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Potential impact of newly proposed drug price policy in Taiwan
IQVIA Solutions Taiwan Ltd., Taipei, Taiwan
Oct 12, 2023
The National Health Insurance (NHI) in Taiwan is a government-administered, single-payer system, providing healthcare insurance to over 99% of 23 million residents1. The National Health Insurance Administration (NHIA) is the only agency authorized to administer the NHI program. The NHIA budget covers pharmaceutical products and medical services.
Containing drug expenditure has been a high priority of NHIA. In 2013, the Drug Expenditure Target (DET)2 pilot program was introduced to adjust pharmaceutical prices on an annual basis. Under DET, a target annual drug expenditure budget was defined based on the expenditure of the prior year and a negotiated growth rate. If the total payment of drug spending exceeded the preset target, the exceeding amount will be adjusted by NHIA in the following year through a drug price cut. Since its rollout, there has been drug price cuts nearly annually due to overspending. Thus, NHIA has been looking for additional approaches to contain drug expenditures more efficiently.
NHIA had a meeting with pharmaceutical associations to propose an evolved DET price cut mechanism on Sep 11th 2023. Compared to the original mechanism, NHIA released its plan to not only adjust the price according to the actual transaction price but also to benchmark the lowest price from the Advanced 10 countries3 (i.e., A10), including US, Canada, Japan, Australia, UK, France, Germany, Belgium, Sweden and Switzerland.
How could the pharmaceutical market be affected if the NHIA newly proposed approach toward drug price cuts were implemented in Taiwan? IQVIA has estimated the potential impact by leveraging its proprietary pharmaceutical data system, following three steps. Firstly, the Top 10 pharmaceutical products were selected by total sales in Taiwan from the IQVIA Q4 2022 Quarterly News Dashboard Report published in March 2023. Secondly, the reimbursed prices in Taiwan were tabulated with the lowest A10 market prices, and the A10 market was converted into the local currency New Taiwan Dollar (NTD) for comparison based on the exchange rate4 published by Taiwan NHIA in the third quarter of 2023. Finally, the volume of these drugs in the MAT5 to Dec. 2022 of IQVIA data system were multiplied by the drug price differential to calculate the overall sales impact.
The IQVIA analysis showed that the 10 leading pharmaceutical products were all marketed in Taiwan by multinational pharmaceutical companies. Those 10 products cover broad therapeutic areas, including oncology, human immunodeficiency virus-1 (HIV-1) infection, chronic hepatitis B infection, hematology and cardiovascular diseases, containing a total of 16 items with different NHIA reimbursed dosages. Currently, 6 of these 10 product ingredients have generic drugs or biosimilar drugs (4 have generic and 2 have biosimilar) in Taiwan NHIA healthcare system.
Under the newly proposed DET program, 7 out of the 10 products will be subject to price reduction when benchmarking the lowest price of A10 countries. The reduction of unit price will vary from NTD 5 to NTD 16,872 per unit, with the median value of NTD 15.8 per unit. The ratio of “unit price reduction/ A10 lowest” will vary from 0.175 to 6.434. The total value lost by different dosage units, calculated by applying the reduced unit price times IQVIA data of MAT to Dec. 2022 dosage units (converted to the annual volume) will range from NTD 22.8million to NTD 1,242.5million, i.e., up to 25.5% reduction of total leading 10 products value.
As demonstrated in the above analysis, the newly proposed DET drug price methodology could have a marked impact on the pharmaceutical market in Taiwan. Lowering the price without increasing access to patients will lead to negative reduction to the value of pharmaceutical products. A drop in drug prices of more than 25% in a short period of time may trigger a comprehensive re-evaluation by global pharmaceutical companies of their launch sequence in Taiwan. Though NHIA will propose a DET factor (usually 30%-40%) as well as IQVIA data including self-pay sales, we believe the analysis is representable.
Reference:
- The National Health Insurance Research Database: https://nhird.nhri.edu.tw/en/index.html
- Drug Expenditure Target (DET) in 2023: https://www.mohw.gov.tw/cp-6567-73744-1.html
- The Advanced 10 (A10) countries in the National health insurance drug benefit items and payment standards: https://law.moj.gov.tw/LawClass/LawAll.aspx?Pcode=L0060035
- The exchange rate published by Taiwan NHIA in the Q3 2023: https://www.nhi.gov.tw/Content_List.aspx?n=3C28B3CCA7488D6E&topn=5FE8C9FEAE863B46
- MAT: quarterly data can be converted to annual data by adding up the last four quarters. The result is the so-called four-quarter sum or moving annual total (MAT).