“Drug price gap” is one of the controversial issues in the current National Health Insurance (NHI) system. It refers to the difference between the actual purchasing price of drugs and the reimbursement provided by the NHI. Drug suppliers have been squeezed by the NHI’s low reimbursement prices and hospitals’ under-the-table demands for rebates. Scholars have raised concerns about the impact of the drug price gap on pharmaceutical R&D and the long-term sustainability of the NHI system. They urge the authorities to fully implement the Drug Expenditure Target (DET) system.
Legislator Chen Gau-Tzu (Taiwan People’s Party) organized a public hearing on the review and future outlook of drug quality under the NHI system. Representatives from the Ministry of Health and Welfare (MOHW), the pharmaceutical industry, patient advocacy groups, and other stakeholders were invited to discuss various issues, including profits from drug procurement. Ms. Chen pointed out that the drug price gap has been a long-standing problem. In an effort to increase profits from this gap, some hospitals even advise physicians on what to prescribe, which undermines physicians' autonomy and professional judgment. Despite this, the MOHW has turned a blind eye to the issue and has yet to take corrective action.
According to a study conducted by Professor Shen Li-Jiuan of the School of Pharmacy at National Taiwan University (NTU), the size of the drug price gap increased from NT$30.6 billion in 2015 to NT$47 billion in 2021 — a 50% rise. She pointed out that medical centers and some regional hospitals rely on profits from the drug price gap to offset losses incurred from providing medical services. As a result, it is nearly impossible to ask hospitals to give up this critical source of income. Professor Shen suggests setting a reasonable 5% limit on the drug price gap. Any excess profits should be returned to the NHI system. This, she argues, would help support the sustainable development of the pharmaceutical industry.
The drug price gap is not merely a matter of market mechanisms, it also reflects the design of the NHI system and its underlying financial incentives. In Taiwan, drugs are classified into three categories: 1. drugs that are still within the patent period; 2. drugs that have been off-patent for less than five years; and 3. drugs that have been off-patent for more than five years. The NHIA is currently piloting a Drug Expenditure Target (DET) system for the first and third categories, which together account for approximately 80% of total drug expenditures. Under this pilot scheme, the NHIA sets an annual drug expenditure target that is adjusted based on actual spending in the previous year.
Mr. Chu Mau-Nan, an adviser to the Ching-Kang Foundation for Pharmacy Promotion, highlighted a common misunderstanding about the drug price gap. He pointed out that actual drug expenditures in fact account for only 18% of the total budget after deducting the amounts returned to the NHI through the mechanisms of the Managed Entry Agreement (MEA) and Price-Volume Agreement (PVA), as well as subsidies to medical services provided through the drug price gap. Mr. Chu urged the government to formally implement the DET system, accompanied by appropriate supporting measures. He also recommended canceling the current drug price and volume survey and replacing it with ad hoc investigations of abnormal cases.
Dr. Kang Jaw-Jou, President of the Taiwan Society of Regulatory Affairs for Medical Products, stated that a lack of price transparency, along with a fundamental structural issue, namely the failure to separate prescribing from dispensing, grants hospitals both the power and the incentive to negotiate drug prices.
Taking Japan's reform of drug price differences as a reference, Prof. Chang Hui-Ping said that Japan has now narrowed its drug price gap, maintaining it between 6% and 9%. Pharmaceutical companies are not allowed to directly participate in price negotiations with medical institutions, and the number of distributors has been reduced to mainly just four companies. If Taiwan were to follow Japan’s approach, there must first be a consensus on the non-adjustment ratio (R-zone) under the DET system. Additionally, since there are currently as many as 580 drug distributors in Taiwan, how to reduce that number and how businesses adjust among themselves would also need to be regulated.
【2025-04-16 / United Daily】
