• Following Up on GPA
  Taiwan has signed the international agreement, but it is still unclear how much impact that will have on actual business.

• What Price for Innovation?

  The pharmaceutical industry seeks cooperation with government to ensure that innovative drugs are properly rewarded.

 — By Don Shapiro

Following Up on GPA

Taiwan has signed the international agreement, but it is still unclear how much impact that will have on actual business.

For Taiwanese companies interested in U.S. government contracts, for example, GPA membership means that the constraints of the Buy American Act do not apply. Taiwan’s IT companies, in particular, are expected to benefit from that change. The semi-official Taiwan External Trade Development Council (TAITRA) has been tasked with assisting Taiwanese exporters in developing the business, and it has begun making contact with the procurement officers in various U.S. government agencies.

The Commercial Section of the American Institute in Taiwan, an arm of the U.S. Department of Commerce, is playing a similar role in alerting U.S. companies to the new opportunities in Taiwan. It has put up explanatory web pages (http://www.buyusa.gov/taiwan/en/taiwan_gpa.html ) and has coordinated with Taiwan’s Public Construction Commission (PCC), the agency responsible for overseeing government procurement, to ensure that English-language information on particular projects is available online. So far the data in English on http://web/pcc.gov.tw consists only of rather bare-boned summaries, but PCC has said it will expand the content in future, including eventual development of an English version of its online system for submitting a bid.

PCC’s Director of Planning, Su Ming-tong, speaking on a podcast on the AIT website, said the most significant change for U.S. companies due to Taiwan’s GPA accession should be in the construction field. Whereas previously U.S. contractors needed a Taiwan construction license to qualify to bid, that is no longer required. Bidders for architectural design or engineering projects, however, still need to have local architect or professional engineering licenses respectively.       

Multinational companies appear to remain somewhat skeptical about how much Taiwan’s GPA membership will in fact improve their market access. Besides the limited degree of English-language information being provided, another major concern is the limited amount of time allotted to prepare a bid – particularly when translation of documents is needed. Typically companies are given no more than 24 days to prepare a proposal, already a tight schedule even when days are not lost due to U.S. holidays. International bidders request that more time be allowed, considering that they need to gather documents from overseas governments certifying their previous project experience, and then have the documents notarized.

An AmCham member company in the engineering field has reported another obstacle that prevented it from bidding in a recent infrastructure tender – a requirement in that case that vendors prove that they have professionally licensed engineers on their staff from 12 different engineering disciplines, even though some of those specialties were totally unrelated to the project. The same requirement applied to local companies, but the large domestic engineering firms employ a broad spectrum of talent. Whether or not the intention was discriminatory, the result was to keep foreign companies from competing for that contract.

Due to these kinds of disadvantages, many multinational companies have yet to be convinced that Taiwan is abiding by the spirit as well as the letter of GPA in opening up its procurement market.

 — By Don Shapiro

What Price for Innovation?

The pharmaceutical industry seeks cooperation with government to ensure that innovative drugs are properly rewarded.

At the same time as they are reeling from a deep reimbursement-price cut imposed by the Bureau of National Health Insurance, foreign-invested pharmaceutical companies in Taiwan are looking for ways to collaborate with BNHI to create a mechanism to ensure sound long-term incentives for innovative drugs.

The recently announced price cut, the largest in Taiwan’s history, has been calculated as amounting to NT$20.5 billion (US$620 million) in annual value, far more than the NT$3-5 billion the industry had initially anticipated. A survey of its members by the International Research-based Pharmaceutical Manufacturers Association (IRPMA) in Taiwan indicated that the move would cause companies to withdraw 80 products from the market as no longer profitable and to refrain from launching another 23 items.

As it does periodically (usually every two years), the government cut prices after conducting a Price-Volume Survey aimed at eliminating the Pharmaceutical Price Gap, often referred to more poetically as “the black hole.” The gap refers to the difference between the amount hospitals or clinics actually pay for drugs after discounts and the much higher figure used by BNHI to reimburse them.

The problem is that the gap never disappears. Hospitals, which have come to depend on the differential for operating revenue, have already started demanding new discounts from the pharmaceutical manufacturers – discounts identical either in proportion or more often in absolute value to the price breaks they previously received. As this was the sixth PVS and subsequent round of price cuts Taiwan has carried out, the industry is pleading for relief, noting that for many medications, prices levels in this market are now among the lowest in the world.

Although the cuts have affected multinational makers of patented drugs most heavily, they have also impacted local manufacturers of generics. Domestic pharmaceutical associations even sought to sue BNHI for allegedly exceeding its authority in carrying out the cuts, but the case was rejected by the court for lack of legal standing. Still, both IRPMA and its local counterparts are appealing to the government to reduce the damage to the industry by phasing in the price reductions over three to five years.

Beyond the immediate crisis, IRPMA – with support from the Pharmaceutical Research and Manufacturers of America (PhRMA) – is seeking to engage the government in constructive dialogue to help devise a pricing system enabling industry to enjoy healthy growth, BNHI to control health care costs, and patients to be assured of timely access to new and innovative drugs. At a Pharmaceutical Innovation & Drug Policy Workshop on July 22, the industry briefed BNHI on the substantial investment it is currently making to develop a detailed economic model as reference in the efforts to achieve those win-win-win goals. The model, being developed by the consulting firm IMS Health, is expected to be unveiled in October.

Even before then, IRPMA and PhRMA plan to invite BNHI to another workshop to continue discussions on how “innovation” should be defined. Industry’s point is that sensational “breakthrough” drugs are quite rare, but that follow-on medicines incorporating improvements or aimed at additional diseases can be equally valuable. It expects to make a proposal to BNHI on what should qualify as innovative conditions and thus receive price incentives under the reimbursement system.

 — By Don Shapiro