reimbursed price adjust will be instituted annually.

Modeling the future, Making way for innovationIntegral to the second-generation legis-lation is a new pricing policy, the seeds for which had been planted months before when IMS Health, at the behest of the International Research-based Pharma-ceutical Manufacturers Association (IRP-MA), built a comprehensive economic model designed to help illuminate the future of public expenditures on drugs and the future, indeed, of pharmaceutical innovation in Taiwan.

Ultimately, according to IRPMA COO Carol Cheng, who was interviewed by Don Shapiro for the American Cham-ber of Commerce in Taipei, the IMS Health model demonstrated “that rea-sonable pricing can be made available

for innovative drugs without damag-ing the finances of the NHI system.” It wasn’t just a hopeful conclusion. It was an honest one, bolstered by an intelli-gent model and a bevy of facts.

fraMing the ConversationWork on the model began in 2009. Hav-ing played an essential role in the develop-ment of Health Technology Assessments (HTAs) in the UK, Canada, Australia, and elsewhere, the international IMS Health team was cognizant of the need, first, to identify the appropriate govern-ment pricing policy levers—to conduct analyses, in other words, on everything from the number of drug categories, defi-nitions, and price levels associated with new drugs to the time of price cuts for off-patent drugs, the premium for quality generics, and the impact of balance billing and price-volume agreements. The idea, of course, was to define the preferred positions of the BNHI and IRPMA on each of the relevant pol-icy levers—to establish, up front, just where the government and the in-dustry stood in terms of policy agree-ments and potential conflicts.

Subsequently, IMS Health undertook an in-depth analysis of three government pricing policy scenarios—this with an eye on establishing the value that new prod-ucts can bring to nations such as Taiwan. At the same time, IMS Health surveyed IRPMA members regarding the status of

Framing Taiwan’s Health Insurance ReformsBy Patrick Chou, iMs Consultant and elaine salt, general Manager iMs taiwan

On July 16, 2010, Taiwan President Ma Ying-jeou described his country’s National Health Insurance (NHI) system as still providing “the best care one could get for such a low price.” It isn’t easy, he continued, “to find anything comparable in other countries,” and, indeed, by regional standards, health indicators in Taiwan remained strong, with an infant mortality rate of just 5.26 per 1,000 live births and a life expectancy of more than 78 years.

their product pipelines, adjusted for risks, modified launch timings, accounted for unfavorable pricing outcomes, adjusted for local manufacturers’ share of new product launches, and applied historical trends for new product volumes, an effort that ena-bled IMS Health to forecast new drug ex-penditures in Taiwan by the year 2016.

All of this and far more formed the foun-dation of a model that afforded the BNHI and others the opportunity to modify as-sumptions and goals and to thereby gain access to alternate views of the future. It was a model, then, that enabled conver-sation—which invited the IRPMA and IMS members to discuss the project ap-proach and findings.

“Our analysis showed that there should be sufficient room to support introduction of pharmaceutical innovation in Taiwan at international price levels” says Patrick Chou, a consultant who played a key role throughout the development of the model and continues to work on adaptations to-day as the IRPMA looks toward 2011. “In fact, the number of drugs in the world-wide development pipeline now stands at less than 50% of what it was just a few years ago—though of course some of the anticipataed new launches, particularly in oncology, will be products representing significant value.”

The IMS Health analysis also suggested that further government price cuts on pharmaceutical products, a strategy re-cently implemented to try to manage surging debt—will not be necessary in the near term unless one of two condi-tions are met: global prices grow faster than expected, or an epidemic breaks out, necessitating the broad consump-tion of products and services.

Ultimately, the IMS Health IRPMA model helped establish the DET by providing realistic projections for how much would be spent based on differ-ent proposed revisions to the National Health Insurance. It was this series of analysis that laid the foundation for re-imbursement levels and premiums.

value drivenThe recently enacted second generation of the NHI system further establishes Tai-wan as a country dedicated to accommo-dating changing medical needs without jeopardizing the economic stability of the overall country. Taiwan’s growing em-phasis on Health Technology Assessments is part and parcel of this new Taiwan—proof that multinational companies seek-ing to launch new products within those borders must build their launches around carefully calibrated measures of value.

“Multinational companies are now obliged to show the value of their prod-ucts—their clinical and economic im-pact—before they’ll receive preferential pricing,” says Elaine Salt, General Man-ager of IMS Taiwan.

What was once a voluntary system has become a prerequisite for high-level reim-bursement categories (i.e., breakthrough and me better), forcing multinationals to make investments in early and meaningful local clinical trials and to assemble docu-ments that incorporate summary reports of HTAs conducted for other countries, reference pricing against ten markets, lo-cal pharmacoeconomic data, clinical data, budget impact analyses, and evidential data.

Fortunately, IMS Health is endowed with local, on-the-ground knowledge of Taiwan’s HTAs as well as global HEOR expertise. It’s a company at work on HTAs now being developed across Eu-rope, Australia, and the United States. “HTA submissions tend to be trans-lational,” says Salt. “We’re getting calls every two to three weeks from clients seeking our help on this matter—clients who recognize our strengths in forecast-ing, pricing policy, budget impact analy-sis, and sensitivity analysis, and who rec-ognize, too, that we have the capacity to produce the HTAs in a timely manner.”

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