1. 1 To the rescue of Taiwan NHI -generic drug policy reformatted- Ivan Liu General Counsel Yeschain Pharma Group

2. 2 NHI: a brief  National Health Insurance (NHI) was launched in 1995 and has won international recognition since then. -NHI covers 98% of Taiwan’s 24 million population. -NHI reimburses almost everything – incl. inpatient/outpatient care, lab test, prescription drug, dental, TCM, day care for mentally ill, nursing home care, and even expensive items such as magnetic resonance imaging scan and organ transplant. -NHI patients enjoy ready access to all levels of healthcare providers islandwide without suffering from wait lists often seen associated with similar programs in advanced countries.

3. 3 NHI: risks posed  Explosive growth in reimbursement: from US$6 bn (1995) to US$18.7 bn (2011)  Ratio of NHI reimbursement/GDP: from 2.66% (1995) to 3.9% (2011)  With flat premium rate, yearly deficit warranted while a US$2 bn loss accumulated since launch.  Without change, NHI bankruptcy guaranteed, but definitely not allowed: -Increase in NHI premiums? Politically incorrect. -Saving from NHI reimbursements? Maneuvering among pressure groups gives rise to a battle of Armageddon. -Predicament? “Premium can’t go up” and “Coverage stays the same”.  2 nd generation NHI promulgated in January, 2011, aiming to generate an extra US$0.66 bn annual income through broadened base for premium calculation and 2% supplemental premiums: -Criticized for achieving merely nominal effects through extra income but downplaying the significance of considerable wastes and non-essential reimbursements. -Heavily attacked by employers and high income residents because they shall share the largest portion of such premium increase.

4. 4 Ailing drug reimbursement policy  Soaring drug reimbursement: US$4.7 bn (2011) -DRUG/TOTAL reimbursement ratio: 25%. -OECD countries’ average: less than 15%.  More drugs dispensed means higher profit for big hospitals: -They enforce explicit preference of expensive brand-names to cheaper generics. -Generics make up 20% of prescriptions from big hospitals, while the share of generics of all NHI reimbursed prescriptions is 65%. -Fat margin: NHI keeps reimbursed price fixed for each and every drug approved. Big hospitals, by exercising concerted procurement actions and exclusive bargaining positions, enjoy lowest possible drug prices.  NHI, as a social insurer, acted like a private one to please Taiwan voters: -Social insurance safeguards the basic stability of a society. Therefore, NHI would be considered successful by simply reimbursing the insured, if applicable, prescribed generic drugs instead of brand-names.  Comprehensive coverage, no claims adjusters. -I scratched the front bumper of my car, which is fully insured with loss damage waiver. May I take it to a repair shop and request insurance reimbursement for replacing the transmission?

5. 5 Tip of the Iceberg? Waste, Abuse, and Fraud  It is estimated that 25% of the drugs dispensed, roughly in the amount of US$1.175 bn (2011), got wasted by patients because the co-pays upon filling prescriptions are next to nothing. -In practice, for drugs, patients shall disburse a fixed amount of co-pays less than 20% of NHI approved drug prices. Such co- pays are further subject to an out-of-pocket maximum of US$6.6  Health care fraud and abuse are similar to other forms of white-collar crime: what you can see is never the problem!

6. 6 Painless rescue: costdown first, new revenues later  Increase in NHI premiums unnecessary - if a saving equivalent to or greater than the extra income generated by 2nd generation NHI (US$0.66 bn annually) shall be available.  A better compliance with para. 1, Article 43, NHI Act shall save at least US$0.7 bn (15% of 2011 drug reimbursements) annually: -Statutory coinsurance of 20% (clinics). Without referrals, the rate shall be increased to 30% (district hospitals), 40% (regional hospitals), and even 50% (medical centers) for all outpatient expenses. -Real-life: regardless of the scale of hospitals visited, coinsurance gets converted to co-pays, from US$0 to US$6.6, for NHI approved drug prices of less than US$3.3 to unlimited. -NHI insured too often visit at no referrals larger hospitals, which prefer brand- name drugs. -Proposal: enforce statutory coinsurance with no out-of-pocket maximum except for the prescription of generic drugs.  Based on Article 80 of NHI Act, to request medical institutions to adopt compliance program and compliance officer to reduce frauds and abuses.

7. 7 Armageddon-free reforms  To raise red flags: Department of Health and big hospitals -Investigation Bureau: Anti-corruption Statute (art. 6) awards imprisonment of 5 years or up for illegally benefiting a 3rd party. NHI Drug Price Standards and actual practices benefit foreign pharmaceutical firms without justifiable grounds. -Control Yuan: Administrative Procedures Act (art. 6) prohibits differential treatment in the absence of adequate causes while Control Yuan has the jurisdiction to designate corrective measures to DOH and to impeach the government officials that derelict. -Fair Trade Commission: Fair Trade Law (art. 14 & 35) bans concerted procurement actions without prior approval. The violation is punishable by a US$3.3 million fine. -In addition to FTC issues, government-owned hospitals’ concerted procurement practice in singling out non-patented brand-names also triggers criminal Anti-corruption liabilities mentioned above as well as violation of Government Procurement Act (art. 6).